TMI Blog1993 (3) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... romoter for a total price of Rs. 8 lakhs. The share of the assessee in the said price was Rs. 4 lakhs. The Andromeda Co-operative Housing Society Limited was formed and registered on November 3, 1972, with the object, inter alia, of purchasing this property and constructing tenements on the said property for the use of its members. The total number of members of the society was not to exceed the total number of tenements or flats available for allotment to the members. Each of the members was required to hold at least five shares of the society. The assessee was one of the signatories to the memorandum of objects of the society and its regulations and had agreed to take a flat in the said society subject to the regulations of the society. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The construction, therefore, was carried out by the society through the construction firm for the benefit of its members. That is the reason why the balance amount was to be treated as a loan to the society. One of the conditions of the agreement was that the assessee had to use the flat for self or members of her family for the purpose of her residence and for no other purpose. It was also stipulated that the society will try to complete the construction of the building within a reasonable time but in any case the assessee was not entitled to cancel the agreement or claim any damages. Under the terms of the agreement, the said amount was to be paid by the assessee in instalments. Accordingly, the assessee has made the following payme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment relating to the cost of construction of this flat to the society within a period of two years from the date when the assessee and her husband conveyed the original property to the society. In these circumstances, we have to see whether the assessee has complied with the requirements of section 54 of the Income-tax Act, 1961, as then in force. The material part of section 54 at the relevant time was as follows : " Section 54. Profit on sale of property used for residence. --- Where a capital gain arises from the transfer of a capital asset. . . . being buildings or lands appurtenant thereto the income of which is chargeable under the head 'Income from house property', which in the two years immediately preceding the date on whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obtain possession of the flat so constructed and in which she intends to reside. The material test in this connection is domain over the flat and investment in it. The assessee satisfies both these conditions. She has acquired such a domain and has invested almost the entire requisite amount in it within a period of two years prescribed under section 54. In this connection, our attention was drawn to a circular of the Central Board of Direct Taxes bearing No. 471, dated October 15, 1986, which dealt with the investment in flats under the self-financing scheme of the Delhi Development Authority. The Board has stated in the circular that when an allotment letter is issued to an allottee under this scheme on payment of the first instalment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 54E of the Income-tax Act which were then in force. It had to consider whether the capital gains arising from the transfer of the capital asset were invested in a new asset within a period of six months. The petitioner who sold a plot of land deposited the consideration amount in National Rural Development Bonds by sending a bank draft for the amount along with his application in the prescribed form within a period of six months. However, on account of certain technical problems, the bonds were not issued to the assessee until after the expiry of six months. The court held that by depositing the amount with the agent of the Reserve Bank of India within six months, the assessee had substantially complied with the provisions of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arch, 1976, the assessee had commenced construction of the new house which was completed in March, 1977. The assessee claimed exeption from tax on capital gains under section 54 of the Income-tax Act, 1961. The court said that the assessee had resided in a major portion of the building which the assessee had sold and had completed the construction of a new residential house in March, 1977. Hence, the assessee was entitled to the benefit of section 54 even though the construction of a new house started prior to the sale of the old building. This decision once again has turned on its own facts and it does not assist us in any manner because the circumstances of the present case are very different. For the reasons which we have set out above ..... X X X X Extracts X X X X X X X X Extracts X X X X
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