TMI Blog1993 (2) TMI 29X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act. The Incometax Officer held that the property was not used by the assessee as residential house for the immediate period of two years and, therefore, the condition necessary for qualifying for exemption was not satisfied. The claim for exemption was thus denied by the Income-tax Officer. In the appeal to the Appellate Assistant Commissioner, the assessee succeeded as the Appellate Assistant Commissioner was of the view that use of the house for residential purpose during any period within the specified period of two years was sufficient for claiming exemption under section 54 of the Act. The Revenue preferred an appeal to the Tribunal which reversed the order passed by the Appellate Assistant Commissioner and restored the order of the Income-tax Officer as it was of the view that exemption under section 54 can be invoked by the assessee if he had used the building for the purpose of his residence for a period of two years immediately preceding the date on which the transfer took place. The assessee then moved the Tribunal for referring the above stated question to this court. What is contended by the learned advocate for the assessee is that the Tribunal has not correct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s rejected by observing that such a broad proposition cannot be accepted and it was held that, if there is ambiguity, the provision for exemption or relief can be construed liberally and in favour of the assessee. After referring to the expression "was being used" and the interpretation put upon it by the Madras High Court in M. Viswanathan v. CIT [1979] 117 ITR 244 and S. Radhakrishna v. CIT [1984] 145 ITR 170, the court observed that, in English grammar, it can properly be described as the past continuous and, therefore, denoting continuity which extends up to and terminates with the date of the transfer; but the past continuous in the context would only mean that whenever used in the preceding two years, the house should have been used as a residence, that is, the house must have been used by the assessee or a parent of his mainly for the purpose of his own or the parent's own residence during the period of two years immediately preceding the date of sale. The Delhi High Court was of the view that the Madras High Court has construed the provision in favour of the Revenue by stretching the plain meaning of the provision and even though the words " in the two years immediately pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uilding from January 16, 1964, to June 16, 1965. On these facts, the question which was referred to the Madras High Court under section 256(1) of the Act was whether the Tribunal was right in holding that the requirement of the provisions of section 54 of the Income-tax Act, 1961, had not been satisfied and, consequently, the assessee was not entitled to the benefit under the aforesaid provisions for the assessment year 1966-67. It was contended on behalf of the Revenue that there should be user of the house as a residential house for the entire period of two years immediately preceding the date on which the transfer took place if that section is to be attracted. The assessee's contention was that the wording of the section did not warrant the insistence on continuous user as residential house for the entire period of two years immediately preceding the date of transfer. The Madras High Court held that (at page 245) : "If the words 'in the two years immediately preceding' had stood by themselves some ambiguity would have arisen, because it is possible to say that when we speak of 'in the two years', it can be any time during the period of two years. But when the words 'in the two ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me from house property', which in the two years immediately preceding the date on which the transfer took place, was being used by the assessee or a parent of his mainly for the purpose of his own or the parent's own residence, and the assessee has within a period of one year before or after that date purchased, or has within a period of two years after that date constructed, a house property for the purposes of his own residence, then, instead of the capital gains being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that is to say, (i) if the amount of the capital gain is greater than the cost of the new asset, the difference between the amount of the capital gain and the cost of the new asset shall be charged under section 45 as the income of the previous year ; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of D three years of its purchase or construction, as the case may be, the cost shall be nil ; or (ii) if the amount of the capital gain is equal to or less than the cost of the ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not in dispute that, before the assessee can claim exemption under section 54, he must satisfy the conditions laid down therein. On a plain reading of the section, it can be said that one of the conditions which is required to be fulfilled is that the building or house property should have been used by the assessee or a parent of his mainly for the purpose of his own or the parent's own residence in the two years immediately preceding the date on which the transfer took place. The use of the words "was being used", as rightly pointed out by the Madras High Court, denotes continuity of user. In order to clarify what was in its mind while providing for the requirement of continuous user, the Legislature specified the period with reference to which continuous user is to be deter mined. The starting point of that period is "two years immediately pre ceding the date on which the transfer took place". For the purpose of deciding whether the property was being used by the assessee for the purpose stated in the section, one has to look to that period of two years and to no other period. It appears that the Legislature specified the period as it intended to give the benefit of exemption to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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