TMI Blog1989 (9) TMI 58X X X X Extracts X X X X X X X X Extracts X X X X ..... ose on the sale of the residential house of the assessee at Tiruppattur during the accounting year relevant to the assessment year 1975-76 ?" The brief facts leading to this reference are the following : The respondent/assessee owned two residential houses, one at Tiruppattur and another at No. 19, Pinjala Subramaniam Road, Madras-17. The house at Tiruppattur which was in his enjoyment for residential purpose was sold by him on May 24, 1974, for a sum of Rs. 45,000. By that sale, admittedly, he has earned capital gain to a extent of Rs. 32,500. The asses see claimed exemption under section 54 of the Act before the Assessing Officer on the ground that by utilising the sale proceeds obtained by the sale of the house at Tiruppattur, he has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition must be commenced within one month and should be completed within three months from the date of the order. The assessee, by producing the order of the Accommodation Controller, has made it clear before the Tribunal that the demolition of the first floor was complete and it is not a case of mere alteration and addition as pointed out by the Income-tax Officer. The Tribunal, concurring with the view taken by the Appellate Assistant Commissioner, held that the assessee is entitled to the exemption under section 54 of the Act. In support of this conclusion, the Tribunal placed reliance on two judgments of the Gujarat High Court, one referred to and relied on by the Appellate Assistant Commissioner and another in CIT v. Natu Hansraj report ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... squarely apply to the facts of this case. In addition to the three judgments referred to above, learned counsel for the assessee also cited a recent decision of the Gujarat High Court in CIT v. Kodandas Chanchlomal reported in 1985] 155 ITR 273 and in this case all the three judgments mentioned above have been noticed. In CIT v. Tikyoma1 Jasanmal reported in [1971] 82 ITR 95 (Guj), though the case went against the assessee on facts, the principle laid down therein, while interpreting the scope of section 54 by Bhagwati C. J., as he then was, speaking for the Bench, was to the effect that for the purpose of claiming exemption under section 54, two conditions are required to be satisfied, namely, (1) the house property must have been used b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onstructs with the end in view of his own immediate residential purpose, then, he should not be made subject to the charge of capital gains. In order to effectuate this object, therefore, what the Legislature could have intended to provide is that the new property must have been really and substantially purchased or constructed by the assessee for the immediate purpose of his own residence. Under section 54, it is sufficient if the old house was mainly used for the purpose of the residence of the assessee or his parent. Since this is the requirement of the first condition, it is difficult to ascribe to the Legislature, while laying down the second condition for exemption, the intention to provide that the new property must be purchased or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 22 to 27 which make it clear that the expression 'house property' takes into account an independent residential unit. In fact, there can be no doubt, that the section takes into account all independent residential units particularly in these days when multi-storeyed flats are becoming the order of the day." The above judgment rendered by a Division Bench of the Delhi High Court has been cited with approval in the latest judgment of the Gujarat High Court in CIT v. Kodandas Chanchlomal reported in [1985] 155 ITR 273, wherein the headnote reads as follows: "A house property for the purposes of section 54 of the Income-tax Act, 1961, has the same meaning as the concept of house property under sections 22 to 27 which takes into account an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce the construction of the new building was completed within the statutory period of two years, both the conditions for grant of exemption were satisfied and the assessee was entitled to pro rata exemption under section 54 from the liability to tax on capital gains to the extent of the value of the portion of the property in his occupation." From the above decisions, it is quite clear that the view taken by the Tribunal is unexceptionable having regard to the admitted position that the assessee, after demolishing completely the first floor, had put up a new construction within the period allowed by the statute, namely, section 54 of the Act. It is also common ground that the assessee is in enjoyment of the entire property. The distinctio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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