TMI Blog1984 (7) TMI 62X X X X Extracts X X X X X X X X Extracts X X X X ..... of 17,136 sq. ft. and the total extent of land including the land on which the building stands is 13,029 sq. yards. The building as well as the entire extent of land was acquired by the Government under the Land Acquisition Act for construction of the office of the Accountant-General. Compensation was initially awarded by the Land Acquisition Officer and it was enhanced by the Second Additional Chief Judge, City Civil Court, Hyderabad, pursuant to a reference made under s. 18 of the Land Acquisition Act. The compensation finally awarded was: Rs. (a) Compensation for land 5,21,160 (b) Compensation for the building 1,71,360 (c) Solatium 1,03,878 ----------- 7,96,398 ----------- In the income-tax return filed for the assessment year 1964-65, the assessee declared her share of capital gain arising on the transfer of the land and building by way of compulsory acquisition. The assessee claimed that she constructed a building for her residential purposes at a cost of Rs. 80,000 within a period of two yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if the land contiguous to a building is vast in extent, the entire extent of land could not be considered to be appurtenant to the building and only a reasonable portion of such land could be so considered under law. He, accordingly, directed the ITO to redetermine the capital gain on the transfer of the building and the land reasonably appurtenant to the same and, if such capital gain should be less than Rs. 75,000, restrict the deduction under s. 54(1) of the Act only to the extent of the restricted sum. The AAC obviously held the view that the capital gain derived on the sale of land, which is not reasonably appurtenant to the building should be taxed in entirety and no part of the sum of Rs. 75,000 spent on the construction of the new residential house should be set off against such capital gain. As the ITO did not examine the question from the above points of view, he directed the ITO to re-work out the capital gain on the aforesaid basis. The assessee filed an appeal to the Income-tax Appellate Tribunal questioning the correctness of the above view of the AAC. It was urged before the Income-tax Appellate Tribunal that the AAC wrongly construed the provisions of s. 54(1) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -... (b) 'land appurtenant', in relation to any dwelling unit or units comprising a building, means, (i) in an area where there is any law in force providing for the minimum extent of land contiguous to the land occupied by any building to be kept as open space for the enjoyment of such building, the minimum extent of land contiguous to the land occupied by the building comprising such dwelling unit or units required to be kept as open space under such law ; (ii) in any other area, an extent of land not exceeding one-third of the plinth area of the building comprising the dwelling unit or units at the ground level contiguous to the land occupied by such building. " Learned counsel states that the same considerations should prevail for determining the land appurtenant for purposes of s. 54 of the I.T. Act also. Learned counsel relied on certain decisions to which we shall presently refer, supporting his contention that the extent of the land appurtenant to a building has to be determined with reference to the facts of each case bearing essentially in mind the extent of land required for proper enjoyment of the building. Sri Parvatha Rao, learned counsel appearing for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apital gain arising on the sale of property used for residence and it may be usefully extracted below: " 54. Profit on sale of Property used for residence.-Where a capital gain arises from the transfer of a capital asset to which the provisions of section 53 are not applicable, 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 which the transfer took place, was being used by the assessee or a parent of his mainly for the purposes 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 gain 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extent of land which is required for the proper enjoyment of the house and may, therefore, be considered as appurtenant to the building. In other words, what the Revenue contends is that if, in a given case, a vast extent of land is also transferred along with the building, it is not permissible to consider the entire extent of land as appurtenant to the building. An enquiry should be conducted for the purpose of ascertaining the extent of land required for effectively and properly enjoying the building and the land appurtenant should be restricted only to that extent and the capital gain ascertained accordingly. The set-off of the cost of the new house property acquired by the assessee for the purpose of his own residence can be made against the capital gain so computed. The expression " land appurtenant thereto " occurring in s. 54 of the Act has not been defined. It must, therefore, be understood in its popular and non-technical sense. It is not possible to accept the Revenue's contention that clause (b) of the Explanation to s. 5(1)(ivc) of the W.T. Act, 1957, defining " land appurtenant " for the purpose of that clause should be considered equally applicable for the purpos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pending upon the facts and circumstances of each case and the authorities must determine the extent of land that is considered to be appurtenant to the building based on some acceptable criteria to which we shall advert a little later. Our attention has not been drawn to any decided cases on this point under the I.T. Act or, for that matter, under the W.T. Act. We have already stated that the expression " land appurtenant thereto " occurring in s. 54 of the Act is used in a broad, popular and non-technical sense and it must be so understood. We may now examine some decisions bearing on this point arising under different enactments. In Palaniappa Chettiar v. Vairavan Chettiar [1960] 1 MLJ (Sh. N.) 29, a case arising under the Madras Buildings (Lease and Rent Control) Act, the Madras High Court held that the word " appurtenant " includes all structures of property abutting or adjacent to the main tenement or property, which are proper and necessary for its due enjoyment. In Trim v. Sturminster Rural District Council [1938] 2 KB 508 ; 2 All ER 168 (CA), which arose under the Housing Act, 1936, the meaning of the expression " house " turned out to be significant. Under s. 188 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lating to, pertinent." That is the primary meaning of the word 'appurtenant'. In Budhi Mal v. Bhati, AIR 1915 All 459, " an appurtenance " is defined as an appendage, an adjunct, or something belonging to another thing as principal and passing as an incident to it. In Trim v. Sturminster Rural District Council [1938] 2 KB 508 ; 2 All ER 168 (CA), the learned judge considered the meaning of the word 'appurtenance' at pages 515 and 516 (of [1938] 2 KB) and observed that the word 'appurtenance' had never been extended to include land, as meaning a corporeal hereditament, which does not fall within the curtilage of the yard of the house itself-that is, not within the parcel of the demise of the house. That may be so. In the definition contained in the Act, the grounds and outhouses, if any, appurtenant to such building are included in the definition. As pointed out in Thomas v. Owen [1888] 20 QBD 225 (CA) at pp. 231, 232, the word I appurtenance has also a secondary meaning as equivalent to 'usually occupied' and this was cited with approval in Woodfall on Landlord and Tenant. If from 1914 this entire ground was occupied for the purpose of continuing the superstructure along with th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be understood in that primary sense and it is not open to the courts to impose any other considerations. Where, however, the expressions used convey more than one sense a primary and secondary sense that sense. is to be adopted which best harmonises with the context and promotes in the fullest manner the policy and object of the Legislature. In our opinion, the expression " land appurtenant thereto " has also a secondary meaning as equivalent to " usually enjoyed or occupied with ". There is no indication that the Legislature used the above expression in s. 54 of the I.T. Act limiting its sense and meaning artificially to any particular extent. Considerations governing the limitations imposed upon the meaning of that expression under sister enactments like the W.T. Act and the Urban Ceiling and Regulation Act, 1976, cannot be imported into s. 54 of the I.T. Act. In our opinion, that expression is used in s. 54 of the I.T. Act in a wider sense. It is, therefore, imperative that the tax authorities will have to determine the extent of land appurtenant to a building transferred, taking into consideration a variety of circumstances that may be relevant for the purpose. It is not pos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. It is for the tax authorities to apply their mind properly to the facts of each case and to devise tests suitable and appropriate to each case. In the present case, it is stated that the total extent of land is 13,029 sq. yards and this included the land on which the building is constructed. It is also stated that four co-owners are separately residing in this building prior to its acquisition. Although the AAC did not spell out how the land appurtenant should be determined, he merely directed the ITO to make an enquiry to determine the extent of land that is reasonably appurtenant to the building. We do not find any error in the direction given by the AAC. While it is true, as Sri Parvatha Rao, learned counsel for the assessee, contends, that there is no material on record to indicate that the land was put to any non-residential user and the building and land was not treated as single unit in the past, it is clear that the ITO did not apply his mind to the matter. If the ITO applies his mind and makes an appropriate enquiry to determine the extent of land appurtenant to the building in the present case, he may conceivably come to a conclusion that the entire extent of land a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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