2000 (11) TMI 22 - HC - Income Tax

Summary

Issues: The judgment involves the interpretation of exemption under section 54(1) of the Income-tax Act, 1961 in relation to the construction of flats in 'Akash Deep Building' and the entitlement to capital gains exemption.

Exemption under Section 54(1): The case revolved around the claim of exemption under section 54(1) of the Act. The late Maharani of Palitana sold her property at 9, Hailey Road, New Delhi to Ansal and Sehgal Properties (P.) Ltd. and a new building, Akash Deep Building, was constructed on the site. The dispute arose when the Income-tax Officer contended that the flats in Akash Deep Building were purchased by the assessee and not constructed by her, thus challenging the exemption claim. The Appellate Assistant Commissioner and the Tribunal, however, upheld the exemption claim, emphasizing that the construction need not be done personally by the assessee. The Tribunal noted that the late Maharani had advanced funds for the construction of flats in Akash Deep Building, which was carried out by Ansal and Sehgal Properties (P.) Ltd. Consequently, the Tribunal found that the provisions of section 54(1) applied as the new flats were constructed within two years of the sale of the property at Hailey Road.

Legal Dispute and Tribunal's Decision: The Tribunal rejected the Revenue's argument that it was a case of purchase and not construction, affirming that the late Maharani had provided funds specifically for the construction of flats in Akash Deep Building. The Tribunal's factual findings supported the conclusion that the construction could be attributed to the late Maharani, thereby meeting the requirements for exemption under section 54(1). As a result, the Tribunal held that no question of law arose from the factual findings and declined to answer the questions referred for opinion.

Conclusion: The High Court declined to answer the questions referred for opinion, as the Tribunal's findings were factual and supported the assessee's claim for exemption under section 54(1) of the Income-tax Act, 1961. The reference was disposed of accordingly.