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Issues Involved:
The issue involves the interpretation of the provisions of section 54 of the Income-tax Act, 1961, specifically regarding the eligibility for exemption claimed under this section for the assessment year 1973-74. Facts and Dispute: The assessee purchased a house in Bangalore for his residence, sold a portion of it, and then bought another house in the same city. The dispute arose when the Income-tax Officer rejected the assessee's claim for total exemption from capital gains tax, which was later allowed by the Appellate Assistant Commissioner but overturned by the Tribunal. Contentions and Legal Interpretation: The assessee's advocate argued that the claim for exemption was valid, citing a ruling from the High Court of Delhi. On the other hand, the Revenue contended that since the residential house was not used continuously for two years before the sale, the exemption under section 54 was not applicable, relying on rulings from the High Court of Madras. Judicial Analysis: The High Court of Karnataka analyzed the language of section 54, particularly the phrase "in the two years immediately preceding the date on which the transfer took place." The court concluded that this phrase did not require continuous residence for two years, rejecting the Revenue's interpretation that the house must have been used continuously for the entire period. Precedent and Conclusion: The court referenced dissenting views from the High Court of Delhi, disagreeing with the interpretations of the High Court of Madras. Ultimately, the court found that the assessee fulfilled all other conditions of section 54 and was entitled to the exemption claimed. Therefore, the court ruled in favor of the assessee, directing each party to bear their own costs.
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