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Issues involved: Determination of eligibility for exemption u/s 54 of the Income Tax Act, 1961 based on the construction of a new residential property after the sale of the old property.
Summary: The case involved an individual who sold a property in December 1964 and realized a capital gain. The individual shifted to a newly constructed house in South Extension, which was completed within two years of the sale. The Income Tax Officer (ITO) denied the exemption under s. 54, but the Appellate Tribunal accepted the claim. The Tribunal found that the new construction was for the assessee's residence, even though only a portion was initially occupied. The High Court analyzed the provisions of s. 54, emphasizing that the term "house property" includes independent residential units. The Court concluded that the conditions for exemption were met as the assessee invested more than the capital gain amount in the new construction, which was used for residential purposes. Therefore, the assessee was entitled to the exemption under s. 54. The Court reframed the question and answered it in favor of the assessee, directing the Commissioner to pay the costs. In conclusion, the High Court upheld the assessee's entitlement to exemption u/s 54 of the Income Tax Act, 1961, based on the construction of a new residential property within the stipulated period after the sale of the old property.
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