1991 (6) TMI 93 - AT - Income Tax

Summary

Issues:
- Contesting the action of the I.T. authorities in not granting exemption u/s. 53 of the Act.

Detailed Analysis:
1. The assessee, an individual, purchased two adjacent flats with his brother. The assessee contributed Rs. 8.50 lakhs for one flat and transferred a room to his brother for Rs. 2,10,000. The assessee claimed exemption u/s. 53 for the capital gains. The ITO rejected the claim stating that selling a part of a flat does not qualify for exemption under section 53 as it requires selling the entire house. The ITO emphasized that the provision aims to prevent individuals from selling parts of their house annually to evade tax.

2. The Dy. Commissioner of Income-tax (Appeals) upheld the ITO's decision, stating that the exemption u/s. 53 applies only when the entire residential house is transferred, not a part of it. The D.C.(A) noted that both flats were jointly used by the assessee and his brother, indicating continued ownership of the residential property by the assessee. Therefore, the claim for exemption was rejected.

3. The assessee appealed to the Tribunal, reiterating the claim for exemption u/s. 53. The Tribunal analyzed the provisions of section 53, emphasizing that exemption is available only if the assessee does not own any other residential house at the time of transfer. As the assessee had sold only a portion of the house while retaining the rest for personal use, the Tribunal concluded that the legislative intent was to prevent misuse of the exemption by selling parts of the house annually. Consequently, the Tribunal dismissed the appeal, upholding the decision of the I.T. authorities to reject the claim for exemption u/s. 53.

In conclusion, the Tribunal affirmed that selling a part of a residential house does not qualify for exemption u/s. 53 of the Act, which requires the transfer of the entire house. The legislative intent behind the provision is to provide concessions to individuals changing their residential property, not to allow annual selling of house parts to evade tax. Therefore, the Tribunal dismissed the appeal, supporting the decision of the I.T. authorities to deny the exemption claim.