1976 (9) TMI 80 - AT - Income Tax

Summary

Issues:
1. Whether the assessee is entitled to exemption under section 54 of the Income-tax Act, 1961 based on the sale of a house property.

Analysis:
The case involved a departmental appeal where the assessee, an individual, sold a house property and claimed exemption of the capital gain under section 54 of the Income-tax Act, 1961. The Income-tax Officer disallowed the exemption initially, stating that a portion of the property was rented out before the sale, questioning the residential use criteria. However, the Appellate Assistant Commissioner found that the conditions under section 54 were met as the property was primarily used for the assessee's residence. The Revenue appealed this decision, arguing that the property was partly rented out, making it ineligible for exemption under section 54. The main issue was whether the assessee fulfilled the conditions for exemption under section 54 of the Act.

The relevant provision of section 54 states that for exemption, the property should have been used mainly for the assessee's own residence in the two years preceding the transfer, and a new property should have been purchased within a specified period. In this case, it was acknowledged that the conditions regarding the income from the asset and the purchase of a new property were met. The dispute centered on whether the property was primarily used for the assessee's residence. The property consisted of a ground floor (rented out) and a first floor (self-occupied). The carpet area of the self-occupied portion was significantly larger than the rented portion, indicating predominant residential use. The Revenue argued based on annual letting values, but the Tribunal rejected this, emphasizing the carpet areas as decisive. The Tribunal upheld the Appellate Assistant Commissioner's decision, concluding that the property was mainly used for the assessee's residence, thus qualifying for exemption under section 54.

Ultimately, the Tribunal dismissed the Revenue's appeal, affirming the assessee's entitlement to exemption under section 54 of the Income-tax Act, 1961. The decision was based on the predominant residential use of the property by the assessee, meeting the conditions specified in the Act for claiming exemption.