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TMI Blog1984 (7) TMI 152X X X X Extracts X X X X X X X X Extracts X X X X ..... ount of Rs. 8,700 to the co-operative society to perfect her title to the flat. In part III of her return for this assessment year, the assessee noted that she is entitled to exemption under section 54 on the ground that she had ordered construction of flat Nos. 10 and 16 in Rameshwar Apartments, Thane, Bombay, for self-occupation and the construction was completed to a great extent. However, admittedly, the said construction was not completed within two years from the date of sale of the old house property. The ITO found that the assessee was not entitled to the exemption claimed under section 54 and the entire capital gains are liable to be added to the income returned. As the proposed addition sought to be made to the returned income is more than Rs. 1 lakh, the draft order was forwarded to the assessee, which was received by the mother and the power of attorney of the assessee, viz., Smt. Ahiliya Bai Kirloskar on 24-11-1982. Smt. Ahiliya Bai Kirloskar, by her application dated 26/27-11-1982, requested time till 31-12-1982 for filing objections for the draft assessment order. However, the maximum time for which extension can be granted under section 144B of the Act is only up to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... completed within two years from the date of sale of the flat in Kalpataru Building, Bombay. However, it was submitted that there was delay in completion of construction of the flats owing to certain factors beyond the control of the assessee. It is stated that the construction work was held up owing to the non-availability of cement in the wake of Maharashtra cement scandal. It was stated that the assessee actually entered into the possession of the flats 10 and 16 at Rameshwar Apartments at Thane, in 1982. It was submitted that denial of exemption under section 54 was not just or fair especially when the assessee was not at all responsible for the delay caused in the construction of the flats or the buildings and it was delayed owing to certain unforeseen circumstances. The assessee sought to rely upon the decisions reported in CIT v. Tikyomal Jasanmal [1971] 82 ITR 95 (Guj.), CIT v. Natu Hansra [1976] 105 ITR 43 (Guj.), Smt. Shantaben P. Gandhi v. CIT [1981] 129 ITR 218 (Guj.) and Addl. CIT v. Vidya Prakash Talwar [1981] 132 ITR 661 (Delhi). The learned Commissioner (Appeals) held that the decisions cited on behalf of the assessee cannot be of any help to her. The learned Commis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. There it is held as follows : " A statutory provision must be so construed, if possible, that absurdity and mischief may be avoided. Where the plain literal interpretation of a statutory provision produces a manifestly absurd and unjust result which could never have been intended by the Legislature, the Court may modify the language used by the Legislature or even do some violence to it, so as to achieve the obvious intention of the Legislature and produce a rational construction. " As against this argument, the learned departmental representative, in the first instance, states that the copies of the agreement now filed in a paper compilation on behalf of the assessee would reveal that the assessee intended to purchase two flats after they have completed construction and she is obliged to make certain payments to the builders of Rameshwar Apartments. The provisions of the agreements dated 1-4-1981 which the assessee had entered into with Somnath Builders, would clearly reveal that the assessee intended to purchase one flat in her favour for Rs. 99,540 and another flat in favour of her minor son for Rs. 1,28,800. Therefore, he contends that we should understand the case of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may operate. Where, however, the house is in the process of construction and, on account of the fact that it is not complete, has not reached a habitable stage, the concept of a 'house' cannot be extended to cover such an incomplete construction. Thus, according to him, unless the house constructed is such which is habitable, it cannot be called a house and as a matter of fact a house whose construction was not complete cannot be called a house. In this case as to whether it is an outright purchase or construction by the assessee herself, the flats which she, subsequently, occupied in 1982 were new constructions and there was no scope for any repairs being undertaken to them and, hence, the category of house, which fell under the proviso to section 5(1)(iv), should not be considered for our purposes. 5. Thus, we considered the arguments on both sides. We are of the opinion that the submissions made on behalf of the department should be accepted. Our reasons are as follows. Section 54(1) is as follows : " Where a capital gain arises from the transfer of a capital asset to which the provisions of section 53 are not applicable, being buildings or lands appurtenant thereto the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the first floor in the said building on the said property. The various stages at which the sale price was to be paid were given at clause 4 of the agreement. Clause 5 speaks of the probable date before which the flat should be completed and handed over possession to the second party (the assessee). It says as follows : " 5. The first party agrees to hand over the possession of the said flat to the second party on or before May 1982 subject to the realization of the cheque, if any, paid by the second party to the first party in payment of the balance payment as aforesaid and subject, however, to the grant of completion certificate by the Thane Municipal Council and subject to the acts of God, such as earthquake, floods or other natural calamities, act of enemy war, and subject to the availability of cement, steel or any other cause beyond the control of the first party." Clause 7 of the agreement discloses the actual interest, which the assessee had purchased from the builders and it is as follows : " 7. The second party shall have no claim save and except in respect of the particular flat hereby agreed to be purchased, i.e., open space, parking spaces, lifts, staircases, te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se was available to the assessee. Thus, exemption under section 54 would be available to the assessee only if the consideration of Rs. 3,34,050 was spent towards purchase of another residential house within 24-4-1980. Therefore, once it is admitted that the sale itself was complete in 1982, it is obvious that the assessee cannot claim exemption under section 54. Further assuming, without admitting, that it is a case of constructing a building, even then, in our opinion, the building must be completed construction and the building must become habitable within two years time available under section 54. The words employed in section 54 relevant for the assessment year under consideration, viz., " has within a period of two years after that date constructed, a house property for the purposes of his own residence, then ", would only admit of the construction which is stated above by us. In our opinion, section 54 exemption would not be available if simply construction of a house started within two years' time from the date of the sale of the old house and the construction is not completed within two years and the house is fit for habitation within two years. We fully agree with the subm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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