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TMI Blog1991 (10) TMI 106X X X X Extracts X X X X X X X X Extracts X X X X ..... land along with the incomplete building on 4-1-1982 to M/s. V.M. Salgaocar Bros. (P.) Ltd. for a sum of Rs. 5,00,000. 3. For the assessment year 1982-83, corresponding to the previous year ended 31-3-1982, the assessee filed a return on 5-7-1982 along with the copies of the purchase and sale deeds. He computed the income from capital gains by treating the land as a long term capital asset and the structure as a short term capital asset in the following manner :-- " Computation of Capital Gains (Assessment year 1982-83) Long Term Sale of site and house on 4th January 82 (No. 55, Indranagar, Bangalore) Site for Rs. 2,40,000 and House Rs. 2,60,000 Rs. Rs. Site purchased in Dec., 1967 9,000 2,40,000 Improvements--Levelling ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he part of the assessee to disclose material facts and that a re-assessment cannot be made by a change of opinion on the same material. The ITO over-ruled these objections and re-computed the capital gains treating the property as a single short-term asset as follows : " Sale consideration Rs. 5,00,000 Cost of the site including improvement and sales commission Rs. 17,800 Cost of construction Rs. 2,60,000 Commission paid Rs. 5,000 Rs. 2,83,000 -------------------------- ------------------------- Rs. 2,17,000 " -------------------------- This was confirmed on appeal. 6. In the further appeal before us it was contended on behalf of the assessee that the re-assessment proceedings could not be sustained either under sub-sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (a) Where the land appurtenant to the building is of such a nature that it cannot be transferred separately from the building or it forms an integral part of the building so that its existence is essential for the necessary use of the building, the land would become a part of the building. The construction of a building on such a land would bring into existence a different asset, i.e., house property/building (being building and land appurtenant thereto) on the date of completion of the building. (b) The sale or transfer of such an asset, i.e., house property (building and land appurtenant thereto) within a period of 60 months (now 36 months) would result in short term capital gains. (Instruction No. 1130-F. No. 202/27/74-ITA-II date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... permission would not be a trespasser, nor would the buildings so constructed vest in the owner of the land . . . . " The Madras High Court has also re-stated this in the recent decision in the case of Park View Enterprises v. State Govt. of Tamil Nadu [1991] 189 ITR 192. It follows that the statement of law contained in the CBDT Circular is not correct. 9. Moreover, a short term capital asset has been defined in section 2(42A) as a capital asset held for not more than thirty-six months immediately preceding the date of its transfer. When the land has been admittedly held for more than 36 months it cannot become a capital asset held for not more than 36 months merely because a building has been constructed thereon. Therefore, when the as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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