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TMI Blog2014 (10) TMI 932X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be made, we fail to understand why that distinction should not be kept in mind in extending the benefit under Section 54(1) of the Act. If the land on which the building is constructed is a long term capital gain and the amount received towards the sale of such land when it is assessed a s a long term capital gain and taxed. In view of Section 54(1) if that consideration from the sale of the land is utilized in acquiring a residential house, the bene fit from exemption is to be extended. Otherwise, the section looks absurd. The land which is adjoining the residential house is entitled to benefit under Sect ion 54(1) of the Act but the land on which the residential house would not be entitled to such benefit, we cannot impute any such int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s long term capital asset and the capital gains treated accordingly. There is no dispute about the cost of construction of another residential house and such residential house has been constructed within the period stipulated under Section 54. The only dispute relates to the availability of Section 54. 3. The Income Tax Officer is of the view that the capital gains as is attributable to long term capital asset viz land will not qualify for relief under section 54 even though it is a long term capital asset as the building which stood on the same and which was the subject matter of transfer was a short term capital asset. 4. Aggrieved by the order, the assessee initially preferred an appeal which came to be dismissed. The second appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he house, which was transferred, is not a long term capital asset because part of it is short term. Section 54 does not provide bifurcation of capital gain arising from the sale of land and building separately and to allow deduction in case anyone of them as long term capital asset. 6. The tribunal relied on the judgment of the Kerala High Court in the case of T.N.Vasavan Vs. CI T reported in 197 ITR 163 to substantiate its content ions and thus the appeal filed by the assessee came to be dismissed. Aggrieved by the said order the assesse e is in appeal. This appeal is admitted to consider the following substantial questions of law: 1. Whether the Tribunal is justified in law under the facts and circumstances of the case in negatin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ale of lands independent of the buildings, and therefore, he submits no cause for interference with the impugned orders is made out. 10. In fact, it is useful to refer to a judgment of this court in the case of Smt. Azra Abdulla Vs. The Commissioner of Income Tax in I.T.R.C.No. 146/1995 decided on 09.04.1997 where the questions which arose for consideration was whether land appurtenant thereto the sale of land appurtenant is entitled to the benefit of Section 54(1) of the Ac?. This court after referring to several judgments has held as under: Section 54 of the Act deals with capital gain arising from transfer of a long term capital asset being building or lands appurtenant thereto and being a residential house the income of which is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so that it may be treated as land appurtenant thereto. Indeed, it was noticed there that in deciding as to whether any land is appurtenant thereto a residential house, the requirements of the persons occupying the building, consistent with their social standing etc., are relevant for the purpose. Thereafter, certain other tests were set out. In Bangalore City, years ago, the style of life was such that persons would purchase property with bungalows having sprawling ground around it and the bungalow and grounds thereto formed one unit. The land around it would not be put to any separate use for that would invade their privacy. If these aspects are borne in mind, we do not think any point is made out in this case to apply the tests laid down ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... constructed is not entitled to the said benefit. 12. When a property, residential house is sold, the sale consideration includes the value of the land and the value of the construction. Though there is no two sale transactions involved for the purpose of the Act, in order to calculate the capital gains as rightly done by the Assessing authority, he has treated the sale of land on which the residential house is constructed as a long term capital gain and he has treated the building as short term capital gain. If, for levying tax under the Act, such a distinction could be made, we fail to understand why that distinction should not be kept in mind in extending the benefit under Section 54(1) of the Act. If the land on which the building i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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