9911796707
TMI Blog1970 (10) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee by way of adjustment of his claim for compensation in respect of properties left in Pakistan. This house property was used by the assessee, mainly, for the purpose of his own residence right up to 26th June, 1962, when he sold it for the price of Rs. 40,000. The sale of the house property resulted in a capital gain of Rs. 33,175. The assessee by utilising the sale proceeds purchased a piece of land on 30th July, 1962, and started constructing a building on it in August, 1962. The construction of the ground floor of the building was completed by March, 1963, at a cost of Rs. 34,000. The total area of the ground floor was 1,389 sq. ft. and as soon as it was about to be ready, the assessee occupied the whole of it in February, 1963 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the purpose of his own residence as required by section 54. The assessee carried the matter in appeal to the Appellate Assistant Commissioner but the Appellate Assistant Commissioner took the same view and rejected the appeal. The assessee thereupon preferred a further appeal to the Tribunal and before the Tribunal the assessee was successful in his claim for exemption. The Tribunal held that, on a proper construction of section 54, it was not necessary that the new building in its entirety must be constructed within a period of two years from the date of sale of the old building and it was sufficient if a part of it was constructed for the purpose of the residence of the assessee. What was essential, according to the Tribunal, was tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thereto the income of which is chargeable under the head 'Income from house property', which in the two years immediately preceding the date on which the transfer took place, was being used by the assessee or a parent of his mainly for the purposes of his own or the parent's own residence and the assessee has within a period of one year before or after that date purchased, or has within a period of two years after that date constructed, a house property for the purposes of his own residence, then, instead of the capital gain being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that is to say, - (i) if the amount of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee can lay a claim to exemption, in respect of capital gain arising from the transfer of the house property. Now, it was not in dispute between the parties that the old house property sold by the assessee in respect of which capital gain was sought to be assessed by the revenue was used by the assessee mainly for the purpose of his own residence during the period of two years immediately preceding the date on which it was sold and the first condition was, therefore, satisfied. The only controversy between the parties was as to the fulfilment of the second condition. The second condition consists of two limbs : one is that the new building must have been constructed by the assessee within a period of two years from the date of sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uilding was completed by March, 1963, and immediately on completion of the construction, the assessee let out an area of 734 sq. ft. to tenants and retained with him an area of only 655 square feet for his own occupation. When more than 50 per cent. of the area of the ground floor of the new building was let out by the assessee to tenants as soon as the construction was completed, it is difficult to see how it can be said that the ground floor of the new building was constructed by the assessee for the purpose of his own residence. If the purpose for which the ground floor was constructed by the assessee was his own residence, it is inexplicable why the assessee should have let out a major portion of the area of the ground floor to tenants. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but he had minor children and, when they grew up, more space would be required and it was in order to provide for this anticipated requirement in future that he had constructed the whole of the ground floor, and, therefore, the entire ground floor must be held to have been constructed for the purpose of his own residence. This suggestion cannot stand scrutiny for a moment. When the section says that the house property must be constructed by the assessee for the purpose of his own residence, it refers to the immediate purpose of construction. It is not sufficient to comply with the requirement of the section to say that the assessee has constructed the house property for the purpose of occupying it for his residence after a period of ten yea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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