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TMI Blog1981 (4) TMI 84X X X X Extracts X X X X X X X X Extracts X X X X ..... bove property from 1957 to 1964. On December 1, 1963, the assessee entered into an agreement of sale in respect of the property with one Shanti Devi and also received an earnest money of Rs. 25,000 from her. Under the terms of the agreement, the assessee had to deliver vacant possession of the said house to Shanti Devi. But this could not be done for reasons to be referred later and the sale fell through. Soon after the agreement with Shanti Devi, i. e., on December 17, 1963, the assessee purchased a plot at South Extension in New Delhi. He also constructed a residential house on this plot commencing in March, 1964. Apparently he expected the house to be completed soon and he anticipated that he would be able to move into this house and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e shifted to the first floor and the barsati and it is common ground that he occupied it as his residential premises. On the above facts, the department had to consider the assessee's claim for exemption under s. 54 of the I.T. Act, 1961. The ITO denied the assessee the benefit of the exemption but the claim was accepted by the AAC as well as the Appellate Tribunal. The Tribunal pointed out that there was no dispute that the Darya Ganj property had been used by the assessee mainly (indeed wholly) for the purpose of the assessee's own residence for the statutorily required period. The only further requirement to render the assessee eligible for exemption under s. 54 was that the assessee should have, within a period of 2 years after the da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation in terms of section 54, notwithstanding the fact that only a portion of the newly constructed property in South Extension came to be occupied for the assessee's own residence ?" Section 54 confers an exemption from capital gains in certain cases in respect of the sale of house property. The section runs as follows: "54. 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 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 ow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... available. A perusal of the entire section will show that where an assessee disposes of a property which he is residing and invests the amount of capital gains derived thereby, within the stipulated period, in a new residential house property either purchased or constructed by him, he will be exempted from tax in respect of the capital gains realised by him. The legislative object of the provision has been explained in the decision of the Gujarat High Court in CIT v. Natu Hansraj [1976] 105 ITR 43. So far as the present case is concerned, we think, it clearly falls both within the intendment and language of s. 54 if two important considerations are kept in mind. The first is that when the section talks of house property it does not mean a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd of that year and was eventually completed in November, 1966. So far as this residential unit is concerned it was constructed by the assessee within period of two years from the date on which Darya Ganj property was disposed of. It has also been found as a fact by the Tribunal that the investment by the assessee in this property was to the extent of Rs. 76,694 between January, 1965, and November, 1966, and this was more than sufficient to absolve the capital gains realised by the assessee on the sale of the Darya Ganj property. If these two aspects of the case are kept in mind it seems to us pretty plain that in the present case the conditions for exemption under s. 54 are clearly fulfilled. To sum up: the assessee sold the Darya Ganj pro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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