9911796707
TMI Blog1980 (6) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... hereinafter referred to as the " larger plot "). Out of the larger plot, which was situated in the front, 100 sq. yards of land was acquired by the Municipal Corporation of Bombay. Ultimately, therefore, the assessee was left with 1,440 sq. yards of land out of the larger plot. There was a building constructed on the said portion of land which was partly let out and partly occupied by the assessee herself. It appears that on June 5, 1967, the assessee entered into an agreement with one K. K. Vora and two others to sell to them the larger plot with the building standing thereon. A few days before the said agreement was executed, the assessee had entered into an agreement on May 25, 1967, with a firm of contractors carrying on its business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITO that having regard to the provisions of s. 54 of the I.T. Act, 1961 (hereinafter referred to as " the Act "), the cost of construction of the new building erected on the smaller plot should be deducted from the sale proceeds realised on conveyance of the larger plot with the building standing thereon and that only the difference between the capital gain arising on the transfer of the larger plot and the cost of construction of the new building should be charged under s. 45 as the income of the previous year. The ITO found that the assessee's claim could not be accepted inasmuch as the two conditions laid down in s. 54 were not satisfied, namely, (1) that the building standing on the larger plot, which was partly let to tenants, could no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transfer, a house property for the purposes of his own residence or he should have, within a period of two years after that date, constructed a house property for a similar purpose, was not satisfied in the instant case. The Tribunal held that since the new house property was constructed on the smaller plot belonging to the assessee and there was nothing on the record to show that the superstructure constructed thereon was purchased by the assessee from the contractors, M/s. Madhani Construction Co., who owned it, it could not be said that the assessee had purchased, within a period of one year before or after the date of transfer of the larger plot, a house property for the purposes of her own residence. The Tribunal further found that si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lace. Section 54 enacts an exemption to the provision of s. 45 and it provides that upon the satisfaction of the conditions therein prescribed, instead of the capital gain being charged to income-tax as provided in s. 45, it shall be dealt with in accordance with the provisions of the said section. Two relevant conditions prescribed in the opening part of the said section for its applicability are: (1) that the capital gain must arise from the transfer of a building or land appurtenant thereto, which in the two years immediately preceding the date on which the transfer took place, must have been used by the assessee or a parent of his mainly for the purposes of his own or the parent's own residence, and (2) (a) that the assessee must ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hin a period of two years after the date of such transfer. It is true that the assessee paid a substantial portion of the cost of construction to M/s. Madhani Construction Company and obtained possession of the new house property on March 20, 1970, that is to say, the day on which the conveyance in respect of the larger plot was executed. That, however, is a matter of no consequence, so far as the satisfaction of the relevant condition is concerned. For the satisfaction of the relevant condition, what has to be seen is an objective fact, namely, whether the new house property was constructed within a period of two years after the date of the transfer of the property on the sale of which the capital gains arises. Merely because the payment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ructed and that it was not fit for occupation. The finding, in fact, is that the construction was completed on March 31, 1968, but for some reason (presumably because the contractors were not paid their full charges) possession was not taken till March 20, 1970. Under such circumstances, in our opinion, it is not possible to hold that the house property could not be said to have been constructed within the meaning of s. 54 on the date on which it is found to have been actually constructed. It was also contended on behalf of the assessee that upon taking an integrated view of the various features of the transaction, namely, (a) that the assessee entered into an aggreement with M/s. Madhani Construction Co. to construct the new building jus ..... X X X X Extracts X X X X X X X X Extracts X X X X
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