9911796707
TMI Blog1988 (4) TMI 97X X X X Extracts X X X X X X X X Extracts X X X X ..... h a direction to bring all relevant facts on record and ascertain whether provisions of sections 54(1) and 54(1)(ii) were applicable in respect of capital gains of Rs. 1,31,238. In pursuance of this order, the ITO passed another order on 31-12-1982 in which he determined the long-term capital gains at Rs. 1,31,258 and allowed deduction under section 80T of Rs. 36,565 therefrom to include an amount of Rs. 94,963 as long-term capital gains. The ITO held that exemption u/s 5 4(1) was not available to the assessee. The facts concerning assessment of capital gains and the availability of exemption u/s 54(1) may now be stated. 3. The assessee owned a flat in Jivan Vihar Co-op. Housing Society Ltd. This flat was purchased by her in the year 1961 for a sum of Rs. 49,950 and was sold by her on 1-9-1975 as stated by the ITO in the body of his order. The sale price of the flat was Rs. 1,81,208. Thus, the assessee made capital gains of Rs. 1,31,258. The appellant claimed before the ITO that she had purchased another flat in Kalpa Vruksha Co-op. Housing Society Ltd. on 1-4-1975 for Rs. 1,55,251. The capital gains of Rs. 1,31,258 were exempt u/s 54(1) of the Act. In the assessment that was re-f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9-1975. Therefore, the CIT (Appeals) firstly agreed that the transfer of the flat took place on 1-9-1975. Thereafter, he proceeded to discuss in para 6 of his order the date of acquisition of the flat in Kalpa Vruksha Co-op. Housing Society Ltd. He concluded from the evidence available before him that the allotment of the flat in favour of the appellant had been made before the meeting of the Annual General Body held on 1-1-1975. The CIT (Appeals) admitted that the exact date on which the allotment was made in the appellant's favour was not clear from the material on record. He, however, relied on a copy of the appellant's account in the books of the Society reproduced by the ITO and came to the conclusion that she became a member of the Society on 5-11-1971 when she was allotted 5 fully paid shares of Rs. 50 each. He relied on a decision of 'A' Bench of the Tribunal in IT Appeal No. 5178 (Bom.)/82 for the proposition that in the case of purchase of a flat through the member of a Co-op. Society, the date of acquisition of flat was the date of agreement and not the date of occupation of the flat. Applying the ratio of this decision, the CIT (Appeals) held that the date of acquisitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rat High Court in Mulshanker Kunverji Gor v. Juvansinhji Shivubha Jadeja AIR 1980 Guj. 62 and a decision of the Supreme Court in Ramesh Himmatlal Shah v. Harsukh Jadhavji Joshi AIR 1975 SC 1470. He argued that the appellant did not construct the building nor had she entered into any agreement to sell when she had acquired a flat on 1-4-1975. He referred to the copy of account of the appellant in the books of the Society which indicated that payments were made from time to time amounting in all to Rs. 1,55,000 up to 30th June, 1972. It would appear that all these facts were submitted to the ITO, Shri M.T. Keshruwala, on 9-8-1982. Shri Desai thereafter referred to a certificate of registration of Kalpa-Vruksha Apartments Co-op. Hsg. Society Ltd. dated 5-11-1971 and argued that in terms of section 36 of the Maharashtra Co-op. Societies Act, 1960, the registration of a society shall render it a body corporate by the name under which it is registered, with Perpetual succession and a common seal, and with power to acquire, hold and dispose of property, to enter into contracts, to institute and defend suits and other legal proceedings, and to do all such things as are necessary for the pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the possession of the flat on 1-4-1975 and the date of occupation of the flat was the same as the date of possession. 5. Shri Raj Kishore, on the other hand, relied on the orders of the ITO and the CIT(A). He argued that in order to get the benefit of sec. 54 the assessee had to either purchase or construct within the prescribed period a flat for his own residence. Allotment of a flat does not amount to purchase. It was also not a case of construction of a flat by the assessee. He, therefore, argued that no exemption u/s 54 was available inasmuch as whereas the flat originally held by the assessee was sold in the previous year relevant to the assessment year 1976-77, the new flat in Kalpa Vruksha Apartments Co-op. Hsg. Society Ltd. was acquired as early as 5-11-1971 when she became a member of the Society and entered into an agreement for purchase of the flat. 6. We have heard both the parties. The short point for decision before us is whether exemption u/s 54(1) is available to the assessee. For resolving this question, we have to decide the date on which the assessee sold the flat in Jivan Vihar Co-op. Hsg. Society Ltd. which she had purchased in the year 1961, and the date on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ety should not hand over any possession of garage to any member till he or she makes the final payment towards flat/garage allotted to him. This would only mean that although the list of flat holders was determined and the payments made by them indicated in this resolution, the flats to be constructed by this society were not ready, completion certificates not obtained and the flats consequently not allotted as on 1-1-1975. It was the stand of the ITO that the flats in Kalpa Vruksha Co-op. Hsg. Society, were constructed by the appellant who was one of the 10 promoters who signed the bye-laws of the Society when the Society was formed on 5-11-1971. It is difficult for us to accept that the construction of the building undertaken by the Society called "Kalpa Vruksha Apartments" was building constructed, by the appellant. The moment the society was formed and registered as such as per the certificate of registration dated 5-11-1971, the Society became a body corporate in terms of sec. 36 of the Maharashtra Co-op. Societies Act. Therefore, firstly, it is necessary to hold that there was no construction of a new residential unit by the appellant after the old flat was sold. When a Socie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te from which she became a member of the Society nor can it be said that she constructed the flat which was ultimately allotted to her. The moment the Society was formed, the rights in the land vested in the Society which is an independent body corporate and the appellant acquired ownership of the flat only when the flat was allotted to her and occupied by her. Both these events on the evidence before us took place on 1-4-1975. It is not in dispute that she is an owner of this flat within the meaning of sections 22 to 27 of the IT Act. Since the purchase of the flat had taken place within a period of one year before the sale of the flat which she was earlier occupying since 1-1-1961, she was entitled to get the benefit of the provisions of sec. 54. We would, therefore, hold that the CIT(A) erred in holding that the appellant's case was covered by sec. 54(1) of the IT Act and that the appellant was liable to be assessed on the capital gain amounting to Rs. 1,13,258. We would, therefore, direct that the computation of capital gains should be revised after giving the relief due to the assessee u/s 54(1).
8. In the result, the appeal is partly allowed X X X X Extracts X X X X X X X X Extracts X X X X
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