1986 (6) TMI 7 - HC - Income Tax

Majority of sold property held self-occupied; first condition of section 54 satisfied, capital gains exemption allowed

HC affirmed the Tribunal's factual finding that the bulk of the sold property was occupied by the assessee for residential purposes, noting the ground ... Capital Gains - entitlement to exemption under section 54 - assessee owned a building with a ground floor occupied by the assessee and a first floor that was let out - HELD THAT:- Taking into consideration the area of the building under the occupation of the assessee, it has stated that the ground floor occupied by the assessee including the garage was 1,330 sq. ft. The land appurtenant to the ground floor excluding the land occupied by the house was 4,795 sq. ft. That was also held to be under the occupation of the assessee. This building with the land has been sold. It was only the first floor that was let out. The Tribunal took into consideration the extent of the building used mainly for the residential purpose of the assessee and found that the major portion of the building was under the occupation of the assessee. The Tribunal, therefore, concluded that the first condition prescribed under section 54 was satisfied. This finding, it may be seen, has been arrived at by the Tribunal upon appreciation of the evidence and the factual aspects of the case. Issues involved: The issues involved in this judgment are whether the old house was mainly used for the residence of the assessee and whether the assessee is entitled to exemption under section 54 of the Income-tax Act, 1961.Mainly Used for Residence:The assessee owned a building with a ground floor occupied by the assessee and a first floor that was let out. The assessee sold the building and claimed exemption under section 54 for capital gains. The Income-tax Officer initially rejected the claim, stating that the construction of the new building had started before the sale of the old building. However, the Tribunal found that the ground and land appurtenant to the building were in the occupation of the assessee for residential purposes. The Tribunal concluded that the major portion of the building was used for the residential purpose of the assessee, satisfying the first condition under section 54.Entitlement to Exemption u/s 54:The Tribunal further determined that the completion of the new building within two years from the sale of the old building made the assessee eligible for relief under section 54. Despite the commencement of construction in 1976, the new building was finished in March 1977, shortly after the sale of the old building. The Tribunal's decision was based on the timeline of construction and sale, leading to the assessee meeting the requirements of section 54.Conclusion:The High Court upheld the Tribunal's conclusions, stating that they were based on an appraisal of the evidence and not unreasonable. Therefore, the questions were answered in favor of the assessee, denying relief to the Revenue. No costs were awarded in this case.