Completion of house before sale determined long-term capital gains treatment and entitlement to section 54E relief.

The assessee was entitled to treat the gain on transfer of the property as long-term capital gains because the house was found to have been completed and fit for occupation more than 36 months before sale. The tribunal accepted surrounding evidence, including occupation of the house, electricity connection, and other circumstances consistent with completion by November 1975, and rejected the Revenue's contrary inference from a loan request, rent payments, and delayed municipal assessment. On that footing, relief under section 54E was available and the Revenue's challenge failed.

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Issues: Whether the assessee had held the property for the requisite period so that the capital gains arising on its transfer could be treated as long-term capital gains and the assessee could claim relief under section 54E of the Income-tax Act, 1961.

Analysis: The decisive question was whether the construction of the property had been completed and the house was fit for occupation more than 36 months before the sale. The surrounding circumstances relied upon by the Revenue, including the request for additional loan, payment of rent for another residence, and delayed corporation tax assessment, were found to be consistent with completion of construction by November 1975. The evidence that the assessee had occupied the house and had obtained electricity connection supported the finding that the property was ready for occupation within the relevant period.

Conclusion: The property was held to have been completed before November 1975, the capital gains were treated as long-term capital gains, and the assessee was entitled to relief under section 54E.

Final Conclusion: The Revenue's challenge failed and the assessee's entitlement to the capital gains relief was upheld.

Ratio Decidendi: Where the evidence shows that a property was ready for occupation within the relevant holding period, the capital gains on its transfer are to be treated according to that completed period of holding for the purpose of exemption under section 54E.

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