TaxTMI 
TaxTMI 
1984 (7) TMI 62
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....ne owning 1/4th share. The building has a built-up area of 17,136 sq. ft. and the total extent of land including the land on which the building stands is 13,029 sq. yards. The building as well as the entire extent of land was acquired by the Government under the Land Acquisition Act for construction of the office of the Accountant-General. Compensation was initially awarded by the Land Acquisition Officer and it was enhanced by the Second Additional Chief Judge, City Civil Court, Hyderabad, pursuant to a reference made under s. 18 of the Land Acquisition Act. The compensation finally awarded was: Rs. (a) Compensation for land 5,21,160 (b) Compensation for the building 1,71,360 (c) Solatium 1,03,878 &nbs....
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....imated cost of construction of the new residential house at Rs. 75,000, the AAC did not interfere with the estimate made by the ITO at Rs. 75,000. The AAC went further into the question whether the deduction of Rs. 75,000 representing the cost of construction of the new residential house could be set off against the entirety of capital gain arising on the sale of building as well as the land or should be limited to the extent of capital gain arising on the sale of the building and land it reasonably appurtenant " to the building. The provisions of s. 54(1) of the Act were construed by the AAC as permitting the set-off of the amounts spent on the construction of a new building for residential purposes only against the capital gain arising on the transfer of the building and land, which is " reasonably appurtenant " to the building. The AAC was of the view that, if the land contiguous to a building is vast in extent, the entire extent of land could not be considered to be appurtenant to the building and only a reasonable portion of such land could be so considered under law. He, accordingly, directed the ITO to redetermine the capital gain on the transfer of the building and the land....
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..... 54. The learned counsel contends that the deduction under s. 54(1) is not permitted against capital gain arising on the sale of (entire) land as such, but only against the sale of the building and land appurtenant thereto. Thus, where a building together with land is sold, the learned counsel urges, it is necessary to enquire and determine the extent of land which is required for the purpose of proper enjoyment of the building as such and the appurtenant land can be restricted only to that reasonable extent and cannot be extended to the entire extent of land. Learned counsel draws attention to the Explanation to s. 5(1)(ivc) of the W.T. Act, 1957, which was inserted by the Finance Act of 1976 with effect from April 1, 1977. It would be appropriate to extract the Explanation referred to by the learned counsel " Explanation.-For the purposes of this clause,-... (b) 'land appurtenant', in relation to any dwelling unit or units comprising a building, means, (i) in an area where there is any law in force providing for the minimum extent of land contiguous to the land occupied by any building to be kept as open space for the enjoyment of such building, the minimum extent of la....
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....ital asset effected in the previous year shall be chargeable to income-tax under the head " Capital gains ". The expression " capital asset " is defined in s. 2(14) of the Act as meaning property of any kind held by an assessee, whether or not connected with his business or profession. The definition excludes certain categories of capital assets which are not relevant for our purpose. Section 48 of the Act provides that the income chargeable tinder the head " Capital gains " shall be computed by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset, the expenditure incurred wholly and exclusively in connection with such transfer and the cost of acquisition of the capital asset and the cost of any improvement thereto. Section 54 of the Act, which is relevant for our present purpose, deals with capital gain arising on the sale of property used for residence and it may be usefully extracted below: " 54. Profit on sale of Property used for residence.-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 t....
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....efit of s. 54, it is necessary that the building together with land is transferred and the income from such building and land is chargeable under the head " Income from house property " under s. 22 of the Act. Inasmuch as the cost of the new house property acquired by the assessee for the purpose of his own residence is liable to be set off against the capital gain arising on the transfer of the buildings or lands appurtenant thereto, the question arises whether the expression " lands appurtenant thereto " covers the entire extent of land transferred along with the building or only a portion of such land as may be considered appurtenant to the building (emphasis supplied by us). The Revenue contends that the expression "land appurtenant thereto" does not cover the entire extent of land that may be transferred along with the building, but is limited only to the extent of land which is required for the proper enjoyment of the house and may, therefore, be considered as appurtenant to the building. In other words, what the Revenue contends is that if, in a given case, a vast extent of land is also transferred along with the building, it is not permissible to consider the entire extent ....
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.... will be apparent if we take into account the fact that the land contiguous to a building can be used for purposes other than the enjoyment of the building. Take for instance a case where a part of the land contiguous to the building is independently leased for a fire-wood depot. The land contiguous to the building may be so vast in its extent that a person can conveniently lay out the surplus extent of land into plots and sell those plots without causing detriment to the proper enjoyment of the building. Could it be said that, in these cases, the land leased for a firewood depot or sold by laying out into plots constituted land appurtenant to the building ? We do not think so. There is force in the contention of the learned standing counsel for the Revenue that the expression " land appurtenant thereto " occurring in s. 54 of the Act is a matter of enquiry depending upon the facts and circumstances of each case and the authorities must determine the extent of land that is considered to be appurtenant to the building based on some acceptable criteria to which we shall advert a little later. Our attention has not been drawn to any decided cases on this point under the I.T. Act or....
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.... is defined in the Madras Act as meaning " any building or hut or part of a building or hut let or to be let separately for residential or non-residential purposes and includes : (a) the garden, grounds and outhouses, if any, appurtenant to such building, hut or part of such building, or hut and let or to be let along with such building or hut, (b) any furniture supplied by the landlord for use in such building or hut or part of a building or hut ". After considering the legal and popular meaning of the expression " appurtenant ", Satyanarayana Rao J. observed at page 655 of the report as under : "The meaning of the word 'appurtenant' given in the Oxford Dictionary is: Belonging as a property or legal right ; constituting a property or right subsidiary to one which is more important ; appertaining as if by right to ; proper, suited or appropriate to ; relating to, pertinent." That is the primary meaning of the word 'appurtenant'. In Budhi Mal v. Bhati, AIR 1915 All 459, " an appurtenance " is defined as an appendage, an adjunct, or something belonging to another thing as principal and passing as an incident to it. In Trim v. Sturminster Rural District Council [1938] 2 KB 5....
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....ating the intention. They are indeed frequently taken in the widest sense, sometimes in a sense more wide than etymologically belongs or is popularly attached to them in order to carry out effectively the legislative intent, or to use Lord Coke's words 'to suppress the mischief and advance the remedy' (vide Maxwell on the Interpretation of Statutes, 9th edition, by Sir Gilbert Jackson, 280)." It is clear from the observations of Satyanarayana Rao J. and Raghava Rao J. above referred to that, if the expression is used in the Act in a primary sense, then the meaning attached to that primary sense must be given irrespective of other considerations. We have already stated that the expression " land appurtenant thereto " was defined in a primary sense for purposes of s. 5(1)(ivc) of the W.T. Act. It would follow that the expression occurring in s. 5(1)(ivc) should be understood in that primary sense and it is not open to the courts to impose any other considerations. Where, however, the expressions used convey more than one sense a primary and secondary sense that sense. is to be adopted which best harmonises with the context and promotes in the fullest manner the policy and object o....
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....egarding the extent of land put for such user' For instance, the land used by the occupiers for commercial, agricultural and horticultural purposes, although forming part of the land adjacent to the building, does not qualify to be treated as land appurtenant to the building; (4) If the owner or occupier is deriving any income from the land which is not liable to be assessed as income from house property under s. 22 of the I.T. Act, then the extent of such land does not qualify to be treated as land appurtenant to the building, and (5) any material pointing to the attempted user of the building for purposes other than the effective and proper enjoyment of the house would also afford a safe guide to determine the extent of surplus land not qualifying to be treated as land appurtenant to the building. The above tests are illustrative and by no means exhaustive. It is for the tax authorities to apply their mind properly to the facts of each case and to devise tests suitable and appropriate to each case. In the present case, it is stated that the total extent of land is 13,029 sq. yards and this included the land on which the building is constructed. It is also stated that four c....