Law: Income Tax Act, 1961

Section: 54,54(1)

Section 54 of the Income-tax Act, 1961 - Capital gains - Profit on sale of property used for residential house - Assessment year 1979-80 - Whether land appurtenant to a building (residential) does imply that ownership of a building and land appurtenant thereto should be of same person, and if that building is owned by one person and land is owned by another person, then it will be a case of land adjoining to that building and by no stretch of imagination it can be called land appurtenant to said building and, therefore, benefit of section 54(1) would not be available to such land adjoining to a building - Held, yes FACTS The assessee received a land measuring 10,700 sq. feet as a gift from his father on 3-8-1971, which property was situated in a compound containing residential bungalow of assessee's father where the assessee lived along with him. On 1-4-1978, he sold 5,700 sq. feet out of that land for certain consideration and claimed that the same was not exigible to capital gains tax since the entire sale proceeds of the land were invested in the construction of the residential house on the remaining portion of the land between May and October, 1978 and land which was sold was part of bunglow. The Assessing Officer, while noticing, inter alia, that the residential house and the land, which was sold, belonged to two different persons, i.e., the assessee's father and the assessee himself respectively; that the land in question was not appurtenant to the residential house being 300 feet away from the building; that the major part of the residential house had been converted into a hotel, held that neither section 54(1) would be attracted nor the income from that building would be assessable as income from house property. On appeal, the Commissioner (Appeals) upheld the Assessing Officer's order. On further appeal, the Tribunal, while placing reliance on section 5(1)(iv)(c ) of the Wealth-tax Act, for the purpose of clarifying the expres- sion 'land appurtenant thereto', concurred with the finding of the Assessing Officer in that regard and upheld the order of Commissioner (Appeals). On reference: HELD It was not in dispute that the assessee had received 10,700…

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