Law:

Section:

Section 54 of the Income-tax Act, 1961 - Capital gains - Profit on sale of property used for residential house - Whether property for purposes of Section 54 has same meaning as concept of house property under sections 22 to 27 - Held, yes - Whether, therefore, expression 'house property' would take into account an independent residential unit - Held, yes - On 29-12-1964 assessee sold house in which he was residing to one 'B' - He had constructed a residential house on a plot purchased by him in 1963 - Capital gains realised on sale of house were utilised by assessee in construction of first floor and barsati of new house - Assessee shifted to first floor in April 1965 and leased out ground floor to a Bank - Whether on facts and in view of aforesaid legal position, assessee was entitled to exemption of capital gains under section 54 - Held, yes FACTS The assessee sold his house property to one 'B' on 29-12-1964. it was a common ground that on the sale of the property, the assessee realised certain capital gains the assessee shifted to the new house on 28-12-1964. He lived there till 1-4-1965 when portion of that house was leased out to a Bank. In the mean-while the assessee also started construction of the first floor and a barsati on the ground floor which was already existing. The amount to construction of the first floor exceeded the amount of capital gains. On 1-4-1965 after the ground floor had been let out to the Bank, the assessee shifted to the first floor and claimed exemption under section 54. The ITO denied the exemption. However, on appeal, the AAC as well as the Tribunal allowed it. On reference: HELD The instant case clearly fell both within the intendment and language of section 54 if two important considerations are kept in mind. The first is that when the section talks of house property it does not mean an independent and complete house in the sense in which the term used to be understood once upon a time. House property for the purposes of section 54 has the same meaning as the concept of house property under sections 22 to 27 which make it clear that the expression "house property" takes into account an independent residential unit. In fact,…

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