Law:

Section:

Section 54 of the Income-tax Act, 1961 - Capital gains - Exemption in respect of residential house property - Assessee was owner of a building which was partly let out and partly self-occupied - Said building was sold on 9-2-1977 and capital gain accruing therefrom was claimed to be exempt under section 54 - Assessee had commenced construction of a new house around March 1976 and construction was completed in March 1977 - Tribunal found that building was used by assessee mainly for residential purposes - Whether assessee was entitled to exemption under section 54 - Held, yes Facts The assessee was the owner of a building consisting of a ground floor, which he used for his residence and a first floor which he had given on rent. The assessee sold the building on 9-2-1977 and the capital gain accruing therefrom was claimed to be exempt under section 54. He had commenced the construction of a new house sometime around March 1976, (i.e., before the sale of the building), though it was completed in March 1977. The ITO rejected the claim for exemption on the ground that the construction of the new building had started much earlier to the sale of the old building and the major portion of the building was let out by the assessee. On appeal, the Tribunal found (i) that the land appurtenant to the building was in the occupation of the assessee, (ii) that the building was used by the assessee mainly for residential purposes, and (iii) that the new building was completed within two years' period contemplated under section 54. So, the Tribunal allowed the relief to the assessee. On reference : Held As per the provisions of- section 54, if the assessee has, within a period of one year before or after the date on which the transfer took place, purchased or has within a period of two years after that date constructed a residential house, then instead of the capital gain being charged to tax, it shall be dealt with in accordance with the other provisions of the said section. In the instant case, on the basis of the evidence on record, the Tribunal found that the building was used by the assessee mainly for his residential purposes and the major portion of the building was under…

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