Law:

Section:

Section 54, read with section 64, of the Income-tax Act, 1961 - Capital gains - Profits on sale of house properties - Assessment year 1974-75 - Assessee had transferred land to his wife, on which he had constructed a building - Building and land were compulsorily acquired - Whether capital gains arising out of compensation paid to wife for acquisition of land belonging to her would attract provisions of section 54 while being assessed in hands of husband by virtue of provisions contained in section 64 - Held, no FACTS The assessee had gifted a piece of land to his wife in year 1960 and thereafter he constructed a building on the said land. The Government had acquired the aforesaid land and the building and also the adjoining land for the purpose of widening the natural highway. The LAO had awarded compensation of a sum of Rs. 73,900 for the land belonging to the wife and Rs. 1,05,518 for the building which was further enhanced to Rs. 1,16,692 as the compensation for the land and Rs. 1,59,766 for the building by reference to the second Additional Subordinate Judge. The return for the assessment year 1974-75 filed by the assessee did not include the capital gains arising from the compulsory acquisition of the land belonging to his wife. The assessing authority held that the capital gain arising from the compulsory acquisition of the land belonging to the assessee's wife was liable to be assessed in the hands of the assessee in view of section 64. On appeal, the AAC held that the assessee was entitled to the benefit of section 54, in respect of the capital gains. The assessee and also the department assailed the said order of the AAC. The Tribunal held that the wife alone was entitled to get the compensation for acquiring the land. It held that merely because the building had been constructed on the land which originally belonged to the assessee, it would not follow that the building in question also belonged to the assessee's wife. Thus, the Tribunal held that the capital gains arising from the compulsory acquisition of the land of the assessee's wife had to be treated separately and that there was no scope for the application of section 54(1). On reference: HELD…

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