Law: Income Tax Act, 1961

Section: 2,45

Income-tax----Capital gains---Short-term or long-term capital gains---Tenant who took a flat on lease acquiring ownership of such flat---Doctrine of merger applies and interest of lessor comes to an end with acquisition of ownership by lessee---Sale of property within five months of acquiring ownership---Gains arising on sale were short term capital gains---Indian Income Tax Act, 1961, Ss. 2 & 45---Indian Transfer of Property Act, 1882, S.111. The assessee jointly with his mother held a flat in Shanti Kutir. Bombay. The said flat was originally taken on lease in the year 1962-63 by for residential purposes on a monthly rent of Rs.175. Since then it was in occupation of the assessees father as a tenant and after his death on March 26, 1974, in the occupation of the assessee and his mother. In May, 1974, the existing tenants of the building Shanti Kutir formed a society and entered into an agreement with the landlords for the purchase of the building. The ownership of the building was transferred to the society in January, 1976. The assessee and his mother, like all other tenants, jointly paid Rs.46,287 towards the purchase price of the flat in their occupation and thereby beanie the owners thereof. After about four months of the purchase of the flat, in May, 1976, the assessee and his mother sold the flat for Rs.1,80,000. The Income-tax Officer computed the capital gains as short-term capital gain. However, the Special Bench of the Tribunal held that what was sold or transferred in this case was a composite asset which had admittedly come into existence as a result of fusion and merger of the smaller estate and bigger estate, assuming that the right of occupation as a tenant was-the smaller estate and the remaining interest of the landlord in the flat including the title constituted the bigger estate. It was observed that the two components of the composite estate were acquired by the assessee separately in two different years. The Tribunal held that the cost of the composite estate should be computed by taking into account the market value of the smaller estate as on the date of acquisition of the bigger estate. As the Income-tax Officer had not considered…

Deprecated: trim(): Passing null to parameter #1 ($string) of type string is deprecated in /home/digixyei/sldsystempk.com/view/master-layout/view_case.php on line 492