Law: Income Tax Act, 1961

Section: 45,54

Income-tax----Capital gains---Exemption---Conditions for claiming exemption--¬Purchase of residential house within a period of one year before or two years after the date on which transfer of property had taken place---Sale of house property A on 13-6-1978 and purchase of house property B on 12-1-1978, within one year before date of sale of house property A---Part of property lei out---Major portion of property used as residence ---Assessee entitled to exemption--- "Mainly", meaning of---Indian Income Tax Act, 1961, Ss.45 & 54. The assessee owned a house (door No.163) which was a residential building and was in occupation of a portion of 1431 sq. ft. out of total area of the building measuring 2130 sq. ft. The assessee had purchased another building (door No. 183) on January 12, 1978. The assessee sold the house (door No. 163) on June 13, 1978. For the assessment year 1979-80, the assessee filed return showing an amount of Rs.24, 411 as capital gain under section 54 of the Income Tax Act, 1961. The Commissioner, in exercise of his powers of revision under section 263 of the Act, held that the assessee not entitled to the benefit of section 54 and directed the Income-tax Officer to assess the capital gains at Rs.76,234 instead of Rs.24,411. On appeal, the Tribunal held that the house property which was sold by the assessee was mainly used for his residential purposes, that the property purchased was also for the purpose of the assessees own residence and, therefore, set aside the order of the Commissioner of Income-tax. On a reference: Held, (i) that a perusal of section 54(1) of the Act would make it clear that an assessee can claim benefit under the Act, if he had purchased a residential house within a period of one year before or two years after the date on which the transfer of the property had taken place and if the above said residential property sold was used in the two years immediately preceding the date of transfer mainly for the assessees or his parents own residence apart from the fact of constructing a new house within a period of three years for the assessees own residence. The assessee had sold the house (door No. 163) on June 13, 1978, and…

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