Law: Income Tax Act, 1961

Section: 54

[Indian Income Tax Act, 1961]......Capital gains---Exemption ---Assessee,, owner of house property--Sale of house property---That construction of new building was started before sale of old building is immaterial ---Assessee entitled to exemption---Indian Income Tax Act, 1961, S. 54. The assessee and his brother owned a residential house at a place G in moiety. The said property was sold on July 10, 1963, for a sum of Rs.4,11,000. The Income-tax Officer computed the capital gains from the sale of one-half share of the assesee at Rs.1,28,477 after allowing initial exemption of Rs.5,000. The assessee contended before the Income-tax Officer that capital gains to the extent of being invested in the construction of a new house at a place S was not taxable under section 54 of the Income Tax Act, 1961.' Though the Income-tax Officer accepted the contention that the house at place G had been used for. the purpose of residence for more than two years before the sale, he rejected the contention of the assessee that the construction of the house at place S had been completed by the assessee within a period of two years from the date of sale of the house at place G. The Income-tax Officer, therefore, held that section 54 was not applicable to the case of the assessee. The assessee alternatively contended before the Income-tax Officer that he started the construction of another residential house at Agra on March 10, 1963, and that came to be completed within two years of the sale of the house at place G and that the capital gains to the extent of being invested in the construction of the house at Agra was not taxable under section 54 of the Act. The Income-tax Officer, however, took the view that the assessee had started construction of the Agra house prior to the sale of the house at place G and, therefore, rejected the assessee's alternative contention also. On appeal, the Appellate Assistant Commissioner affirmed the order of the Income-tax Officer. On further appeal, the Tribunal found that a perusal of section 54 showed that it did not lay down that the construction of any house must be begun only after the sale of the old residential house and that the sale proceeds…

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