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income-tax Officer Vs. Anwar K. PorbandarwallA. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMumbai High Court
Decided On
Case NumberIT APPEAL NO. 2529 (BOM.) OF 1983 [ASSESSMENT YEAR 1978-79]
Reported in[1984]8ITD658(Mum)
Appellantincome-tax Officer
RespondentAnwar K. PorbandarwallA.
Excerpt:
.....that being so, we are of the opinion that the assessee has satisfied the condition of personal residence in the house for two year immediately preceding the date of transfer......as an owner only for one year and three months and not for two years immediately preceding the date of transfer, i.e., 17-10-1977, he was not entitled to the exemption under section 54(1).3. however, on appeal, the aac held that section 54(1) did not require that the assessee must necessarily reside in the house as an owner for two years immediately preceding the date on which the transfer took place. according to him, as the assessee had been residing in the house since the year 1972 and as there was no dispute about the satisfaction of the other conditions, the assessee was entitled to claim exemption under section 54(1). aggrieved by the order of the aac, the department has filed the present appeal.4. after going through the record and hearing the learned representatives of the.....
Judgment:
ORDER

Per Shri M. R. Sikka, Judicial Member - This appeal has been filed by the department against the order dated 15-2-1983 of the AAC, whereby, he has held that the assessee is entitled to the benefit of section 54(1) of the Income-tax Act 1961 (the Act).

2. The assessee had been in possession of the flat in question situated at Bandra as a tenant under one Smt. Khatijabai since the year 1972. He purchased this flat from smt. Khatijabai on 17-7-1976 for Rs. 15,000. Later on, he sold the same to Smt. Zohrakhanubai Alomohamed on 17-10-1977 for Rs. 46,500 and declared the net capital gains at Rs. 26,451. In the course of the assessment proceedings for the assessment year 1978-79, the assessee claimed the benefit of section 54(1). The ITO was of the view that sine the assessee had used the flat for his residence as an owner only for one year and three months and not for two years immediately preceding the date of transfer, i.e., 17-10-1977, he was not entitled to the exemption under section 54(1).

3. However, on appeal, the AAC held that section 54(1) did not require that the assessee must necessarily reside in the house as an owner for two years immediately preceding the date on which the transfer took place. According to him, as the assessee had been residing in the house since the year 1972 and as there was no dispute about the satisfaction of the other conditions, the assessee was entitled to claim exemption under section 54(1). Aggrieved by the order of the AAC, the department has filed the present appeal.

4. After going through the record and hearing the learned representatives of the parties, we do not find any substance in this appeal. Section 54(1) provides as follows :

'54. (1) Where a capital gain arises from the transfer of a capital asset t which the provisions of section 53 are not applicable, being buildings or lands appurtenant thereto the income of which is chargeable under the head Income from house property, which in the two years immediately preceding the date on which the transfer took place, was being used by the assessee or a parent of his mainly for the purpose of his own or the parents own residence (hereafter in this section referred to as the original asset), and the assessee has within a period of one year before or after that date purchased, or has within a period of two years after that date constructed, a house property for the purpose of his own residence, then, instead of the capital gains being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of section section, that is to say,-'

It would be evident from the perusal of the aforesaid section that, in order to get the benefit of section 54(1), it is not a condition precedent that the assessee must necessarily reside in the house as on owner for two years immediately preceding the date of transfer. All that is necessary is the residence of the assessee (or his parent) in the house. It is immaterial whether he resides in the house as an owner or as a tenant. Now, in the present case, it is not in dispute that the assessee had been residing in the flat in question since the year 1972-first as a tenant up to 17-7-1976 and then as an owner up to 17-10-1977. That being so, we are of the opinion that the assessee has satisfied the condition of personal residence in the house for two year immediately preceding the date of transfer. He is, therefore, entitled to claim the benefit of section 54(1). We, accordingly, confirm, the impugned order of the AAC on this point.

5. In the result, the appeal is dismissed.


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