1. This appeal by the assessee, an individual, relating to his assessment for the assessment year 1979-80, raises an interesting issue. The assessee, it may be stated, by an agreement dated 20-12-1972, had agreed to purchase the office premises No. 5 on 12th floor of the building that was under construction known as 'Atlanta' situate on leasehold plot bearing No. 209, Nariman Point, Bombay-21, from the builders, Shree Rangnath Properties Pvt. Ltd. for a sum of Rs. 68,950. During the course of five to six years, the assessee had paid a sum of Rs. 65,502.50 towards part consideration for the aforesaid office premises, the balance remaining outstanding stood at Rs. 437.50.
In the meantime, the consideration was reduced from Rs. 68,950 to Rs. 65,940. By another agreement dated 26-4-1978, entered into with Shri Ramanlal Rajpal Shah, the assessee has sold his right, title and interest in the abovesaid office premises for a sum of Rs. 1,41,300.
There is no dispute that the surplus is liable to capital gains.
However, according to the assessee, he is entitled to deduction of 40 per cent of the amount by which the long-term capital gain exceeds Rs. 5,000 in terms of Section 80T(b)(ii) of the Income-tax Act, 1961 ('the Act'). It is the case of the departmental representative that the assessee is entitled to deduction of 25 per cent as in this case it is Clause (i) of Sub-section (b) of Section 80T which is applicable and not Clause (ii). Thus, the controversy is whether the assessee's case falls within Clause (i) or Clause (ii) of Sub-section (b) of section SOT.2. It is pertinent to mention that Clause (ii) speaks of long-term capital gain relating to capital assets other than those referred to in Clause (i). Therefore, what we have to determine in this appeal is whether the assessee's case falls under Clause (i) or not.
3. For the purpose of proper appreciation, it is desirable to refer to Clause (i) of Sub-section (b) of Section 80T, which reads as under: Where the gross total income of an assessee not being a company includes any income chargeable under the head 'Capital gains' relating to capital assets other than short-term capital assets (such income being, hereinafter, referred to as long-term capital gains), there shall be allowed, in computing the total income of the assessee, a deduction from such, income of an amount equal to,-- (b) in any other case, five thousand rupees as increased by a sum equal to-- (i) twenty-five per cent of the amount by which the long-term capital gains relating to capital assets, being buildings or lands, or any rights in buildings or lands, exceed five thousand rupees; There being no dispute that the building was not ready and the assessee had not taken possession of the office premises and that, in any event, the agreement was not for the purchase of land, both the cases will fall under Clause (i) only if it can be said that the long-term capital gains in the case of the assessee related to capital assets being any rights in building or land. In other words, what we have to see is whether the agreement of purchase and sale of the office premises, coupled with the fact that the assessee had paid the consideration for the purchase to the extent of Rs. 62,502.50 as against the total consideration of Rs. 64,940, amounted to any right in the building or land.
4. There is no definition of the expression 'any rights in the buildings or lands'. In the Act some clue is available in Section 54 of the Transfer of Property Act, 1882, where a contract for the sale of immovable property is stated to be a contract that such a sale of property shall take place on terms settled between the parties.
However, it does not, itself, create any interest in or charge on such a property. The case before us is not a case of simple contract for the sale or the purchase. In this case, the consideration to the extent of Rs. 65,502.50 as against the total sale consideration of Rs. 65,940 had already passed. It is true that the office premises were not ready as such and the assessee had not taken possession of it before the sale.
All the same, the land was very much there and the construction of the building was nearly complete, if not complete. In this view of the matter, it is not possible to accept that the contract of sale herein did not refer to a capital asset involving any rights in buildings or lands. Accordingly, we hold that the capital assets in this case amounts to a right in the office premises, i.e., buildings, and, therefore, covered by Clause (i) of Sub-section (b) of Section 80T.