1. The question under reference is
'Whether, on the facts and circumstances of the case, the assessee is entitled to the benefit of Section 12B(4)(b) of the Indian Income-tax Act,. 1922, in respect of capital gains arising out of sale of the property, 'Bishops Gardens'?'
2. The assessment year with which we are concerned is 1961-62 for which the accounting period ended on March 31, 1961. The assessee, the Raja of Pudukottai, entered into an agreement with the Raja of Chettinad on February 8, 1960. Under the agreement the assessee was to convey the property, No. 4, Greenways Road, Adyar, in favour of the purchaser for a sum of Rs. 4,35,000. A further stipulation between the parties was that the sale deeds should be executed either in favour of the Raja of Chettinad or his nominees. A sum of Rs. 1,00,000 was paid and there remained a balance of Rs. 3,35,000 which was to be paid before May 31, 1960. The balance was paid on two dates, September 15, 1960, and November 13, 1960. As per the stipulation, sale deeds were executed in favour of the nominees of the Raja of Chettinad, the first of which was on March 15, 1961, and the last on October 20, 1962. On November 24, 1961, the assessee purchased some other bungalow for his residential purpose for Rs. 94,850. The assessee, on that basis, claimed the benefit of Section 12B(4)(b) of the Act. When exactly possession was delivered is not clear, but the revenue as well as the Tribunal would put it, some time in April, 1960.
3.The benefit claimed by the assessee was disallowed in the first instance on the view that the sale was not finalised as maintained by the assessee in December, 1960, and that the full payment for the transactions had been received by November 13, 1960. The Income-tax Officer thought that the transfer took place long before December, 1960, particularly because the Madura South India Corporation (Private) Limited, which by an arrangement with the Raja of Chettinad paid the balance of consideration, was arranging to let out the property. The Appellate Assistant Commissioner took, however, a different view. He considered that the sale of 'Bishops Gardens' was not completed by the end of the accounting year and, therefore, no question of capital gains arose. On a departmental appeal, which was dismissed, the Tribunal accepted the contention for the assessee that the property can be said to have been transferred only when a sale deed is executed, and that as the purchase of the property in December, 1961, was sufficiently within the time during which the sale deeds were executed in relation to parcels of the property comprised in 'Bishops Gardens', the assessee would be entitled to the benefit of Section 12B(4)(b) of the Act,
4. The reasoning of the Tribunal is rather vague. It seems it was inclined to think that in the vendee's case when the question of taking the income, from the property arose, it might have to be held that the transfer took place in the middle of 1960. We are unable to understand this observation. The Tribunal does not appear to have applied its mind to all the implications of the question before it and considered the same from the proper perspective. For instance, it could have gone into the question as to how Section 12B(4)(b) is to be applied or is attracted when a property is sold in parts by successive deeds spread over more than one accounting year.
5. Anyway, we do not think it is necessary to require the Tribunal to dispose of the appeal afresh because the conclusion that the assessee is not liable to charge on the capital gains in the accounting year appears to be correct. This is on the view that the sale of the property had not been completed by the accounting year.
6. But there is another reason on which we would like to base our conclusion in this reference, rather than the above ground. The sales, as we mentioned, took place between March 15, 1961, and October 20, 1962. Whichever view may be taken, it is obvious that the purchase by the assessee of a bungalow on November 24, 1961, was within the period prescribed for the allowance of the benefit under Section 12B(4)(b). On that view, we answer the question against the revenue with costs. Counsel's fee Rs. 250.
7. We may add that the question of user of the premises sold by the assessee within two years of the accounting year has not been raised or investigated and, therefore, it must be taken to be no longer open.