1. The assessee was the owner of two house properties--Door Nos. 5-A and 5-B, Rajaji Street, Tambaram, and a vacant site adjoining the said properties. The two houses were separately assessed to panchayat tax. The assessee sold away these three items of properties during the year of account relevant to the assessment year 1962-63 to three different persons under three separate sale deeds on different dates. The house properties were sold for Rs. 14,000 each and the land for Rs. 6,000, thus realising a total consideration of Rs. 34,000. In addition, the assessee obtained a sum of Rs. 500 by way of forfeiture of deposit in respect of one of the transactions. Thus in all the assessee got a sum of Rs. 34,500 by the sale of these properties. Adopting the value of these properties as on January 1, 1954, at Rs. 20,000 the assessee returned an income of Rs. 14,500 under capital gains and claimed exemption under Section 53 of the Income-tax Act, 1961 (hereinafter called ' the Act '), in respect of this income on the ground that each of the three capital assets was sold for less than Rs. 25,000 and the aggregate value of all the properties owned by him did not exceed Rs. 50,000. The assessee contended that for the application of Section 53 of the Act each property sold or each transfer effected is to be considered independently. The Income-tax Officer did not accept the assessee's claim for exemption and held that even though the amount of capital gains arising from the transfers would have to be calculated item by item it was the aggregate value of the consideration of all the transfers that has to be taken into account for the application of Section 53. In that view, he subjected the amount of Rs. 14,500 to capital gains tax. The Appellate Assistant Commissioner and the Tribunal agreed with this view of the Income-tax Officer. At the instance of the assessee the following question has been referred :
'Whether the assessee is entitled to exemption under Section 53 of the Income-tax Act, 1961, in respect of the capital gains arising from the transfer of the capital assets in the year of account ?'
2. The learned counsel for the assessee reiterated his contention that for application of Section 53 of the Act each transfer effected would have to be considered independently. The learned counsel for the revenue, on the other hand, contended that even though the amount of capital gain arising from transfers would have to be calculated item by item, for the application of Section 53 of the Act it is the aggregate value of the consideration of all the transactions that has to be taken into account. We have to consider this question with reference to the scheme of the Act and in particular the provisions of Sections 45, 48 and 53. The scheme of the Act, in our opinion, envisages each transaction separate and independent. Sections 45 and 48 take note of this position and provide for finding out the capital gain in respect of each transaction. Capital gain for the year is determined by finding out the gain in respect of each of the transactions during the year and adding up the same vertically, but Section 53 provides that, notwithstanding anything contained in Section 45, capital gains arising from certain transfers are exempt from tax. That section reads as follows :
'53. Capital gains exempt from tax.--Notwithstanding anything contained in Section 45, where a capital gain arises from the transfer of one or more capital assets, being buildings or lands appurtenant thereto, the income of which is chargeable under the head ' income from house property ', and the full aggregate value of the consideration for which the transfer is rnade does not exceed twenty-five thousand rupees, the capital gain shall not be included in the total income of the assessee : Provided that this section shall not apply in any case where the aggregate of the fair market values of all capital assets, being buildings or lands appurtenant thereto the income of which is chargeable under the head 'income from house property' owned by the assessee immediately before the transfer aforesaid is made, exceeds the sum of rupees fifty thousand.'
3. It is seen from the section that three conditions nave to be satisfied in order to claim exemption from capital gains tax.
4. Firstly, the property sold shall be a building or land appurtenant thereto the income of which is chargeable under the head ' income from house property ' ;
5. Secondly, the full aggregate value of the consideration for which the transfer is made shall not exceed Rs. 25,000 ; and
6. Thirdly, the aggregate fair market value of all the buildings and lands appurtenant thereto owned by the assessee immediately before the transfer aforesaid is made does not exceed the sum of Rs. 50,000.
7. All these conditions will have to be cumulatively satisfied. If any one of the conditions is not satisfied the exemption will not be available. Both the main part of the section and the proviso use the expression ' transfer ' in singular though the transfer may comprise of more than one capital asset. The proviso requires that the third condition referred to above shall be satisfied with reference to a particular transaction and with reference to the date of that particular transfer. It does not say that at the beginning of the accounting year the assessee shall not have been the owner of buildings and lands appurtenant thereto whose aggregate fair market value exceeds the sum of Rs. 50,000. Thus, the relevant date for the purpose of finding out whether the third condition prescribed by the proviso is satisfied or not is the date of the particular transaction and not any other date. It follows that each transaction of sale shall have to be considered independently and the applicability of the exemption under Section 53 shall have to be considered with reference to the position existing as on the date of that particular sale. But the learned counsel for the revenue laid stress on the phrases ' transfer of one or more capital assets ' and ' the full aggregate value of the consideration for which the transfer is made ' in the main part of Section 53 and contended that the section is not concerned with the number of transfers but the number of assets transferred and the full consideration of all the assets sold during the year is only relevant for testing the applicability of Section 53. The untenability of this contention of the revenue would be apparent if we test that contention with reference to an illustration. Suppose an assessee who owns buildings or lands appurtenant thereto whose aggregate value is Rs. 60,000 sells one item for Rs. 15,000 on one date and another item for Rs. 5,000 subsequently. How to apply the section On the date of the first transaction the assessee was owning property worth more than Rs. 50,000 and the proviso to Section 53 is therefore attracted. So for the first transaction the section is not applicable. For the second transaction since at the time of the second transaction the assessee had parted with Rs. 15,000 worth of property, he was in possession of only Rs. 45,000 worth of assets and, therefore, the proviso to Section 53 is satisfied. Even assuming that the aggregate value of Rs. 15,000 and Rs. 5,000 is to be taken for the purpose of finding out the applicability of the main part of the section, still since it is less than Rs. 25,000 the assessee would be entitled to exemption for the entire Rs. 20,000 though on a strict interpretation of the proviso the first sale for Rs. 15,000 was not entitled to any exemption. Similarly, take another illustration. An assessee was owning buildings of the aggregate value of Rs. 45,000. He sells one item for Rs. 10,000, thereafter purchases another item for Rs. 20,000 and sells yet another item for Rs. 10,000. For the first sale the proviso is satisfied, but for the second sale the proviso is not satisfied, because of the subsequent purchase of property worth Rs. 20,000. The main part of the section is satisfied even aggregating the consideration.
8. That the proviso deals with the valuation of the assets as on the date of each transfer admits of no doubt. If the proviso is to be applied with reference to each transaction and with reference to the date of transaction, then there can be no doubt that even for the applicability of the main part each transaction will have to be considered independently. That is clear from the use of the words ' transfer aforesaid is made ' in the proviso. This is only a reference to the ' transfer' coming under the main part of Section 53 of the Act. We, are therefore, of opinion that the applicability of the exemption under Section 53 is to be tested with reference to each transaction independently and with reference to the position of the holding' of the assets as on the date of that transaction. We, accordingly, answer the reference in the affirmative and in favour of the assessee. The assessee will be entitled to his costs. Counsel's fee Rs. 250.