KRISHNAMURTHY R Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE Tribunal has referred the following question to this Court under s. 256(1) of the IT Act, 1961 :

(2.) THE assessee constructed one house in the financial year 1961-62. It was let out to a tenant. THE tenant vacated it in May, 1971. THE assessee used that house for his residence from 1st June, 1971 to 21st Sept., 1971. THE house was sold by the assessee on 21st Sept., 1971. In respect of capital gain which arose as a result of sale of that residential house, the assessee claimed exemption under s. 54 of the Act. THE ITO held that the property was not used by the assessee as a residential house for the immediate (preceding) period of two years and, therefore, the condition necessary for qualifying for exemption was not satisfied. THE claim for exemption was thus denied by the ITO. In the appeal to the AAC, the assessee succeeded as the AAC was of the view that use of the house for residential purpose during any period within the specified period of two years was sufficient for claiming exemption under s. 54 of the Act. THE Revenue preferred an appeal to the Tribunal which reversed the order passed by the AAC and restored the order of the ITO as it was of the view that exemption under s. 54 can be invoked by the assessee if he had used the building for the purpose of his residence for a period of two years immediately preceding the date on which the transfer took place. THE assessee then moved the Tribunal for referring the abovestated question to this Court.

(3.) RELYING upon these two judgments, it was submitted by the learned advocate for the assessee that the latter words 'was being used' though connote continuity of user, should not have any effect upon the interpretation of the word 'in' used in the phrase 'in the two years immediately preceding the date of the transfer'. He submitted that if the legislature had intended user for the full period of two years, then it could have used the word 'for' instead of 'in'. He also submitted that if the word is interpreted in any other manner, then it would amount to adding words in the section. The legislature on the other hand had thought it fit to use the word 'in' and, therefore, it should be held that what the legislature intended was user of the residential house at any time within the period of two years. We do not find any substance in these contentions, but before we give our reasons, it would be more useful to refer to the decisions of the Madras High Court to which our attention was drawn by the learned advocate for the assessee and which have been referred to both by the Delhi High Court and the Karnataka High Court.