COMMISSIONER OF INCOME TAX Vs. MALA R

JUDGEMENT

(1.) THE Tribunal has referred the following question under s. 256(1) of the I.T. Act, 1961.

(2.) THE assessee is the proprietrix of the business called Raju Real Estate. On September 3, 1969, she purchased a plot of land at 31, Bhagirathi Ammal Street, Madras-17, and constructed a building on the same costing Rs. 38,359. This building was used as a dwelling house till July 13, 1970, on which date it was sold for Rs. 49,000. She purchased on the same day another plot of land for a sum of Rs. 20,000 and put up a construction costing Rs. 63,000. She stayed in the said house till July 5, 1971, when she sold it for a sum of Rs. 1,00,000. In making the assessment for the year 1971-72, the ITO brought to tax as short-term capital gains a sum of Rs. 10,641, being the excess realised on the sale of the house at 31, Bhagirathi Ammal Street, sold in July, 1970. THE assessee claimed that the capital gains should be computed in accordance with the provisions of s. 54 of the Act. This claim was rejected by the ITO and the AAC. THE assessee thereafter appealed to the Tribunal which held that the sum of Rs. 10,340 was not assessable to tax as capital gains. In the view of the Tribunal, the conditions of s. 54 would be satisfied if the assessee or her parents were to utilise the house for the purpose of their residence even for a day and also if the construction or purchase of the house was intended for his or her residence. As in the present case the above conditions were said to have been satisfied the Tribunal deleted the entire sum of Rs. 10,340. In coming to its conclusion, the Tribunal compared also the cost of the new building which came to Rs. 83,000, consisting of Rs. 20,000, being the cost of the plot, and Rs. 63,000, being the cost of the construction. It is this order of the Tribunal that is now challenged under the present reference.

(3.) IN the result, we answer the question referred to us as follows :