COMMISSIONER OF INCOME-TAX Vs. M KALPAGAM

JUDGEMENT

(1.) In compliance with the order of this court dated November 8, 1982, the following questions are referred by the Tribunal for the opinion of this court under section 256(1) (sic) of the Income-tax Act :

(2.) The assessee is an individual. The assessee sold a plot of land measuring 10 grounds and 29 sq. ft. for a sum of Rs. 2,70,000 in the assessment year 1975-76. With the proceeds, the assessee constructed a new house and claimed relief under section 54 of the Income-tax Act in the computation of capital gains exigible to tax. The Income-tax Officer was of the opinion that applying the norms of the Urban Land Ceiling Act, only an area of 2 grounds and 580 sq. ft. could be taken as land appurtenant to the building and the balance of the vacant land should be treated as separate asset. Accordingly, the Income-tax Officer apportioned the sale consideration of Rs. 2,70,000 as Rs. 1,10,000 for the value of the building and the appurtenant land so restricted by him and the balance of Rs. 1,60,000 relating to the piece of the vacant land.

(3.) On appeal, the first appellate authority found that the house which was situated at Thiruvanmiyur, about eight miles away from the city of Madras, did not fall under the provisions of the Madras City Municipal Act and, therefore, no part of the land could be separated and treated as a separate asset and the entire property sold should be treated as one unit of land and building.