COMMISSIONER OF INCOME TAX Vs. CITIBANK N A

JUDGEMENT

(1.) FOR the assessment year 1979 -80, the Department has come by way of reference under Section 256(1) of the Income -tax Act, 1961, for our opinion on the question quoted hereinbelow :

(2.) SOME time during the accounting year ending December, 1975, the assessee purchased a plot of land admeasuring 3,930 sq. yards at Friends Colony, New Delhi. In the next year, the assessee started construction of a bungalow as a residence for the assessee's manager in New Delhi. On August 7, 1978, the assessee sold the entire property for Rs. 30,00,000. In the conveyance the price was allocated as follows ; for the land, it was Rs. 14,00,000 ; for the building, it was Rs. 9,00,000 and Rs. 7,00,000 was for the air -conditioning plant, equipment, installations and fixtures. The total consideration was Rs. 30,00,000. At this stage, it may be mentioned that out of the total area admeasuring 3,930 sq. yards, the built up area occupied by the bungalow/building was 1,235 sq. yards.

(3.) MR . R. V. Desai, learned senior counsel appearing on behalf of the Department, argued that after the construction of the building on the land, the house property became an inseparable asset. That, after construction of the building on the land, the house property became a new asset. That, it was not possible to bifurcate the capital gains as relatable to building separately or land separately and since the apportionment was not possible, the view of the Tribunal was not correct in law. According to learned counsel for the Department, the land and building are not sold separately but as one unit and, therefore, it is not possible to bifurcate the building and land as two separate units.