CIT Vs. CHHAYA B. PAREKH

JUDGEMENT

(1.) IN this appeal by the revenue, the following question of law has been proposed for our consideration.

(2.) THE revenue does not dispute the entitlement of the respondent -assessee under section 54F of the Act on the purchase of the bungalow property. However, the grievance of the revenue is that as the respondent had demolished the bungalow within 3 years of its purchase, the same would amount to transfer and would be hit by section 54F(3) of the Act. Consequently, in the previous year relevant to the assessment year under consideration the capital gain tax would be payable on the amounts not charged due to the benefit availed of section 54F of the Act as held by the assessing officer in his order dated 30 -10 -2009.

(3.) THE Commissioner of Income Tax (Appeals) (the CIT (A) by his order dated 18 -03 -2010 fallowed the appeal of the respondent -assess. The CIT(A) held that the demolition of the structure would not constitute a transfer of the assets in terms of section 54(3) of the Act. Being aggrieved the revenue carried the matter in appeal to the Tribunal. By order dated 16 -05 -2012, the Tribunal dismissed the 'appeal of the revenue by placing reliance upon he decision of the Apex Court in the matter of Vania Silk Mills P. Ltd. v. CIT : (1991)191 ITR 647 (SC). In the above case, the Apex Court has held that when an asset is destroyed, there is no question of transfer taking place under the Act. The Apex court held that in terms of the Act that the words Extinguishment of any right in section 2(47) of the Act, does not include an extinguishment of right on account of destruction. It has to be an extinguishment of right on account of transfer. Thus, a destruction of assets when not on account of any transfer would not be hit by section 54F(3) of the Act.