COMMISSIONER OF INCOME TAX Vs. SUDHIR JAYANTILAL MULJI

JUDGEMENT

(1.) BY this reference under S. 256(1) of the IT Act, 1961, made at the instance of the Revenue, the Tribunal has referred the following question of law to this Court for opinion :

(2.) THIS reference pertains to the asst. year 1973 74, the corresponding previous year being the financial year ending 31st March, 1973. The assessee is an individual. He had held a one half share in a flat at Usha Kiran Building, Bombay. The said flat was sold during the relevant previous year for a sum of Rs. 4,50,000. The assessee's share being 50 per cent of the total consideration, worked out to Rs. 2,25,000. His contribution to the total cost of acquisition was Rs. 1,38,396. His share of long term capital gains from the sale of the above flat worked out to Rs. 35,182. The assessee claimed exemption in respect of the entire amount of a capital gain arising from the sale of the said flat on the ground that the flat in question had been used as a residential unit for two years immediately preceding the date on which the transfer took place and within a period of one year from the date of sale, he had purchased a flat at Delhi for the purpose of his own residence and hence S. 54 of the Act was applicable. The above claim of the assessee was rejected by the ITO on the ground that S. 54 of the Act was not applicable to the case of the assessee, because, within the two years immediately preceding the date of transfer, it was not being used by the assessee or his parents mainly for the purpose of his own or his parent's residence. It was observed that the flat in question was let out to the Deputy British High Commissioner upto 17th Feb., 1971; and thereafter it was lying vacant for a period of eleven months. The ITO, therefore, held that it was not being used by the assessee or his parents for the purpose of own residence in the two years preceding the date on which the transfer took place as required under S. 54 of the Act. An appeal against the above order of the ITO was rejected by the AAC, who observed that the claim of the assessee in regard to the user and occupation of the flat, in the two years immediately preceding the date on which the transfer took place, was not correct. The assessee went in further appeal to the Tribunal. The Tribunal also found that the assessee was in occupation of the flat in question only for a period of 62 days during the two years immediately preceding the date on which the transfer took place. Despite that, it held that the occupation or user of the property for the purpose of residence even for 62 days during the period of two years immediately preceding the date on which the transfer took place, fulfilled the requirement of S. 54 of the Act, inasmuch as, in its opinion, for the purpose of availing of the benefit of S. 54 of the Act, it was not necessary that the property should have been so used by the assessee or his parent throughout the period of two years prior to the date of transfer. Accordingly, the Tribunal allowed the appeal of the assessee, set aside the order of the ITO and the AAC and held that the assessee was entitled to the benefit of S. 54 of the Act. Hence, this reference at the instance of the Revenue.

(3.) WE have given our careful consideration to the rival submissions in the light of the facts of the present case. We have also perused the decision of this Court in CIT vs. Indulal C. Kamdar (supra). On a careful consideration of the same, we find it extremely difficult to agree with the construction sought to be put on S. 54 by counsel for the assessee and the submission purportedly made on the basis of the above decision that even in a case like the one before us where admittedly the flat was in occupation of the tenant for over one year in the two years immediately preceding the sale, benefit of S. 54 of the Act would be available.