HAMEED JAFTERY Vs. COMMISSIONER OF INCOME TAX BOMBAY

JUDGEMENT

(1.) BY this reference under section 256 (1) of the Income Tax Act, 1961 made at the instance of the assessee, the Income Tax Appellate Tribunal has referred the following Question of law to this Court for opinion:

(2.) THIS reference pertains to assessment year 1975-76. The material facts of the case giving rise to this reference are as follows: the assessee is an individual. He was occupying flat No. 9-G of Malbar Apartment at Nepeansea Road, Bombay, since May 1968 on leave and licence basis. He was paying compensation for that at the rate of Rs. 525/ per month. He purchased the said flat on 16th July, 1973 for a sum of Rs. 36,375 and was in occupation of the same as its owner since then. He sold the above flat on l1th August, 1974 for a sum of Rs. 70. 000/ -. The assessee had purchased a flat being flat No. 203 in Casablanca for Rs. 1,10,000/- on 1st August, 1974. The assessee claimed exemption from capital gains tax under section 54 of the Income-Tax Act, 1961 (the Act) in respect of capital gains arising from the sale of the flat at Malbar Apartment for Rs. 70,000- on the ground that he had been occupying the same for a period of two years prior to its sale. The Income-Tax Officer did not accept the claim of the assessee for exemption under section 54 of the Act as, according to him, the assessee was not even the owner of the flat sold by him for 2 years. On appeal by the assessee, the Appellate Assistant Commissioner of Income-Tax accepted the claim of the assessee and allowed exemption under section 54 of the Act. Aggrieved by the above order of the Appellate Assistant Commissioner, revenue appealed to the Income-Tax Appellate Tribunal The Tribunal reversed the order of the Appellate Assistant Commissioner and restored that of the Income-Tax Officer. While doing so, the Tribunal held that for getting exemption under section 54 of the Income-Tax Act, the assessee must reside in the residential house as an owner for a period of two years prior to its sale. Hence this reference at the instance of the assessee.

(3.) MR. S. J. Mehta, learned Counsel for the assessee, submits that for the purpose of exemption under section 54 of the Act it is not necessary that the assessee should occupy the premises for his own residence as an owner. According to him, it is sufficient if the assessee was in occupation of the premises for a period of two years in any capacity.