Income Tax Appellate Tribunal - Madras
Income-Tax Officer vs H.H. Raghavachari on 11 March, 1996
Equivalent citations: [1982]1ITD192(MAD)
ORDER
Shri T. N. C. Rangarajan, Judicial Member
1. This appeal by the revenue is directed against the order of the AAC granting relief under section 54 of the Income-tax act ("the Act").
2. The assessee is an individual. In the previous year relevant to the assessment year 1975-76, the assessee sold a building situate on 61/2 grounds of land for a sum of Rs. 1,52,000. Since he purchased a residential flat subsequently, he claimed that the capital gains arising from the sale of the property should be set off against the price of purchase transaction for granting relief under section 54. However, the ITO was of the view that the entire extent of land could not be regarded as appurtenant to the building and keeping in view the norms set under the Urban land ceiling Legislation, only an extent of 11/2 grounds of land could be treated as appurtenant to the building. He, accordingly, computed the proportionate value of 11/2 grounds at Rs. 32,100 and the value of the building at Rs. 12,500 and allowed exemption under section 54 only in the sum of Rs. 44,600. On appeal, the AAC found that the building was situate in the middle of the plot of land and no part of the land could be sold independent of the building. He was also of the view that the provision of the Urban Land Ceiling Act has no relevance and, therefore, the entire land surrounding the building had to be treated as appurtenant and the entire capital gains had to be allowed to be set off under section 54.
3. In this appeal, the only pressed on behalf of the revenue is that the norms for appurtenant land set down in the land ceiling legislation should be applied to ascertain the appurtenant land that could be allowed for granting relief under section 54. We are unable to see how the land ceiling legislation has any relevance to the issue. For one thing the Urban Land Ceiling Legislation itself was not in force at the time of the sale as the sale itself would not have been possible if the property had been affected by the ceiling prescribed. For another, even the norms prescribed under the Land Ceiling Legislation for ascertaining the land appurtenant to the building are not to be applied unless by such application it is possible to exclude any part of the land which could be independently utilized. Besides, section 54 refers to capital gains arising from the transfer of the capital asset being buildings or land appurtenant thereto the income of which is chargeable under the head "Income from house property". The word 'or' indicates that even if the land alone is transferred the provision of this section would be applicable and in that context whether the land is appurtenant could only mean whether it is contiguous to the building or not and not whether it was essential for the enjoyment of the building. This is because if it were so essential it could not be carved out and sold separately as envisaged by one provision. Secondly the capital asset being building or land appurtenant thereto is qualified by the words "income of which is chargeable under the head 'Income from house property'". This again indicates that the land must be part of the building the income of which is assessed to income-tax for land alone does not give rise to taxable income under the head "Income from house property". The necessary implication is that the words "land appurtenant thereto" has been utilized in the section to mean the lands which are taken as a unit along with the house. From this point of view there is no scope of bifurcating the land which formed a unit along with the building as a portion appurtenant to the building and a portion which is not. Apart from all these, a reference to the sketch of the property makes it amply clear that the land forms one unit with the house and out-house which are built in such a way as to have only strips of land surrounding them and formed one unit with the result that no part of the strips of land surrounding the building could have any independent value other than being appurtenant to the house.
4. We are, therefore, convinced that the AAC was right in granting relief under section 54 in respect of the entire capital gains arising from the sale of the property treated as one unit. We have, therefore, no hesitation in confirming his order. The appeal is dismissed.