MRS. USHA GUJRAL v. INCOME TAX OFFICER
[Citation -1984-LL-0313]

Citation 1984-LL-0313
Appellant Name MRS. USHA GUJRAL
Respondent Name INCOME TAX OFFICER
Court ITAT
Relevant Act Income-tax
Date of Order 13/03/1984
Assessment Year 1976-77
Judgment View Judgment
Keyword Tags transfer of capital asset • business or profession • new residential house • industrial estate • salaried employee • vacant possession • valuation report • servant quarter • approved valuer • house property • town planning • capital gain • monthly rent • sale deed • new house
Bot Summary: The assessee, whose husband, Dr. M. L. Gujral lives at Avanti, Faizabad Road, Lucknow, had sold house property at 31, Pusa Road, New Delhi on 16-5-1975 to one Shri J. S. Kohli for Rs. 2,72,000. The mere fact that the assessee held a ration card with reference to Delhi address was not conclusive of the assessee's residence at Delhi. In appeal, the learned Commissioner felt satisfied about the following two aspects: That the house at Delhi was used by the assessee for her residence. According to him, on facts the ground floor portion, which was in occupation of the assessee from September 1968 till the sale made on 16-5- 1975 was more than the first floor portion which stood let out. The question to be factually resolved is whether the ground floor portion of the house in question, which was admittedly used by the assessee for the purposes of her own residence, could be said to be more than half. In the statement of facts filed before the Commissioner, the assessee has mentioned that the sketch plan of the property was produced and filed before the IAC. It also mentions a concrete platform on the ground floor. Considering the portion used by the assessee 'mainly' for the purposes of her own residence, we are of the view that it constituted more than one-half and the assessee could be said to be using the house property in question mainly for the purposes of her own residence.


In this appeal filed by assessee, only question for consideration is regarding capital gain under section 54 of Income-tax Act, 1961 ('the Act'). assessment year involved is 1976-77. 2. assessee, whose husband, Dr. M. L. Gujral lives at Avanti, Faizabad Road, Lucknow, had sold house property at 31, Pusa Road, New Delhi on 16-5-1975 to one Shri J. S. Kohli for Rs. 2,72,000. She had purchased plot of land situated at 440/11-A, New Hyderabad, Lucknow, vide sale deed dated 17-10-1974 for Rs. 49,800. Although construction of house thereon was started prior to 16-5-1975 when old residence (at Delhi) was sold, construction was completed on 7-3-1977. assessee originally declared capital gain of Rs. 24,433 as result of transfer of said capital asset. However, in revised return this capital gain was omitted and exemption was claimed under section 54. Section 54 provides that where capital gain arises from transfer of capital asset (to which provision of section 53 of Act are not applicable) being buildings or lands appurtenant thereto, income of which is chargeable under head 'income from house property', which in two years immediately preceding date on which transfer took place was being used by assessee or parent of his mainly for purposes of his own or then parent's own residence, and assessee has within period of one year before or after that date purchased, or has within period of two years after that date constructed house property for purposes of his own residence, then, instead of capital gain being charged to income-tax as income of previous year in which transfer took place, it shall be dealt with in accordance with provisions given in that section. IAC in course of proceedings under section 144B (4) of Act found that assessee's claim was not admissible for following reasons: (i) In returns of income for years 1961-62 till assessment year under consideration residence shown was not Delhi property but Avanti, Faizabad Road, Lucknow. (ii) From 1-4-1972 to 31-3-1974 assessee was working as full time salaried employee of Encardio-Rite Electronics (P.) Ltd., Lucknow, are received salary from above company. (ii) capital gain was claimed to be exempt in revised return though declared in original return. (iv) assessee's husband along with children living at Lucknow since 1949-50. (v) assessee did not carry on any profession or vocation nor did she keep herself engaged otherwise at New Delhi. (vi) plot of land at Lucknow had been purchased before property was sold on 16-5-1975 and construction was started immediately thereafter, i.e., much earlier than sale of property at New Delhi. (vii) It is likely that husband and children might be using Delhi property for them but on account of this assessee did not become entitled to relief claimed. (viii) property could not be said to have been mainly occupied for residential purposes. (ix) mere fact that assessee held ration card with reference to Delhi address was not conclusive of assessee's residence at Delhi. On basis of above directions, ITO held that assessee was not entitled to any relief under section 54. He worked out capital gains at Rs. 1,34,295 after taking value of building at Rs. 70,000 as on 1-1-1954. 3. However, in appeal, learned Commissioner (Appeals) felt satisfied about following two aspects: (i) That house at Delhi was used by assessee for her residence. (ii) new house was constructed and occupied within period of two years from date of sale of house at Delhi as there is no prohibition for starting construction of new residential house before sale of old residence. However, he held that house was not mainly used by assesse for residential purposes. Accordingly, he confirmed order of ITO disallowing assessee's claim for exemption under section 54. 4. In appeal before us, Shri R. K. Gulati, learned counsel for assessee, submitted that meaning of expression 'mainly' as defined in Webster's Dictionary was 'in principal, for most part, chiefly'. He also relied upon following decisions in respect of proposition that if more than 50 per cent of capital asset was being used by assessee for purposes of his own residence, within meaning of section 54 it had to be taken that it had been used for that purpose 'mainly' - CIT v. Tikyomal Jasanmal [1971] 82 ITR (Guj.), CIT v. Natu Hansraj [1976] 105 ITR 43 (Guj.), B. B. Sarkar v. CIT [1981] 132 ITR 150 (Cal.) and Addl. CIT v. Vidya Prakash Talwar [1981] 132 ITR 661 (Delhi). In this connection, reliance was also placed by him on following definition of word 'mainly' in Words and Phrases Legally Defined by John B. Saunders, Vol. 3, Second edn: "Mainly (A town planning authority granted permission to develop area subject to condition that occupation of houses built thereon should be limited to certain classes of persons including those employed in industry 'mainly' dependent on agriculture). 'The word "mainly" at once gives rise to difficulties. Probably it means "more that half" and this was meaning which this House gave to phrase "the bulk thereof" in Bromley v. Tryon [1952] A. C. 265.' Fawcett Properties Ltd. v. Buckingham County Council [1961] A. C. 636, H. L. per Lord Morton of Henryton, at p. 669." According to him, on facts ground floor portion, which was in occupation of assessee from September 1968 till sale made on 16-5- 1975 was more than first floor portion which stood let out. He submitted that learned Commissioner (Appeals) was wrong in holding that open land which was left in front, back and on all sides was because of corporation bye-laws and was not specifically kept open or reserved for use of occupant of ground floor when assessee transferred vacant possession of full ground floor of main house with three lofts, one motor garage, one servant quarter, one-half of terrace above first floor, lawns, flower beds on all sides and two verandahs which were under occupation of assessee. He also submitted that it was not necessary that property in question must be used continuously for purposes of residence immediately preceding date of transfer. In this connection, reliance was placed by him on letter No. 207/24/76-IT (A-II) dated 25-3-1977 of Board addressed to ICCI which is reproduced in paragraph 232 of TAXMAN's Direct Taxes Circulars, Vol. 1, 1980 edn. He, therefore, argued that assessee was entitled to exemption claimed under section 54. 5. On other hand, learned departmental representative placed k reliance on orders of income-tax authorities. He also submitted that in financial years 1972-73 to 1973-74 assessee was employed at Lucknow with Encardio-Rite Electronics (P.) Ltd. A-5, Industrial Estate, Talkatora Road, Lucknow, and that it is only from 1-1-1973 to 30-6-1973 that assessee was posted in Delhi. Placing reliance on decision of Hon'ble Madras High Court in CIT v. C. Jayalakshmi [1981] 132 ITR 82, he submitted that accommodation on ground floor and first floor was identical; that there was no excess area on ground floor and that other things like lawns, flower beds, etc., were to be equally enjoyed. 6. We have considered rival submissions as also decisions referred to above. Having regard to decisions relied upon on both sides as also to definition of word 'mainly'. It is clear that it means 'more than half'. Therefore, question to be factually resolved is whether ground floor portion of house in question, which was admittedly used by assessee for purposes of her own residence, could be said to be more than half. There is nothing in section 54 to warrant proposition that property in question must be used continuously for purposes of residence immediately preceding date of transfer. This is also clear from letter of Board referred to above on which reliance was placed on behalf of assessee. In that letter it was recognised by Board that person may maintain more than one residential house on account of exigencies of his business or profession or for reasons of health and pleasure. In all those cases persons or his parents would not be reside continuously in one house. Therefore, so far as this aspect of matter is concerned, department's own letter is against it. We may now examine factual position in regard to other question. house property No. 31, Pusa Road, New Delhi, which is capital asset in question, effect of transfer of which is under examination, consists of ground floor and first floor and terrace above first floor. total area of plot was 10,917 sq. ft. following description occurs of accommodation on ground and first floor as given in sale deed dated 16-5-1975: "That actual vacant possession of full ground floor of main house, with 3 lofts, one motor garage, one servant Qr., one-half of terrace above first floor, lawns, flower beds on all sides and two verandahs which until now was under self-occupation of vendor has been delivered on vendee on spot on date hereof. That first floor of said property with one garage, one servant quarter, and one half of terrace is under tenancy of Shri R. N. Minocha on monthly rent of Rs. 250 (Rupees two hundred and fifty only) and proprietary possession and ownership of same has also been delivered to vendee by attorning said tenant up to vendee. said tenant shall b e duly informed by vendor to attorn to vendee from date hereof, recognise him landlord and to pay future rents to him and that vendor has not let aforesaid first floor to tenant for any definite period and that she has not recovered any rent in advance." In statement of facts filed before Commissioner (Appeals), assessee has mentioned that sketch plan of property was produced and filed before IAC (Assessment). It also mentions concrete platform on ground floor. Next, it was mentioned that for upper floor all pathways were not common. This shows that not only area of lofts [given in order of Commissioner (Appeals) as 288 sq. ft.] was extra but was also area of lawns, flower beds on all sides and two verandahs. In section 54 capital asset with reference to capital gain is referred to as consisting of buildings or lands appurtenant thereto. Therefore, there is no reason why lands appurtenant to buildings be not taken into consideration. assessee had pointed out before income-tax authorities that in valuation report dated 15-9-1969 of approved valuer Shri B. N. Chadda, self-occupied portion (ground floor) was valued at Rs. 92,000 whereas rented portion was valued at Rs. 53,000 only. We agree with submission made on behalf of assessee that learned Commissioner (Appeals) was not right in observing that open space had been left as matter of compulsion because of bye- laws of corporation. In our view, they had to be taken into consideration. Considering portion used by assessee 'mainly' for purposes of her own residence, we are of view that it constituted more than one-half and, therefore, assessee could be said to be using house property in question mainly for purposes of her own residence. Therefore, assessee was duly entitled to claim exemption under section 54. On account of this finding, arguments were not heard by us on assessee's alternative submission that capital gains, in any case, required to be assessed on pro rata basis for occupied and rented portion of house of and that deduction under section 54 required to be allowed against self-occupied portion. We have, therefore, not considered said alternative submission. 7. appeal is allowed. *** MRS. USHA GUJRAL v. INCOME TAX OFFICER
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