T.V. RAJAGOPALA RAO, J.M.: ORDER This is appeal filed against order of CIT(A), dt. 22nd June, 1983, and it relates to asst. yr. 1980-81. only point involved in this appeal is whether assessee is entitled to exemption under s. 54 of IT Act, 1961 ('the Act'). 2. facts leading to present appeal are as follows : assessee is individual. assessment year involved is 1980-81, for which previous year ended on 31st March, 1980. During this year, assessee was owner of flat bearing No. 4 on third floor in Kalpataru at 39, Dr. Deshmukh Marg, Bombay 26. It appears she had obtained flat by becoming member of co- operative society engaged in construction of complexes for human living. assessee sold her flat mentioned above to one Smt. Murli Indru Advani and Shri Indru Govindram Advani for Rs. 3,34,050, even at time that she had to pay amount of Rs. 8,700 to co-operative society to perfect her title to flat. In part III of her return for this assessment year, assessee noted that she is entitled to exemption under s. 54 on ground that she had ordered construction of flat Nos. 10 and 16 in Rameshwar Apartments, Thane, Bombay, for self-occupation and construction was completed to great extent. However, admittedly, said construction was not completed within two years from date of sale of old house property. ITO found that assessee was not entitled to exemption claimed under s. 54 and entire capital gains are liable to be added to income returned. As proposed addition sought to be made to returned income is more than Rs. 1 lakh, draft order was forwarded to assessee, which was received by mother and power of attorney of assessee, viz., Smt. Ahiliya Bai Kirloskar on 24th Nov., 1982. Smt. Ahiliya Bai Kirloskar, by her application dt. 26/27th Nov., 1982, requested time till 31st Dec., 1982 for filing objections for draft assessment order. However, maximum time for which extension can be granted under s. 144B of Act is only up to 16th Dec., 1982. ITO did not grant extension and no objections were also received by ITO on or before 16th Dec., 1982. draft order is referred to IAC by ITO in his office reference dt. 13th Jan., 1983 and learned IAC, by his office reference dt. 6th Feb., 1983, intimated ITO that under circumstances, ITO ought to have completed assessment on his own treating objections as belated. He also intimated that reference under s. 144B is incompetent as there are no valid objections within 22 days after service of assessment order. Therefore, he wished ITO to consider release of assessment order within statutory time limit. Thereupon, ITO computed capital gains at Rs. 2,45,300 by taking sale value of old house property, which assessee had got in Bombay and which was sold in April 1979 at Rs. 3,29,000 instead of its correct value at Rs. 3,34,050. ITO completed assessment under s. 143(3), r/w s. 144B of Act, and capital gains were determined as under : Long-term capital gains As against nil return by assessee, capital gains are Rs. determined as follows : Sale value of immovable 3,29,000 property (flat sold in April 1979) Less : Cost of purchase of 75,000 same in 1970 . 2,54,000 Less : Due to society 8,700 Gross long-term capital gains 2,45,300 Rs. Less : (1) Basic exemption . 5,000 (2) 25 per cent on balance Rs. of Rs. 2,40,300 (Rs. 2,45,300 Rs. 65,075 60,075 5,000) Net capital gains . 1,80,225 3. Aggrieved, inter alia, against capital gains computed in hands of assessee under assessment orders dt. 16th Feb., 1983, assessee went in appeal before CIT(A). It was argued before learned CIT(A) that within two years from date of sale transaction, assessee had entered into two agreements dt. 1st April, 1981 with Somnath Builders for purchase of two flats in building named 'Rameshwar Apartments' at Panch Pakhadi Thane, i.e., flat No. 10 , on first floor in name of assessee for Rs. 99,540 and flat No. 16 on second floor to be purchased for Rs. 1,28,800 in name of her minor son, Master Devendra Talwalker. it was admitted that construction of two flats are not completed within two years from date of sale of flat in Kalpataru Building, Bombay. However, it was submitted that there was delay in completion of construction of flats owing to certain factors beyond control of assessee. It is stated that construction work was held up owing to non-availability of cement in wake of Maharashtra cement scandal. It was stated that assessee actually entered into possession of flats 10 and 16 at Rameshwar Apartments at Thane, in 1982. It was submitted that denial of exemption under s. 54 was not just or fair especially when assessee was not at all responsible for delay caused in construction of flats or buildings and it was delayed owing to certain unforeseen circumstances. assessee sought to rely upon decisions reported in CIT vs. Tikyomal Jasanmal (1971) 82 ITR 95 (Guj), CIT vs. Natu Hansraj (1976 CTR (Guj) 365 : (1976) 10 5 ITR 43 (Guj), Smt. Shantaben P. Gandhi vs. CIT (1981) 129 ITR 218 (Guj) and Addl. CIT vs. Vidya Prakash Talwar (1981) 25 CTR (Del) 220 : (1981) 132 ITR 661 (Del). learned CIT(A) held that decisions cited on behalf of assessee cannot be of any help to her. learned CIT(A) went on considering meaning of words 'has constructed' in s. 54. He stated that true meaning of those words is that construction of new house property should be completed within period of two years from date of sale of old residential house. Thus, according to him, actual construction of house within two years from date of sale of old house is mandatory requirement to get exemption under s. 54. However, in this case, agreements with Somnath Builders were extended on 1st April, 1981 just before expiry of two years' time limit from 24th April, 1979. Clause 5 of agreement shows that possession of flats should be handed over on or before May 1982 unless postponed for certain specified reasons. Thus, CIT(A) held that main ingredient under s. 54 has not been satisfied. Since correct figure of sale price was not given before ITO, learned CIT(A) felt that he should ascertain correct figure of net capital gains in hands of assessee and as per working given in impugned order, he had determined net capital gains at Rs. 1,84,000 as against Rs. 1,80,225 adopted in ITO's order. Further, aggrieved against impugned order dt. 22nd June, 1983, assessee came up in second appeal before this Tribunal. 4 . We have heard Shri P.M. Venkatesan, learned counsel for assessee, and Shri N. Santhanam, learned Departmental Representative. It i s submitted before us that except plastering, all other construction of flats was complete within two years from date of sale of old flat under agreement of sale dt. 24th April, 1979. Only plastering could not be done because cement was not released in Bombay State as freely as it used to be after great cement scandal took place in Bombay State. According to assessee, words 'constructed residential house' should not be taken on its face value but as it is beneficial provision, it may be construed liberally and it should be held enough for claiming exemption under s. 54 even if construction of residential house started within two years after date of sale of old residential house. In support of this contention, assessee relied upon decision of Supreme Court in case of K.P. Varghese vs. ITO (1981) 24 CTR (SC) 358 : (1981) 131 ITR 597 (SC). There it is held as follows : " statutory provision must be so construed, if possible, that absurdity and mischief may be avoided. Where plain literal interpretation of statutory provision produces manifestly absurd and unjust result which could never have been intended by legislature, Court may modify language used by legislature or even do some violence to it, so as to achieve obvious intention of legislature and produce rational construction. " As against this argument, learned Departmental Representative, in first instance, states that copies of agreement now filed in paper compilation on behalf of assessee would reveal that assessee intended to purchase two flats after they have completed construction and she is obliged t o make certain payments to builders of Rameshwar Apartments. provisions of agreements dt. 1st April, 1981 which assessee had entered into with Somnath Builders, would clearly reveal that assessee intended to purchase one flat in her favour for Rs. 99,540 and another flat in favour of her minor son for Rs. 1,28,800. Therefore, he contends that we should understand case of assessee as one of purchase of residential flat and if that is so, as per requirements of s. 54, it should be done within one year after s l e of old residential house. That means, according to learned Departmental Representative, as old residential flat of assessee was sold under agreement dt. 24th April, 1979, purchase of new flats for residential purposes should have been complete by 24th April, 1980. However, he argues that agreement to purchase was entered into on 1st April, 1981 with Somnath Builders, which is quite beyond one year and as such assessee is not entitled to exemption under s. 54. Secondly, he argued even assuming that case of assessee is not of purchaser but of person who constructed another residential building, construction should be complete within two years from date of sale of old residential house. That means, according to him, construction should be complete within 24th April, 1981. However, even according to assessee, construction was not complete and possession of flats was taken over only in 1982. So, by completion of two years, viz., by 24th April, 1981, there was only incomplete construction of two flats under consideration. Further, even according to specific term of contract dt. 1st April, 1981, viz., cl. 5 of agreement entered into by assessee with Somnath Builders, possession of flats 10 and 16 in Rameshwar Apartments was agreed to be delivered only in May 1982 and not before that date. So it is very clear that on 24th April, 1981, apartments were not even agreed to be delivered and if that is so, it cannot be argued that by 24th April, 1981, flats 10 and 16 in Rameshwar Apartments can even be said to be flats of completed construction. It is argued that incomplete construction cannot be called house and learned Departmental Representative very much relied on decision of Orissa High Court in CWT vs. K.B. Pradhan (1981) 130 ITR 393 (Ori). In that case for giving exemption for value of house under s. 5(1)(iv) of WT Act, 1957, what is meant by term 'house' fell for consideration before Orissa High Court. Hon'ble Orissa High Court had held that if house was once habitable and became uninhabitable on account of want of repairs, exemption provided by proviso to s. 5(1)(iv) may operate. Where, however, house is in process of construction and, on account of fact that it is not complete, has not reached habitable stage, concept of 'house' cannot be extended to cover such incomplete construction. Thus, according to him, unless house constructed is such which is habitable, it cannot be called house and as matter of fact house whose construction was not complete cannot be called house. In this case as to whether it is outright purchase or construction by assessee herself, flats which she, subsequently, occupied in 1982 were new constructions and there was no scope for any repairs being undertaken to them and, hence, category of house, which fell under proviso to s. 5(1)(iv), should not be considered for our purposes. 5. Thus, we considered arguments on both sides. We are of opinion that submissions made on behalf of Department should be accepted. Our reasons are as follows. Sec. 54(1) is as follows : " Where capital gain arises from transfer of capital asset to which provisions of s. 53 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 parent's own residence (hereafter in this section referred to as original asset), 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 following provisions of this section,... " Firstly, flat No. 4 in third floor in Kalpataru building at 39, Dr. Deshmukh Marg, Bombay 26, was purchased by assessee in 1970. It was not disputed by Department that assessee herself lived in said flat till it was sold under agreement dt. 24th April, 1979 and thus she utilised flat for her residential purposes. Thus, first requirement that house sold should have been used by assessee or her parent for residential purposes for two preceding assessment years before sale was fulfilled in this case. Next we have to see whether assessee actually purchased two flats, flat Nos. 10 and 16 from Somnath Builders under two agreements entered into by her dt. 1st April, 1981 or whether she got those flats constructed by employing Somnath Builders as contractors. Photostat copies of agreements are filed in paper compilation before this Tribunal. Clause 3(a) of agreement is similarly worded in both agreements, so we felt it enough to extract one of clauses from one of agreements : " 3.(a) second party hereby agrees to purchase flat No. 10 on first floor in said building, admeasuring about 711.00 sq. ft. (carpet area) approximately, as shown on plan, seen and approved by second party for price of Rs. 99,540.00 (Rupees nintynine thousand five hundred forty only). This price shall include amenities listed in exhibit 'B'. " There is preamble to agreement and para (e) of preamble is important which states that second party (the assessee) has approached first party (builders) and offered to purchase flat 10 on first floor in said building on said property. various stages at which sale price was to be paid were given at cl. 4 of agreement. Clause 5 speaks of probable date before which flat should be completed and handed over possession to second party (the assessee). It says as follows : " 5. first party agrees to hand over possession of said flat to second party on or before May 1982 subject to realization of cheque, if any, paid by second party to first party in payment of balance payment as aforesaid and subject, however, to grant of completion certificate by Thane Municipal Council and subject to acts of God, such as earthquake, floods or other natural calamities, act of enemy war, and subject to availability of cement, steel or any other cause beyond control of first party." Clause 7 of agreement discloses actual interest, which assessee had purchased from builders and it is as follows : " 7. second party shall have no claim save and except in respect of particular flat hereby agreed to be purchased, i.e., open space, parking spaces, lifts, staircases, terraces, etc., which will remain property of first party until whole property is transferred to proposed Co-operative Housing Society or other incorporated body, as hereinabove mentioned, subject to rights of first party hereinafter stated. " format as well as terms of two agreements dt. 1st April, 1981, one of which is obtained in name of assessee and another in name of her minor son, was one and same. Similar clauses are present in two agreements. Therefore, it can be seen that what was purchased under agreements is only flats and open space, parking spaces, lift, staircases, terraces, etc., would remain property of builders themselves until co- operative society is formed and whole property is transferred to said society. Therefore, to our minds, it appears to be that except right of lateral support to flat area purchased by assessee in her name and in name of her minor son and carpet area of flat, she had no interest in land over which those flats were built. question of getting building constructed would arise in case where land on which building or complex is sought to be raised belongs to assessee herself. However, on reading of agreement, we feel that until construction of flats purchased by assessee is completed, ownership of those flats does not automatically vest in assessee. To our minds, it appears ownership of flats would vest only in assessee after taking over possession of said flats from builders which is stated to be ordinarily in May 1982. If ownership of flats remains with builder till possession is taken of flats on payment of full amount of consideration, to our minds, it appears, that it is case of outright sale of flat on date of taking over possession, which would also be date on which complete consideration would be paid to builders. Therefore, we find it difficult to comprehend argument advanced on behalf of assessee that they got flats constructed for them by employing builders or taking only their services. In our opinion, assessee did not construct but only purchased flat which was already constructed in 1982. Therefore, only one year's time from date of sale of old residential house was available to assessee. Thus, exemption under s. 54 would be available to assessee only if consideration of Rs. 3,34,050 was spent towards purchase of another residential house within 24th April, 1980. Therefore, once it is admitted that sale itself was complete in 1982, it is obvious that assessee cannot claim exemption under s. 54. Further assuming, without admitting, that it is case of constructing building, even then, in our opinion, building must be completed construction and building must become habitable within two years time available under s. 54. words employed in s. 54 relevant for assessment year under consideration, viz., " has within period of two years after that date constructed, house property for purposes of his own residence, then ", would only admit of construction which is stated above by us. In our opinion, s. 54 exemption would not be available if simply construction of house started within two years' time from date of sale of old house and construction is not completed within two years and house is fit for habitation within two years. We fully agree with submission of learned Departmental Representative that incomplete house cannot be stated to be house either for purposes of wealth-tax or for purposes of s. 54. We humbly follow Orissa High Court judgment reported in K.B. Pradhan's case (supra) in this regard. No other authority taking opposite view is filed before us. All four authorities, viz., Tikyomal Jasanmal's case (supra), Natu Hansraj's case (supra), Smt. Shantaben P. Gandhi's case (supra) and Vidya Prakash Talwar's case (supra) do not come to aid of assessee in any way. We also hold that ratio of decision of Hon'ble Supreme Court in K.P. Varghese's case (supra) cannot apply to facts of case. Firstly, we are of opinion that power of doing violence to language used by legislature in section can be exercised only by Courts conferred with powers of extraordinary jurisdiction when they felt on reading of legal provision that literal interpretation of it produces manifestly absurd and unjust result and also when they felt that said absurd result could not have been intended by legislature. We are of opinion that such power is not available to lower Tribunals. We feel that if such powers are also being enjoyed by lower Tribunals, there is every likelihood of misinterpreting intention of legislature and subverting letter of law in garb of correcting unjust result which would again be subjective. We are of opinion, person would be entitled to benefits conferred by provision if only he fulfils all conditions laid down therein. literal interpretation of s. 54 does not, to our minds, present any manifestly absurd or unjust result, which is not in contemplation of legislature. Hence, there is no question of doing violence to language of section in order to carry out intention of legislature. In result, appeal of assessee bears no merits and, hence, it is dismissed. *** DR.(MRS) MRUDULA A. TALWAR v. INCOME TAX OFFICER