· Assessee's grandmother purchased a plot of land before 01.04.1981. After her demise on 31.03.1985, the property was acquired by assessee's mother by way of Will. Finally, the assessee inherited said property on the death of his mother on 16.03.1994.
· During relevant year, the assessee sold said plot of land and claimed the long-term capital gain as exempt by claiming deduction u/s 54 of the Act.
· The AO allowed the assessee’s claim for deduction u/s 54 of the Act, however, the CIT(A) held thatthe long-term capital asset sold by the assessee was 'land appurtenant to the building' but was not a residential house, and therefore, the assessee was not entitled for deduction u/s 54.
· The Hon’ble Tribunal, after considering the above facts observed thatthe land, which was sold by the assessee, was forming part of the residence and all the property was duly assessed to house-tax and was self-occupied by the assessee and other family members. The Tribunal further observed thatunder section 54, the legislature has used the expression "being buildings or lands appurtenant thereto and being a residential house".
· Therefore, the Tribunal concluded by holding thatthe deduction under section 54 is available even if the land, which was appurtenant to the residential house, is sold and it is not necessary that the whole of the residential house should be sold.Thus, the exemption as claimed and allowed by the Assessing Officer was upheld, and the enhancement as made by the CIT (A) was stated to be not sustainable in the eyes of law, and hence, deleted.
For further reading, refer the attachment.
Further Reading