ORDER
Joginder Singh, J.M.
The main appeal of the assessee was disposed of by the Tribunal vide order dated 28-1-1999 for the assessment year under consideration, dismissing the appeal by holding that in so far as the benefit under section 54 of the Act is concerned, the deduction is available only when out of the sale proceeds, the assessee makes an investment in the construction of a residential building. Since the case of the assessee was not that he had constructed a residential building after the sale and by utilising the sale proceeds, the benefit of section 54was not available to the assessee. The assessee preferred miscellaneous petition before the Tribunal to which the Tribunal recalled the order with the intention to hear the matter afresh after issuing notice to both parties vide its order dated 29-3-2001 by opining that certain vital facts were necessary for adjudicating the grounds of appeal and the matter requires further clarification. The revenue carried the same order in the miscellaneous petition before the Hon’ble High Court. The Hon’ble High Court mainly relied upon the decision of the Hon’ble Delhi High Court pronounced in the case of Karan & Co. v. ITAT (2002) 253 ITR 131 (Del) and also the decision in CIT v. ITAT (I992) 196 ITR 640 (Ori.) and set aside the order passed by the Tribunal in MP No. 88/Bang/1999 and remitted it back to the Tribunal to reconsider the miscellaneous petition filed by the assessee on merit and in accordance with law. The Hon’ble court left all the contentions on merit open to be urged before the Tribunal.
2. At the time of hearing we have heard Shri S. Venkatesan, the learned CA for the assessee and Shri Y. Rajendra, the learned senior representative for the revenue. The gist of arguments on behalf of the assessee is that the assessee constructed a house at the cost of Rs. 17.40 lakhs and invited our, attention to the sale deed, the copy of which is available on record. It was also contended that it is a single sale deed and what was sold was a flat. It was further contended that it is not a case of two separable things being single sale deed and when the flat was sold, it was sold along with the land appurtenant to building and the land was consumed by the building which was opposed by the learned representative for the revenue by arguing that there is no mistake apparent on record in the order of the Tribunal and it will amount to review of the order. It was also objected that the miscellaneous application is signed by the advocate only so it is not maintainable. It was also told that the Tribunal has also considered the matter in a regular appeal and as such there is no mistake, which can be rectified. The learned counsel for the assessee Shri Venkatesan further contended that this miscellaneous petition is subject to the order of the High Court. So, the objection raised by the revenue should not be considered.
3. We have considered the rival submissions. First we shall deal with the objection of the learned counsel for the revenue that the miscellaneous application is signed by the advocate/ counsel of the assessee. Without going into much discussion a rid debate, the present miscellaneous petition is to be heard by the Tribunal subject to the order of the Hon’ble High Court of Karnataka in which the original miscellaneous petition was set aside and the Tribunal has been directed to hear the miscellaneous petition afresh so the objection raised by the learned representative for the revenue does not survive under the facts and circumstances present before us since the Hon’ble jurisdictional High Court has remitted the matter back to the Tribunal for reconsideration.
4. The Tribunal disposed of the appeal of the assessee by denying the relief as claimed, which is available in para 4 of the order of the Tribunal. For convenience, the same is reproduced as under:
“Rival contentions in regard to the above have been very carefully considered. Insofar as the facts go which are not disputed, the basis of assessment framed by the assessing officer and upheld by the first appellate authority in our view is reasonable. The super structure came into existence between 1993 and 1995. The assessee could sell the super structure independent of the land. Because the assessee has sold the land, to claim that the super structure should also be treated as having been existed on the land earlier than three years, to our mind, is not an acceptable proposition. The super structure is a development of the land and the development of the land in the nature of first and second floor was made between 1993 and 1995 only. Therefore, the sale that arises with reference to the super structure is clearly in the nature of short-term capital gain. Insofar as the benefit under section 54 is concerned, the deduction is available only when out of the sale proceeds, the assessee makes investment in the construction of a residential building. Because it is not the case of the assessee that he has constructed residential building after the sale and by utilising the sale proceeds, the benefit of section 54 cannot be available to the assessee.”
5. Section 54 of the Act reads as under :
“Section 54(1) : Subject to the provisions of sub-section (2), where, in the case of an assessee being an individual or a Hindu undivided family, the capital gain arises from the transfer of a long-term capital asset, being buildings or lands appurtenant thereto, and being a residential house, the income ol which is chargeable under the head “Income from house property” (Emphasis here italicised in print supplied) (hereinafter in this section referred to as the original asset), and the assessee has within a period of one year before or two years after the date on which the transfer took place then, instead of the capital gain being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that is to say,
(i) if the amount of the capital gain is greater than the cost of the residential house so purchased or constructed (hereinafter in this section referred to as the new asset), the difference between the amount of the capital gain and the cost of the new asset shall be charged under section 45 as the income of the previous year; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be nil, or
(ii) if the amount of the capital gain is equal to or less than the cost of the new asset, the capital gain shall not be charged under section 45; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be; the cost shall be reduced by the amount of the capital gain.’
Section 54(2) : says that the amount of capital gains which is not appropriated by the assessee towards purchase of the new asset within the stipulated period of which the transfer of original asset took place or which is not utilised by the assessee for the purchase or construction of the new asset before the date of furnishing the return of income under section 139, shall be deposited in the account as prescribed by the government in such bank or institution as may be specified, in any scheme which the Central Government may, by Notification in the Official Gazette, framed in this behalf and such return shall be accompanied by proof of such deposit.
6. Lot of changes has been effected from the introduction of section 54 by the Finance Acts, such as Finance Act, 1982, Finance Act, 1985 and Finance Act, 1986. The scope of the amendment and effect to these amendments have been elaborated in the departmental Circular No. 461 dated 9-7-1986. The assessee acquired the land at Sripuram Extension, Seshadripuram by virtue of family settlement between him and his father and constructed a residential building between 1993 and 1995 comprising of ground floor, first floor and second floor and sold the first floor and second floor with undivided interest in land to two parties. In our view, when the structure was constructed, the land became the part of the building or we can say consumed by the building and the appurtenant land also became the part of the said building. There is no dispute to the fact that the land was in possession of the assessee earlier to 1981 and on the basis of that the assessee claimed the cost of land at Rs. 1 lakh. The super structure came into existence between 1993 and 1995. The super structure is the development of the land. For getting the benefit under section 54, the deduction is available only when out of the sale proceeds, the assessee makes further investment in residential property within a stipulated period from the date of sale. Otherwise, the benefit of section 54 cannot be available with the assessee. The assessee has not satisfied this condition. Because the basic requirement of section 54 is that the capital arises from the long-term capital asset being building and what the assessee has sold is the upper portions of the building and not the land simplicitor. The land was consumed in the building itself. So the assessee cannot claim the benefit of such land under section 54 of the Act. Insofar as the benefit under section 54 is concerned, the deduction is available only when out of the sale proceeds, the assessee makes the investment in construction of a residential building. In the present case before us, admittedly, the building is on short-term gains and the long-term gains are from the land appurtenant thereof. The basic requirement for claiming deduction under section 54 is that the capital gains should arise from the transfer of long-term capital asset being building or land appurtenant thereof and being a residential house…. Admittedly, in the present case before us, the super structure is clearly in the nature of short-term capital gains, so the Miscellaneous Petition as preferred by the assessee has no merit. We have not found anything contrary in the order of the Tribunal dated 28-1-1999 on the basis of which it can be rectified. If we take the contention of the assessee to be true, then it will be a review of the order which power we do not have. Under these circumstances, there is no merit in the contention of the learned counsel for the assessee. We hold accordingly.
In the result, the miscellaneous petition is dismissed.