1. The assessee in this case is an individual and the reference relates to the assessment year 1975-76. The assessee sold his dwelling house at No. 1, Park Lane, Calcutta, on 26th July, 1974, for a consideration of Rs. 3,15,000. He also purchased one house property at No. 91, Shyambazar Street, Calcutta, on 13th June, 1975, for a consideration of Rs. 1,23,001 and; invested a further sum of Rs. 1,08,300 before March 27, 1976, for the construction of an additional floor thereon. The latter house was being used for the purpose of the assessee's residence. Since the purchase price together with the cost of development of the house property at No. 1, Park Lane, Calcutta, was Rs. 83,801, the ITO determined the capital gains at Rs. 2,31,199 by deducting the sum of Rs. 83,801 from Rs. 3,15.000. In the subsequent assessment year, the ITO determined that amount as the capital gain and rejected the assessee's claim for deduction of Rs. 1,23,000 under Section 54(1) being the cost of the newly purchased house on the ground that the latter house was purchased in the subsequent assessment year. The assessment order was passed on the 30th August, 1975. On appeal, the AAC concurred with the view taken by the ITO. The assessee went up in further appeal before the Appellate Tribunal and the Tribunal directed the ITO to deduct the sum of Rs. 1,23,001 from the capital gains so determined.
2. Thereafter, the assessee preferred a petition under Section 155(8) to the ITO on 26th February, 1977, to amend the order of assessment for exclusion of the capital gains since, according to the assessee, the cost of construction of Rs. 1,08,300 was also eligible for deduction oinder Section 54(1) of the I.T. Act, 1961. It may, however, be mentioned that the further construction of the additional floor of the house property was made before 27th March, 1976. The ITO rejected the claim of the assessee as he was of the opinion that under the law the assessee could get a deduction for the cost of the purchase of one house or the cost of construction of one house only. There was an appeal before the Commissioner of Appeals who affirmed the action of the ITO. He in his order stated, inter alia, as follows :
"Shri S. Bhattacharyya, advocate, learned representative of tbe appellant, pleaded that there is nothing in the Act which prohibits the assessee from claiming the deduction in respect of both the amounts, i.e., purchase price of the house property and the cost of construction, I have considered the arguments and have perused the assessment records. In Section 54(1) the word used is 'or' and not 'and or'. In my view the appellant is entitled to get deduction only in respect of purchase of one house only. To me it appears, that the section provided clearly for one out of the two contingencies :
(a) Purchase of house, or
(b) Construction of house.
I, therefore, hold that the Income-tax Officer rightly rejected the petition of the appellant."
3. The assessee thereafter went up in further appeal before the Tribunal and contended that he was entitled to a deduction for the cost of construction of the additional floor on one dwelling house which was constructed within two years of the sale of one house. It was urged that in order to be entitled to a deduction under Section 54 the only condition to be fulfilled was that the assessee must construct the dwelling house within two years of the sale of the house which was being used as the residential house of the assessee or by his parents. It was pointed out that the new house, though partly purchased and partly constructed later on, was one house, the construction of which took place within two years from the date of the sale of the old house. Therefore, the Tribunal proceeded on the basis that the new house which the assessee purchased originally was partly constructed and the further construction of the new house of the dwelling house was completed within a period of two years. It was claimed by the assessee that one house partly purchased and partly constructed was to be regarded as a house constructed for the purpose of deduction under Section 54 of the Act. The Tribunal observed that Section 54 provided the concession in the matter of exclusion of capital gains arising from the transfer of a residential house if the assessee purchased one residential house within a period of one year before or after the said transfer or constructed the residential house within two years of the aforesaid transfer. The Tribunal was of the opinion that it was not at all clear from the language of Section 54 whether the assessee was entitled to both the benefits under Section 54, that is, the purchase of a house within one year or making a further construction in the same house, within a period of two years from the date of sale of the old house. The Tribunal, therefore, came to a finding regarding the allowability of the assessee's claim that for the exclusion of Rs. 1,08,300, being the cost of the additional floor of the newly purchased house, was a debatable question of law and, therefore, the ITO was not within his power to invoke the provisions of Section 155(8) in which Section 154 has also been made applicable. The Tribunal was of the opinion that under Section 154, an order cannot be rectified unless there was a mistake which was free from doubt. Accordingly, the Tribunal held that the I.T. authorities were justified in refusing to allow -the assessee's claim for the exclusion of Rs. 1,08,300 from the capital gains so determined, though on a different ground. Upon these, the following three questions have been referred to this court under Section 256(1) of the I.T. Act, 1961 :
"(i) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the Income-tax Officer did not have the power to invoke the provisions of Section 155(8) to amend the assessment order.
(ii) Whether, on the facts and in the circumstances of the case, having regard to the fact that the provisions of Section 155(8) are mandatory in nature, the Tribunal was justified in invoking the provisions of section 154 in their totality when Section 155(8) itself restricted the operation of Section 154 by the use of the words ' and the provisions of section 154 shall, so far as may be, apply thereto'.
(iii) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in not adjudicating the issue whether the appellant was entitled under Section 54 of the Income-tax Act, 1961, to the deduction not only of the cost (Rs. 1,23,001) incurred for the purchase on June 13, 1975, of the house property at No. 91, Shyambazar Street, Calcutta, but also for the cost of further construction (Rs. 1,08,300) in spite of the fact that the Commissioner of Income-tax (Appeals) decided this issue and that this issue formed a ground of appeal before the Tribunal."
4. The question involves a simple interpretation of the provisions of section 54 of the I.T. Act, 1961, read with Section 155(8) of the said Act. The scheme seems to be that where an assessee transfers a property and purchases a property within two years of the transfer of his own or of his parent's residence and a profit in the nature of a capital gain arises to him, then he would be not liable to tax on such gain or would be entitled to the relief, as the case may be, if he fulfils certain conditions, that is to say, if he purchases a house within one year after the transfer of the original residential house or constructs within two years of the sale a new residential house then he would be entitled to a certain relief as indicated in clauses (i) and (ii) of Section 54 of the Act. In our opinion this being the purpose of Section 54, it appears that in order to be eligible for the relief, as contemplated under clause (i) or (ii) of section 54, one must fulfil certain conditions. In order to appreciate this point it would be relevant to refer t6 the said section. Section 54 of the Act reads as follows :
"54. Profit on sale of property used for residence.--Where a capital gain arises from the transfer of a capital asset to which the provisions of section 53 are not applicable, being building or lands appurtenant thereto the income of which is chargeable under the head 'Income from house property', which in the two years immediately preceding the date on which the transfer took place, was being used by the assessee or a parent of his mainly for the purposes of his own or the parent's own residence and the assessee has within a period of one year before or after that date purchased, or has within a period of two years after that date constructed, a house property for the purposes of his own residence, 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 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."
5. In such cases, rectification has to be done in accordance with Section 155. Sub-section (8) of Section 155 reads as follows :
"(8) Where in the assessment for any year a capital gain arising from the transfer of any such capital asset as is referred to in Section 54 is charged to tax and within a period of one year after the date of the transfer the assessee purchases, or within two years from that date constructs, a house property for the purpose of his own residence, the Income-tax Officer shall amend the order of assessment so as to exclude the amount of capital gain not chargeable to tax under the provisions of Section 54, and the provisions of Section 154 shall, so far as may be, apply thereto, the period of four years specified in sub-section (7) of that section being reckoned from the date of the assessment."
6. It may be mentioned in this connection that Section 154 deals with the rectification of a mistake and in order to be applicable the section enjoins that "with a view to rectifying any mistake apparent from the record". Therefore, Section 154, on its own force, to be applicable is attracted only where there is a mistake apparent from the record. It is well settled, and it has been so held by several judicial decisions, that the question on which a debate is possible, such a question cannot be said to be a mistake apparent from the record in terms of Section 154 of the Act. The said section is headed as "Rectification of mistake "while Section 155 is headed as "Other amendments", that is, to indicate the consequences of other amendments made subsequently or in respect of other assessments on the assessment orders. These assessment orders are to be altered and modified as contemplated by the different sub-sections of Section 155. Now, adverting back to the provisions of section 54 of the Act, in our opinion, the language contemplates that in order to be entitled to the relief, the assessee must fulfil either of these conditions either the assessee or his parents must be using or residing in a house and it must have been used as a residential house within two years prior to the date of the transfer. This is a mandatory provision in order to attract the provisions of section 54. If a house was so used, then on a transfer of that house, (1) one year prior to the transfer or one year after the transfer, (2) either purchased a house or within a period of two years after the date constructed a house property for the purpose of his own residence, then in respect of the value of the new asset, that is to say, the house property purchased or constructed he would be entitled to claim relief as contemplated in clauses (i) and (ii) of the section. In the facts and circumstances of the case, Clause (ii) would be attracted if the assessee's contention is accepted. Now, if an assessee is entitled to relief on fulfilment of either of the two conditions, that is to say, either purchasing a house property within one year or constructing the house within two years, in our opinion, it would be improper to read that on fulfilment of both the conditions, he would be disentitled to that relief. The mistake seems to be that the authorities below found as if two kinds of relief are contemplated in Section 54. It is the fulfilment of two alternative conditions that is contemplated by Section 54. But, if both the conditions are fulfilled within the time stipulated then, in our opinion, the assessee does not become disentitled to the relief if the other conditions are fulfilled, viz., the house which was transferred was being used as residential house either for himself or by his parents within the period of two years before the transfer. It is in this context that Section 54. would be applicable. On behalf of the revenue it was sought to be urged that what was required to be fulfilled was that the house property was to be used for the residence of the assessee. The revenue is right that it must be a house property. If a floor is constructed to the new house or if it is renovated it remains a house and this will not be two houses. There is no evidence that two different houses were constructed with two different municipal numbers, that is to say, giving two different municipal numbers in respect of two houses. If the interpretation sought to be urged by the revenue is given to the expression "a house was constructed" then the expression "purchased a house" would not include purchasing the land first and constructing a house thereon. That would be an absurd construction defeating the purpose of the scheme of Section 54. In such a case, the question of reading the expression "or" as conjunctive does not arise. It is not a question of reading "or" as conjunctive. It is a question of interpreting the section, which stipulates that on the fulfilment of either of the two alternative conditions, the assessee would be entitled to a relief, by saying that it would not mean that the fulfilment of both the conditions disentitled the assessee to the relief in question. Therefore, the principle of how the expression "and" or "or" should be construed as was mentioned in Maxwell on the Interpretation of Statutes, 12th edn., p. 233, are not attracted. In any event, as the learned editor of that well-known book emphasises, to carry out the intention of the Legislature it may be necessary to read "and" in place of "or" and vice versa. The scheme and purpose of Section 54, in our opinion, if read in the entirety of the section, would be defeated if the construction sought for by the revenue is accepted. But it is only on the fulfilment of this that Section 155(8) would be attracted.
7. The Tribunal, in our opinion, made a mistake in construing that in order to attract Sub-section (8) of Section 155, Section 154 would be applicable in its full force. That is not the case. The moment the conditions of Section 54 are fulfilled a mistake apparent from the record would be deemed by the fiction created by Sub-section (8) of Section 155, that is to say, where in the assessment for any year a capital gain arising from the transfer of any such capital asset as is referred to in Section 54 is charged to tax and within a period of one year after the date of the transfer the assessee purchases, or within two years from that date constructs, a house property for the purpose of his own residence, the ITO shall amend the order of assessment so as to exclude the amount of the capital gain not chargeable to tax under the provisions of section 54 and in such a situation the provisions of section 154 shall, so far as may be, apply thereto, the period of 4 years specified in sub-section (7) of that section being reckoned from the date of the assessment. We are not concerned with that from the point of view of the order made in this year. When Sub-section (8) of Section 155 states that the provisions of section 154 shall, so far as may be, apply, it means that the power of rectification enjoined by Section 154 would- be made applicable if the conditions stipulated in Sub-section (8) of Section 155 are fulfilled and not only that, it would have to fulfil Sub-section (1) of Section 154, that is to say, the ITO would again have to redetermine whether there was any mistake apparent from the record irrespective of the conditions stipulated under Sub-section (8) of Section 155. Therefore, in our opinion, the Tribunal was clearly wrong on this aspect of the matter.
8. To borrow the expression of Mr. Justice Krishna Iyer in the case of CIT v. T. N. Aravinda Reddy :
"The significance of a word of plural semantic shades may, in a given text, defend on the pressure of the context or the other indicia."
9. Here the purpose of the expression used in Section 54 and the context in which it is used, in our opinion, leave no doubt as to the conditions that are required to attract the provisions of Sub-section (8) of Section 155, and, understood in that manner. Again, in the words of Mr. Justice Krishna Iyer the speech of the lay is also the language of the law". As Mr. Justice Krishna Iyer says (p. 48) :
"if you sell your house and make a profit, pay Caeser what is due to him. But if you buy or build another, subject to the conditions of Section 54(1), you are exempt."
10. That is to say, in our opinion, if you buy and then further construct a house which is used for your residence, then you are exempt and we agree with Mr. Justice Iyer with great respect, "the language is plain, the purpose is plain, the symmetry is simple" and, if it is so, there is no question of any debate in the applicability of the provision in the facts and circumstances of the case. That being the position, it is not necessary for us to consider what is the meaning of the mistake apparent from the record in the context of Section 154, for which our attention was drawn to T.S. Balaram, ITO v. Volkart Brothers . It is well settled that the words of a statute, when there is a doubt about their meaning, are to be understood in the sense they best harmonize with the object of the enactment and the object which the Legislature has in view. Keeping this principle in mind the conclusion we have arrived at, in our opinion, is the correct one and fulfils the object which the Legislature had in view. If that meaning is not, so found in a strictly grammatical or etymological propriety of language nor even in its popular use, as, in the subject, on which they are used, one must try to harmonize the object to be attained. In this connection, reference may be made to the decision in the case of Workmen of Dimakuchi Tea Estate v. Management of Dimakuchi Tea Estate, . The expressions used in a statute should ordinarily be understood in the sense in which they best harmonise with the object of the statute and which effectuate the object of the Legislature. (See in this connection also the observations of the Supreme Court in the case of New India Sugar Mills Co. Ltd. v. Commr. of Sales Tax ). It is, therefore, necessary to read Section 54 in the context of the subject-matter and its setting in the scheme of capital gains and the object of exemption and to ascertain the true import of the relevant part thereof. (See the observations of the Division Bench of the Gujarat High Court in the case of CIT v. Natu Hansraj ).
11. The main purpose of the statute is to give relief for the acquisition of a new residential house. In that context, it does not really matter whether the new residential house is partly constructed or partly purchased.
12. In the premises, question No. (i) is answered in the negative and in favour of the assessee. Question No. (ii) is also answered in the negative and in favour of the assessee and question No. (iii) is also answered in the negative and in favour of the assessee.
13. In the facts and circumstances of the case, the parties will pay and bear their own costs.
Sudhindra Mohan Guha, J.
14. I agree.
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