COMMISSIONER OF INCOME TAX Vs. KODANDAS CHANCHLOMAL

JUDGEMENT

(1.) THE assessee is an HUF. It sold a residential property at Veraval for Rs. 1,02,000 and earned capital gains of Rs. 79,000. Within two years of the sale of the property, the assessee constructed a house for Rs. 96,500. This house consists of a ground floor, a first floor and a second floor. The area of the ground floor is 320 sq. yards, and the combined area of the first and second floors is 380 sq. yards. The assessee leased out the ground floor and used the first and second floors for personal residence. The assessee claimed reduction of Rs. 57,680 under S. 54 of the IT Act, 1961, on the plea that part of the capital gains in respect of the sale of Veraval property was used for construction of a new residential property.

(2.) THE ITO rejected the assessee's claim. In appeal, the AAC allowed the claim of the assessee since in his opinion S. 54 did not provide that the new house property should be exclusively used for residential purposes of the assessee. In so concluding, the AAC relied on the decision of this Court in CIT vs. Tikyomal Jasanmal (1971) 82 ITR 95.

(3.) ON the above facts, the Revenue prayed for a reference which was granted and the following question is referred to us for our opinion :