1993 (10) TMI 46 - HC - Income Tax

Summary

Issues:
Interpretation of the term "assessee" in section 54(1) of the Income-tax Act regarding eligibility of Hindu undivided family for exemption.

Analysis:
The case involved a Hindu undivided family claiming the benefit of section 54(1) of the Income-tax Act for capital gains on the sale of a property. The dispute centered around whether the term "assessee" in the provision could include a Hindu undivided family. The Income-tax Officer initially denied the benefit, but the Commissioner of Income-tax (Appeals) ruled in favor of the family, stating that the term "assessee" encompassed Hindu undivided families. However, the Income-tax Appellate Tribunal disagreed, citing a decision by the Madhya Pradesh High Court and holding that the benefit under section 54(1) was only available to living individuals, not Hindu undivided families or artificial persons.

The Tribunal's decision was based on the interpretation that the term "assessee" in section 54(1) referred specifically to living persons and did not extend to Hindu undivided families. The Tribunal highlighted that the provision required the property to be used for the residence of the assessee or their parent, indicating an individual-centric approach. The Tribunal also noted that while the exemption was later extended to Hindu undivided families from a subsequent assessment year, it was not retrospective in nature.

The assessee's argument relied on a Supreme Court decision regarding the term "individual" in the Wealth-tax Act, contending that it could include Hindu undivided families. However, the Tribunal distinguished this case, emphasizing the specific language and requirements of section 54(1) related to the use of the property for personal residence. Various High Courts had previously interpreted the provision and consistently held that the benefit of exemption under section 54(1) could not be claimed by Hindu undivided families.

Ultimately, the High Court upheld the Tribunal's decision, affirming that the term "assessee" in section 54(1) referred only to living individuals and not Hindu undivided families. The judgment favored the Revenue and denied the benefit of the exemption to the Hindu undivided family in this case.