1980 (7) TMI 113 - AT - Income Tax

Summary

Issues:
Interpretation of Section 54(c) of the Income Tax Act - Applicability to Hindu Undivided Families (HUFs) - Capital gains on sale of jewellery - Exemption for reinvestment in jewellery - Scope of "any member of his family dependent on him" clause.

Analysis:
The case involved the interpretation of Section 54(c) of the Income Tax Act concerning the exemption of capital gains on the sale of jewellery for reinvestment in jewellery. The assessee, a Hindu Undivided Family (HUF), sold jewellery and reinvested the proceeds, claiming exemption under Section 54(c). The Income Tax Officer (ITO) rejected the claim, stating that the provision applied only to individuals, not HUFs. The Appellate Authority Commissioner (AAC) upheld the decision. The primary issue was whether the exemption under Section 54(c) extended to HUFs. The assessee's counsel argued that the section did not specify the type of assessee and that the HUF should be considered within the scope of the exemption. They cited a Gujarat High Court decision stating that the use of jewellery by HUF family members constituted use by the assessee. The Department contended that the provision applied only to individuals, emphasizing the term "him" in reference to family members dependent on the assessee. The provisions of Section 54(c) were discussed, highlighting the deletion of the clause post-April 1, 1976. The Tribunal noted that the section did not restrict the exemption to individuals and that HUFs could be considered within its scope. The Tribunal reasoned that the extended clause regarding family members dependent on the assessee provided additional benefits but did not limit the exemption to individuals. Therefore, the assessee's claim for exemption was accepted, and the appeal was allowed.