1984 (5) TMI 125 - AT - Income Tax

Summary

Issues involved: Claim of relief u/s 54 of the Income-tax Act, 1961.

Summary:

Issue 1: Conditions for relief u/s 54
The appeal concerns the claim of the assessee for relief u/s 54 of the Income-tax Act, 1961. Section 54 outlines three conditions for the relief: (i) the house sold should have been used mainly for the assessee's own residence, (ii) the new residential house should be purchased within a year, and (iii) the purchase must be for the purpose of the assessee's own residence. The revenue does not dispute the first two conditions but objects to the third condition based on the assessee using a room in the new flat for conducting business. The Tribunal notes that the objection is contrary to the purpose of section 54, which aims to ignore capital gains when substituting one residence for another. The Tribunal emphasizes that the object of purchase, not the subsequent use, is crucial for section 54 eligibility. Therefore, the Tribunal accepts the claim and directs the ITO to grant the relief u/s 54, instructing a recomputation of capital gains for taxation purposes.

Conclusion:
The appeal is allowed.