Court Upholds Exemption for House Purchase: Residence Before Buying Not Disqualifying

The court upheld the Tribunal's decision to grant the assessee exemption under section 54 of the Income-tax Act, 1961. It was held that purchasing a portion of a house property and residing in it before purchase does not disqualify the assessee from claiming exemption. The judgment favored the assessee, emphasizing that a portion of a house constitutes a unit of house property, supporting the exemption claim. The court ruled in favor of the assessee without awarding any costs.

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Issues Involved:
The judgment addresses the issue of whether an assessee is entitled to claim exemption under section 54 of the Income-tax Act, 1961, when purchasing a portion of a house property previously used for residence.

Summary:

Facts:
The respondent-assessee purchased a house property using a cash gift from her husband, later selling it and buying a 15% share in another property where she continued to reside. The Income-tax Officer rejected her exemption claim, arguing the property was already used for residence before purchase.

First Issue - Purchase of Portion of House:
The court held that purchasing a portion of a house should enable the assessee to claim exemption under section 54. The judgment cited a previous case where a portion of a house was considered a unit of house property, supporting the assessee's claim for exemption.

Second Issue - Residence Prior to Purchase:
The court determined that residing in a house before purchase does not disentitle an assessee from claiming exemption under section 54. The absence of any restriction in the Act against purchasing a previously occupied house property supports the assessee's entitlement to exemption.

Conclusion:
The Tribunal's decision to grant the assessee exemption under section 54 was upheld by the court. The judgment favored the assessee, emphasizing that the purchase of a portion of a house and residing in the property prior to purchase do not negate the right to claim exemption. The reference was answered in favor of the assessee, with no costs awarded.

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