Inherited property under the Hindu Succession Act is individual property, with capital gains taxed in heirs' hands.

Property inherited after the commencement of the Hindu Succession Act, 1956 devolves on heirs in their individual capacity and not as continuing HUF property; accordingly, capital gains arising from such property are taxable in the heirs' individual hands. Because the lower authorities had disallowed sections 54F and 54B claims mainly on the mistaken HUF premise, those exemption claims required fresh examination on their own factual and statutory merits, and the matter was restored for reconsideration. The claimed sale-related expenditure was disallowed where no supporting evidence was produced, so that disallowance was sustained.

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Issues: (i) Whether property inherited by the assessee and family members devolved as individual property or as HUF property for capital gains purposes; (ii) whether the claims for deduction under sections 54F and 54B required fresh examination; (iii) whether expenditure claimed towards sale of land was allowable.

Issue (i): Whether property inherited by the assessee and family members devolved as individual property or as HUF property for capital gains purposes.

Analysis: The property was inherited on the death of the predecessor after the Hindu Succession Act, 1956 came into force. On that legal regime, succession under sections 6 and 8 results in the heirs taking the property in their individual capacity and not as a continuing HUF. The heirs hold the property as tenants in common, and the property ceases to retain the character of HUF property.

Conclusion: The property was held to be the individual property of the assessees, and any capital gains arising therefrom were taxable only in their individual hands.

Issue (ii): Whether the claims for deduction under sections 54F and 54B required fresh examination.

Analysis: The deductions were disallowed below mainly on the premise that the assessees were HUFs. The factual conditions for the claimed exemptions, including the nature of investment and fulfillment of statutory requirements, were not independently examined on merits.

Conclusion: The matter was set aside to the Assessing Officer for fresh consideration, and the claims were allowed for statistical purposes.

Issue (iii): Whether expenditure claimed towards sale of land was allowable.

Analysis: The assessees did not produce supporting evidence for the claimed sale-related expenditure.

Conclusion: The disallowance of the claimed expenditure was sustained.

Final Conclusion: The appeals succeeded only in part, with relief granted on the ownership character of the inherited property and with the exemption claims restored for reconsideration, while the remaining disallowance was maintained.

Ratio Decidendi: Property inherited after the commencement of the Hindu Succession Act, 1956 devolves upon the heirs as their individual property under intestate succession and not as HUF property.

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