Section 54 and 54F exemptions turn on substance of investment and legal ownership, not mere title in spouse's name.

Section 54 relief was treated as available where the capital gain was invested in a qualifying residential house, and the house standing in the wife's name did not by itself defeat exemption; the Tribunal's remand on repayment of housing loan and incidental expenditure was upheld because the record was insufficient for verification. Under Section 54F, the Court held that the ownership test turns on legal ownership on the date of transfer, so a house validly transferred away before that date could not be counted, and a property standing solely in the spouse's name was not the assessee's own house. The denial of Section 54F exemption was therefore rejected, subject to satisfaction of the remaining conditions.

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Issues: (i) whether the Tribunal was justified in remanding the claim under Section 54 of the Income-tax Act, 1961 in relation to repayment of housing loan and incidental expenditure, and whether the investment in the residential house standing in the name of the assessee's wife could be treated as the assessee's investment for exemption purposes; (ii) whether exemption under Section 54F of the Income-tax Act, 1961 could be denied on the footing that the assessee owned more than one residential house on the date of transfer of the original asset.

Issue (i): whether the Tribunal was justified in remanding the claim under Section 54 of the Income-tax Act, 1961 in relation to repayment of housing loan and incidental expenditure, and whether the investment in the residential house standing in the name of the assessee's wife could be treated as the assessee's investment for exemption purposes.

Analysis: The exemption under Section 54 was examined on the basis that the capital gain was invested in a residential house purchased in the name of the assessee's wife. The Court applied the principle that Section 54 does not require the new residential house to stand only in the assessee's name, and relied on the accepted view that the substance of the investment is material for the exemption. On the separate factual aspect of repayment of housing loan and stamp duty payments, the Tribunal had found that the record was insufficient to conclusively identify the payments and therefore remanded those matters for verification.

Conclusion: The remand on the factual verification issue under Section 54 was upheld, and the assessee succeeded on the broader claim that investment in the wife's name could not by itself defeat exemption under Section 54.

Issue (ii): whether exemption under Section 54F of the Income-tax Act, 1961 could be denied on the footing that the assessee owned more than one residential house on the date of transfer of the original asset.

Analysis: Section 54F was treated as distinct from Section 54 because the proviso uses the expression "owns", which required examination of the assessee's legal ownership on the date of transfer. The Court held that a house gifted prior to the transfer ceased to be owned by the assessee, and the house purchased in the wife's name could not be treated as the assessee's own property for Section 54F. The Court also distinguished the precedent relied upon by the Revenue, noting that it concerned co-ownership and not a house standing solely in the spouse's name. On that basis, the assessee was found to satisfy the ownership condition for Section 54F.

Conclusion: The denial of exemption under Section 54F was rejected and the assessee was held entitled to the benefit of Section 54F, subject to fulfilment of other conditions.

Final Conclusion: The impugned orders were set aside to the extent inconsistent with these findings, the appeal succeeded in part, and the income was directed to be recomputed in accordance with the allowed exemptions.

Ratio Decidendi: For Section 54F, the relevant inquiry is whether the assessee legally owns more than one residential house on the date of transfer, and a house standing in the spouse's name after a valid transfer cannot be treated as the assessee's owned property; by contrast, for Section 54, the decisive factor is the investment of the capital gains in the qualifying residential house, even if the property stands in the spouse's name.

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