Section 54 relief extends to a residential plot and adjacent flats used as one home, despite later construction restrictions.

Section 54 relief was discussed as a beneficial exemption: investment in a residential plot remained within the provision where construction could not be completed because a later government ban prevented completion beyond the assessee's control. The text also notes the settled approach that two adjacent flats used together as one residential unit may qualify as "a residential house" for section 54 purposes. On valuation, the Assessing Officer's estimate was not supported by a scientific basis, while the assessee's evidence was not accepted in full, so moderated estimated figures were adopted for fair market value and cost of improvement.

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Issues: Whether deduction under section 54 was allowable for the investment in a residential plot where construction could not be completed because of a subsequent governmental ban; whether deduction under section 54 was allowable for purchase of two adjacent flats used as a single residential unit; and whether the cost of acquisition and cost of improvement of the transferred property required interference with the valuation adopted by the Assessing Officer.

Analysis: The investment in the Kansal plot was held to be within the statutory framework of section 54, and the failure to complete construction was treated as arising from circumstances beyond the assessee's control because the construction activity was later banned by the Government. The provision was treated as a beneficial one, and the substantive requirement of investing in a residential house was held not to be defeated by the subsequent inability to complete construction. For the two adjacent flats, the Tribunal applied the settled principle that where separate units are purchased but are used as one residential unit, deduction under section 54 is available for both units, as the expression "a residential house" is not to be read in a narrow singular sense. On valuation, the Assessing Officer's estimate was found to be unsupported by any scientific basis, while the assessee's valuation evidence was also not accepted in full; a moderated estimate was therefore adopted for both the fair market value as on 1.4.1981 and the cost of improvement.

Conclusion: Deduction under section 54 was allowed for the Kansal plot and for the second flat treated as part of the same residential unit, and the valuation additions were partly modified by directing adoption of revised estimated figures.

Final Conclusion: The assessee obtained substantial relief on the exemption claim and partial relief on valuation, resulting in a mixed outcome in which the appeal succeeded on the principal section 54 issues and was partly sustained on the computation issues.

Ratio Decidendi: Where the assessee has invested in a residential house within the statutory period, later impossibility caused by events beyond control does not defeat section 54 relief, and two adjacent flats used as one unit may be treated as a residential house for the purpose of the exemption.

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