Ownership, not mere possession, determines denial of exemption under section 53 where another house is held on hire-purchase.

For the proviso to section 53 of the Income-tax Act, 1961, the word "owns" requires legal ownership of another residential house on the date of transfer. Mere possession of a house under hire-purchase, or a situation resembling part-performance, does not amount to ownership and therefore does not withdraw the exemption. On the facts discussed, the Faridabad property remained owned by the Haryana Housing Board, so the assessee's possession did not disqualify the claim. Section 2(47) and authorities on gift or registration under section 123 of the Transfer of Property Act, 1882, did not alter this ownership-based test.

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Issues: Whether the assessee was entitled to exemption under section 53 of the Income-tax Act, 1961, despite possession of another residential house held on hire-purchase basis.

Analysis: The proviso to section 53 withdraws the exemption only where the assessee owns another residential house on the date of transfer. The expression used is "owns", which requires actual ownership and not merely possession or a situation of deemed transfer. Section 2(47) of the Income-tax Act, 1961, which includes part-performance concepts within "transfer", was held inapplicable because the statutory focus here is ownership, not transfer. The house at Faridabad remained owned by the Haryana Housing Board, and possession with the assessee did not amount to ownership. The authorities dealing with gift and registration under section 123 of the Transfer of Property Act, 1882, did not alter this conclusion.

Conclusion: The assessee was entitled to exemption under section 53 of the Income-tax Act, 1961, and the Revenue's challenge failed.

Ratio Decidendi: For the purpose of the proviso to section 53 of the Income-tax Act, 1961, the word "owns" denotes legal ownership, and possession or part-performance does not by itself disqualify the assessee from exemption.

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