Coparcenary rights and section 54 relief recognised where daughters' partition and two flats formed one residential arrangement.

A Tamil Nadu amendment conferring coparcenary rights on daughters placed them on the same footing as sons in a Mitakshara HUF, so a partition recognising those rights was a genuine partition and had to be accepted under section 171 of the Income-tax Act. The absence of separate maintenance or marriage provision did not, by itself, undermine its genuineness. On section 54, the expression "a residential house" was construed broadly: where sale proceeds were invested in two flats acquired simultaneously and used as one residential arrangement, exemption could not be denied merely because more than one flat was involved.

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Issues: (i) Whether the family partition of the Hindu undivided family was entitled to recognition under section 171 of the Income-tax Act, 1961 in the light of the Tamil Nadu amendment conferring coparcenary rights on daughters. (ii) Whether exemption under section 54 of the Income-tax Act, 1961 could be denied where the assessee invested the sale proceeds in two flats acquired simultaneously as part of one residential arrangement.

Issue (i): Whether the family partition of the Hindu undivided family was entitled to recognition under section 171 of the Income-tax Act, 1961 in the light of the Tamil Nadu amendment conferring coparcenary rights on daughters.

Analysis: The amendment to the Hindu succession law placed daughters in the same position as sons in a Mitakshara coparcenary, giving them coparcenary rights by birth and the right to demand partition on the same footing as male coparceners. The partition in question was treated as a real partition and not a sham or unilateral device, and the absence of separate provision for maintenance or marriage did not negate genuineness once the daughters had coparcenary status.

Conclusion: The partition was required to be recognised under section 171, and the refusal to recognise it was unsustainable.

Issue (ii): Whether exemption under section 54 of the Income-tax Act, 1961 could be denied where the assessee invested the sale proceeds in two flats acquired simultaneously as part of one residential arrangement.

Analysis: Section 54 was construed as allowing investment in a residential house without restricting relief to a single self-contained unit, unlike section 54F. The two flats were acquired at the same time and were used as one residential set-up, so the statutory conditions for exemption were satisfied. The comparison with section 54F and the related authorities supported a broader reading of the expression "a residential house" in favour of the assessee.

Conclusion: Exemption under section 54 could not be denied merely because the investment covered two flats, and the assessee was entitled to the relief.

Final Conclusion: The family partition was to be accepted and the capital gains relief under section 54 was allowable in respect of both flats, resulting in relief to the assessee on both substantive disputes.

Ratio Decidendi: Where a state amendment confers coparcenary rights on daughters, a partition giving effect to those rights can be recognised for income-tax purposes, and the expression "a residential house" in section 54 may encompass more than one flat when acquired and used as one residential unit.

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