Section 54 exemption depends on actual residential occupation of the sold house, while later use of the new house is irrelevant.

Section 54 relief depends on the sold house being used mainly for the assessee's own residence, and that factual requirement should be determined by the area actually under residential occupation rather than by the head under which any income from the property was assessed. The new house must be purchased for the assessee's own residence, but its subsequent use is not relevant to eligibility for exemption. The matter required fresh factual examination on the residential character of the sold property and proper consideration of the purchase requirement under section 54.

---

---

Issues: (i) Whether relief under section 54 was dependent on the house sold being used mainly for the assessee's own residence, and how that requirement was to be determined; (ii) whether the subsequent use of the house purchased was relevant to the availability of relief under section 54.

Issue (i): Whether relief under section 54 was dependent on the house sold being used mainly for the assessee's own residence, and how that requirement was to be determined.

Analysis: Section 54 grants exemption where the proceeds from the sale of a house used mainly for the assessee's own residence are invested in another house for the purpose of the assessee's own residence. The question whether the sold property was mainly used for residence is a question of fact. The better guide is the area actually under the assessee's residential occupation, rather than the income assessed under the head 'property income', because the basis of assessment for self-occupied and let-out portions is different.

Conclusion: The factual enquiry had to be made on the basis of the area occupied by the assessee, and the matter required reconsideration by the appellate authority.

Issue (ii): Whether the subsequent use of the house purchased was relevant to the availability of relief under section 54.

Analysis: The statutory requirement is that the new house should be purchased for the purpose of the assessee's own residence. Subsequent use of that property does not determine the entitlement to relief and is not relevant to the statutory condition.

Conclusion: Subsequent use of the purchased house was irrelevant to the claim for relief under section 54.

Final Conclusion: The matter was remitted for fresh disposal after proper examination of the relevant facts concerning both the sale and purchase of the residential property.

Ratio Decidendi: For relief under section 54, the residential character of the sold house must be determined on the basis of actual residential occupation, and the new house need only be purchased for the assessee's own residence; later use of the new property is not material.

---