COMMISSIONER OF INCOME TAX Vs. N KANNAIYIRAM

JUDGEMENT

(1.) THE question of law that arises in this tax case reference is whether the sole surviving coparcener is entitled to claim the exemption under section 54(1) of the Income-tax Act, 1961 ('the Act') on the capital gains arising on the sale of a residential property.

(2.) THE facts are not in dispute which are as under : For the assessment year 1982-83, the assessee was assessed in the status of a HUF (non-specified) and derived income from trade in auto spare parts, dealership in petroleum and running of tourist taxis. THE assessee was assessed as a HUF, and the family consisted of the sole surviving coparcener and his wife and during the previous year ended 31-3-1982 relevant for the assessment year 1982-83, the assessee sold the residential property at Door No. 110, West Sandaipettai Street, Madurai, and it was a long-term capital gain. THE assessee claimed exemption under section 54(1). THE ITO disallowed the claim on the ground that the assessee was not entitled to the relief as the assessee was assessed in the status of a HUF. THE Commissioner (Appeals), however, disagreed with the view taken by the ITO and held that the relief would be applicable ex,enin the case of an HUF. THE revenue preferred an appeal before the Tribunal and the Tribunal held that the assessee-family consisted of only a sole surviving coparcener and the assessee could have sold his property only as an individual, even though he was assessed in the status of a HUF. THE Tribunal, therefore, held that the decisions relied upon on behalf of the department to the effect that the relief under section 54 would not be available to HUF, are not applicable to the facts of the case, but the decision of this Court in the case of M. S. P. Rajah v. CGT [1982] 134 ITR 1/6 Taxman 180 and the decision of the Bombay High Court in the case of CIT v. Anil J. Chinai [1984] 148 ITR 3/17 Taxman 181 would apply and when the sole surviving coparcener sold the property, he acted in his individual capacity and, therefore, there is nothing which prevented the assessee from claiming exemption under section 54 of the Act. It is the order of the Tribunal which is the subject-matter of the tax case reference, and the Tribunal has stated a case and referred the following question of law for our consideration :

(3.) MR. C. V. Rajan, the learned counsel for the revenue, is also right in his submission that where a sole surviving coparcener with his wife and a minor daughter received certain joint family properties on a partition in the family, such properties would be treated as belonging to the HUF of himself, his wife and his daughter and cannot be assessed as his individual properties. This proposition is well-established by a decision of the Supreme Court in the case of N. V. Narendranath v. CWT [1969] 74 ITR 190, wherein the Supreme Court after noticing the decision in Attorney -