A Hindu undivided family is not entitled to the benefit of section 54 of the Income-tax Act, 1961, which exempts from capital gains tax the sale of a residential house if another property is purchased within one year of the sale.

B. P. JEEVAN REDDY, J.

( 1 ) TWO questions are referred by the Income-tax Appellate Tribunal to this court under section 256 (1) of the Income-tax Act, which read thus :"1. Whether, on the facts and the circumstances of the case, the Income-tax Appellate Tribunal was legally right in permitting the respondent-Income-tax Officer to raise before it in an appeal filed by the assessee an entirely new plea for the first time to sustain an assessment on the capital gains derived on the sale of the assessees residential house ? 2. Whether, in any event, and on the facts and in the circumstances of the case, the capital gains derived on the sale of the assessees residential house is exempt under section 54 of the Income-tax Act, 1961 ?"

( 2 ) THE relevant facts are that the assessee is a Hindu undivided family. It owned a house at Nellore which was an ancestral property, which it sold for a sum of Rs. 1,65,000 in the year 1975. In the assessment proceedings for the assessment year 1976-77, the assessee claimed exemption in respect of the capital gains arising from the sale of the above property under section 54 of the Income-tax Act. It was submitted that the assessee has purchased another property for a sum of Rs. 1,10,000 within one year of the sale and, therefore, it is exempted from the capital gains tax under section 54 of the Income-tax Act. This plea was rejected by the Income-tax Officer and the Appellate Assistant Commissioner on the ground that the purchase of the property was made beyond one year. It was pointed out that while the sale deed was executed on 4/12/1975, the assessee purchased another property under the deed dated 9/12/1976, which is clearly beyond one year. When the matter came to the Tribunal, the Tribunal held, following the decisions of the Madras and Calcutta High Courts, that the expression "within one year" as occurring in section 54 of the Act must be construed as within the next calendar year. On the basis, it was of the opinion that the requirement of purchasing another property within one year was satisfied. But yet it dismissed the appeal on the ground that the assessee being a Hindu undivided family, it cannot take advantage of section 54 of the Act. This argument was urged for the first time by the Revenue at the stage of the Tribunal only and it was allowed to be raised and upheld. Hence, the aforesaid two questions are referred to.

( 3 ) SO far as the legal proposition that the Hindu undivided family is not entitled to have the benefit of section 54 of the Act is concerned, it appears to be beyond any doubt. Section 54 of the Income-tax Act reads thus :"where a capital gain arises from the transfer of a capital asset to which the provisions of section 53 are not applicable, being buildings or lands appurtenant thereto the income of which is chargeable under the head Income from house property, which in the two years immediately preceding the date on which the transfer took place, was being used by the assessee or a parent of his mainly for the purposes of his own or the parents own residence, and the assessee has within a period of one year before or after that date purchased, or has within a period of two years after that date constructed, a house property for the purposes of his own residence, then, instead of the capital gain being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that is to say, - (i) if the amount of the capital gain is greater that the cost of the new asset, the difference between the amount of the capital gain and the cost of the new asset shall be charged under section 45 as the income of the previous year; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be nil; or (ii) if the amount of the capital ga

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