Section 54 of the Income-tax Act, 1961 is applicable to individuals and not to juridical persons. The usage of buildings for residential purposes is a key condition for claiming the benefit under section 54.

Srinivasa Iyengar, J.

1. The Income-tax Appellate Tribunal, Bangalore Bench, has referred the following question for a decision by this court :

"Whether, on the facts and in the circumstances of the case, and on a true interpretation of the provisions of section 54 of the Income-tax Act, 1961, the Tribunal was justified in upholding the taxing of the amount of Rs. 1,86,044 to capital gains tax ?"

2. The assessee is a co-operative society registered under the Co-operative Societies Act. It owned a building in Mission Road, Mangalore. That was sold for a sum of Rs. 6,32,000 on March 30, 1970. The assessee, however, purchased another house within one year from the date of sale and claimed the benefit of section 54 of the Income-tax Act, 1961. The Income-tax Officer did not recognise the claim and, on appeal, the Appellate Assistant Commissioner held that the assessee was not entitled to the benefit under section 54 of the Act of the ground that the said section applied to individual or natural persons and not to a juridical person such as the co-operative society. On further appeal, the Tribunal agreed with the view of the authorities below and dismissed the appeal. Two reasons were given by the Tribunal, namely, that the income was not chargeable under the head "Income from house property" and could not be said to have been used by the assessee or a parent of his mainly for the purpose of his own or the parents' own residence and further the building that was purchased could not also be said to be a house for the purpose of his own residence or his parents. It is urged by Shri S. P. Bhat, learned counsel for the assessee, that the building was used for the purpose of the business of the co-operative society and so it must be deemed that it was being used for the purpose of its residence. Reliance was sought to be placed on the provisions of section 6 of the Act where the circumstances under which a company could be said to be resident in India in any previous year has been specified.

3. The expression "residence" is an ambiguous work and may receive different meaning according to the position in which it is found. [per Cotton L.J.in In re Bowie : Ex parte Breull [1880] 16 Ch D 4484 (CA)]. In Stroud's Judicial dictionary, 4th edition, volume 3, one of the meanings attributed to the expression "residence" is :

"What is the meaning of the word 'resides' ? I take it that that word, where there is nothing to show that it is used in a more extensive sense, denotes the place where in individual eats, drinks and sleeps, or where his family or his servants eat, drink and sleep (per Bayley J. in R v. North Curry [1825] 4 B andamp; C 959). 'A man's residence is where he habitually sleeps' (per Blackburn J. in Oldham [1869] 1 O' M andamp; H 151, 158)." The above definitions were quoted with approval and depended upon by the High Court of Calcutta in Calcutta Stock Exchange Association Ltd., In re [1935] 3 ITR 105, 110, 111 (Cal). The learned judges observed as follows :

"In my opinion, the word 'residence' in its simple and ordinary meaning signifies the place where a human being eats, drinks and sleeps or where his family and servants eat, drink and sleep, and where there is some permanence or continuance of such eating, drinking and sleeping and the statement of Bayley J. in the case of The King v. Ihabitants of North Curry [1825] 4 B andamp; C 953, 959, is, in my opinion, an authority for that proposition. In that case, the learned judge said that : 'Where there is nothing to show that it is used in a more extensive sense, the word "residence" denotes the place where an individual eats, drinks and sleeps, or where his family or his servants eat, drink and sleep'. It is true that in certain circumstances and in certain statutes, a more extended meaning certain has been given to the word; for example, it has been held that a limited liability company can 'reside' for the purpose of income-tax legislation. That was decided by Lord Lore