R.V. Easwar, Vice President.: assessee in this appeal is individual deriving income from business, capital gains and other sources. In return he claimed exemption under s. 54 in respect of capital gains on footing that he had acquired residential house out of sale proceeds of certain land and building owned by him in N-136, Panchshila Park, New Delhi. AO noticed that assessee had entered into arrangement with builder in respect of property under which he was to receive five flats for himself and some cash consideration for giving builder right to develop property, and that out of five flats received assessee had disposed of two flats and retained three flats for himself. According to AO benefit of s. 54 can be given only in respect of one residential house acquired by assessee and not "for spate of residential houses which he constructs out of consideration received", and accordingly granted deduction only in respect of one residential flat which came to Rs. 5,27,710. balance of sale consideration after deduction was brought to capital gains tax. On appeal, CIT(A) noted that assessee retained three flats to be used for his residence as his married son along with his family and widowed daughter and her family was living with him, that in all there were 8 bedrooms and two living and dining rooms, both in ground floor and second floor and another hall in basement which was occupied by assessee s family. He noted that Allahabad High Court in Shiv Narain Chaudhari vs. CWT 1977 C T R (All) 149: (1977) 108 ITR 104 (All) has held that several self-occupied dwelling units which were contiguous and situated in same compound and within common boundary, having unity of structure, should be regarded as one residential house. He further found that ration card had been issued to assessee in 1996 where names of son, daughter-in-law and grand daughter were included in names as family members. He accordingly agreed in principle with assessee that exemption under s. 54 cannot be confined to single flat as was done by AO. However, he directed that exemption be given in respect of two flats which can be taken as residence of assessee s family as well as his son s family. He directed AO to recompute capital gains accordingly. assessee is in further appeal to Tribunal to point out that order of CIT(A) directing exemption in respect of two flats having been accepted by Department and no appeal having been filed by it, only question is whether CIT(A) was right in substituting his opinion or assessment about requirement of family members of assessee with regard to residential house to restrict exemption to two flats as against three flats claimed by assessee. This line of reasoning appeals to us and matter can possibly be disposed of in favour of assessee on short ground that CIT(A) cannot substitute his opinion as to requirements of assessee for his residence. However, in deference to arguments addressed before us, wider canvass has got to be appreciated. assessee acquired land (1200 sq. yards) on 8th May, 1967 and put up two-storied residential building on plot. On 5th Oct., 1992 he entered i n t o collaboration agreement with M/s Vidhi Constructions (P) Ltd. for remodelling construction by making additions, improvements and construction of ground, first, second and third floors after getting plan sanctioned from Municipal Corporation of Delhi. building was accordingly constructed and assessee was to receive one part of building which was remodelled according to his specifications with ground floor and three upper floors. other part of building was to be taken by building company. On completion of construction, assessee sold two flats and retained three and it is not in dispute that he was using them as his residence. AO has been criticised by Mr. Kapila, learned counsel for assessee, as having introduced new concept called "residential unit" which is foreign to s. 54, to confine claim of exemption to one residential unit. No doubt section uses expression "a residential house", signifying perhaps that exemption can be confined to one residential house and not more, but what is residential house has not been defined in section. Mr. Kapila says that there is nothing in section to confine exemption to "residential unit" equivalent of modern-day independent flat and that if regard is had to opening words of section, it hints that residential house shall be "buildings or land appurtenant thereto" and that so long as assessee acquires building, which incidentally may be constructed, for sake of convenience, in such manner as to consist of several units which can be independently used as residence, requirement of section is satisfied. He contrasts provisions of s. 23 as it stood at relevant time to show that words "residential units" were used therein but only to provide incentive to housing projects. We find good deal of sense in what Mr. Kapila says. residential house has to be building. But we see nothing in s. 54 which requires building to be constructed in particular manner. only requirement is that it should be for residential use as contrasted with commercial use. It is no longer requirement that assessee should reside in house, as it used to be earlier. He may even let it out. If there is nothing in section which requires that residential house should be built in particular manner, IT authorities in our humble opinion cannot insist upon that condition. person constructs house according to his plans and requirements. He may have his own whims and fancies, even eccentricities in building house. There may be compulsions. For instance, he may construct house in such manner that he may use ground floor for his own residence and let out first floor having independent entry in order to augment his income, say, after retirement. He may build house consisting of four bedrooms all in ground floor (without any upper floor) in such manner that independent residential unit consisting of two or three bedrooms can be carved out with independent entrance and exit and which can be let out. He may even arrange for his children and their family to stay there, so that they are nearby, arrangement which can be mutually supportive. He may construct his residence in such manner that in case of future need he may be able to dispose of part thereof as independent house. There may be several such considerations for person while constructing residential house. We are unable to see how or why physical structuring of new residential house, whether it is lateral or vertical, should come in way of considering building as residential house. fact that residential house consists of several independent units should not be impediment to allowance of exemption under s. 54. That is neither expressly nor by necessary implication prohibited. In case before us, there is evidence in form of ration card where all residents of new house built by assessee have been shown as family members. CIT(A) has himself adverted to this evidence while accepting assessee s case in principle. In our view, having accepted case of assessee in principle, he was not justified in examining question as to who can be considered as members of assessee s family and in restricting exemption to two flats on footing that it will meet requirements of assessee and his son s family. He was not justified in excluding widowed daughter and her family who were admittedly staying with assessee in house, albeit in independent portion. They are, in our view, as much part of assessee s family as assessee s son and his family. We therefore hold that CIT(A) was not justified in restricting claim under s. 54 to two flats. He ought to have allowed exemption as claimed by assessee. We hold accordingly. We ought to refer to order of Bombay Bench of Tribunal in K.G. Vyas vs. ITO (1986) 26 TTJ (Bom) 491: (1986) 16 ITD 195 (Bom) in which similar question arose. There assessee sold his flat and acquired four flats in same building two in first floor and one each in second and third floors. assessee was living in these flats with his family with common kitchen and common ration card. It was held that exemption under s. 54 was available to assessee since condition that assessee should have invested sale proceeds in purchase of house for his own residence. It was observed that fact that at future date assessee might divide properties among members of his family was of no relevance. It was noted that family consisted of ten members and therefore acquisition of four flats in same building was commensurate with requirements of assessee. In para 5 Tribunal noticed objection of Revenue that flats were on different floors and were "self-contained residential units" but overruled same on ground that all of them were purchased in assessee s name. Reference was made to judgment of Allahabad High Court in Shiv Narain Chaudhari s case (supra) where it was held that "a house may consist of more than one self-contained dwelling unit and that if there is unity of structure, mere fact that such self-contained dwelling units are occupied by different persons, will not make that house into several houses". These authorities are applicable to case before us. appeal is accordingly allowed with no order as to costs. *** PREM PRAKASH BHUTANI v. ASSISTANT COMMISSIONER OF INCOME TAX