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Issues involved: Interpretation of exemption u/s 54F of the Income-tax Act, 1961 based on the timing of purchase of a residential house in relation to the sale of a long-term capital asset.
Summary: The High Court of BOMBAY delivered a judgment regarding the interpretation of exemption u/s 54F of the Income-tax Act, 1961. The assessee had sold office premises resulting in long-term capital gains and entered into an agreement to purchase a residential flat. The Department questioned the allowance of exemption u/s 54F by the Tribunal, arguing that the purchase of the new flat was made more than one year prior to the sale, thus disqualifying the assessee. However, the Tribunal held that the purchase was within two years after the sale, considering the date when the full consideration was paid and possession was obtained as the date of purchase. The Tribunal emphasized the substance of the transaction, concluding that the purchase was substantially completed on July 29, 1988, when the full consideration was paid and possession was taken. In conclusion, the High Court dismissed the Department's application, affirming the Tribunal's decision and discharging the rule with costs.
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