TMI Blog1986 (7) TMI 182X X X X Extracts X X X X X X X X Extracts X X X X ..... n 54 by the ITO in the assessment of the assessee for the assessment year 1981-82. 3. The short point that arises for consideration in this appeal is whether the appellant can be said to have purchased the residential flat within a period of one year after the sale of residential property from which capital gains arose and, therefore, whether the appellant is entitled to the benefit of exemption under section 54. The main contention urged on behalf of the appellant before us is that the Commissioner erred in holding that the date, viz., 3-3-1983 on which the sale deed was executed and registered in favour of the assessee must be taken to be the date of purchase of the flat by the appellant for purposes of exemption under section 54. It was urged by Shri M.J. Swamy for the assessee that the provision in section 54 for purchase of residential house within a period of one year before or after the transfer of the capital asset from which the capital gain had arisen is directory and not mandatory and, therefore, substantial compliance with that requirement is sufficient for the assessee to be entitled to exemption under section 54. It was further contended that where within the statut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the time of agreement and within one year from the date of sale of the flat by the assessee, nothing had happened except signing an agreement to purchase a residential flat. The payments towards the purchase were all made only after the expiration of one year from the date of sale. The residential flat was not in existence at the time of entering the agreement by the assessee with the construction company. The residential flat was conveyed to the assessee only on 3-3-1983 and till then the construction company was the owner of the flat. In the circumstances of the case, the conditions stipulated in section 54(1) are not satisfied. 6. As regards the alternative plea of the assessee that these agreements should be construed as agreements for construction, Shri Santhanam contended that such an interpretation is not called for. Section 54 contemplates exemption to the assessee and the said section should be strictly construed. He relied on a number of decisions in support of his contentions, chief among them being M. Ramanamma v. CWT [1986] 157 ITR 555 (AP) and Dr. (Mrs.) Mrudula A. Talwar v. ITO [1984] 10 ITD 928 (Hyd.). 7. We have heard rival submissions and perused the records ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsideration 2,05,000 Registration and stamps 21,116 ----------------- Total 2,26,116" ----------------- Within two years from the date of sale of the residential flat, the conveyance deed was executed and registered by Meridian Construction Co. in favour of the assessee and the assessee was put in possession of the property on 3-3-1983, the day the sale deed was executed. On all these facts, there is no dispute. 8. The dispute is with regard to the construction that is to be placed on the word 'purchase'. In our view, the expression 'purchase' occurring in section 54 is not synonymous with 'ownership' or 'transfer of legal title' whereas in sections 22 and 45 of the Act, which are the charging sections creating tax liability, the wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operty. It was further held that for purposes of section 54, the date of purchase could be taken to be the date on which the agreement for purchasing a new house property was obtained by the assessee even though the registration took place long after the period stipulated in section 54. In this connection, we notice the following observations under the head 'Purchase' at page 1110 of Black's Law Dictionary viz., "The term 'purchase' includes any contract to purchase or otherwise acquire. Securities : Exchange Act, section 3." 10. In view of the above, we hold that the date of the agreement of purchase should be taken as the date of purchase for purposes of section 54. 11. The learned departmental representative pointed out that the major part of the consideration towards the purchase was paid after the expiry of one year and, therefore, the assessee was not entitled to exemption under section 54(1). The Supreme Court in the case cited supra observed that "we see no stress in the section on 'cash and carry' ". Even though the major part of the consideration had not been paid within a period of one year, the assessee is not disentitled to exemption, because there is nothing to su ..... X X X X Extracts X X X X X X X X Extracts X X X X
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