TMI Blog1983 (4) TMI 102X X X X Extracts X X X X X X X X Extracts X X X X ..... x Act, 1961 ('the Act'), the resultant capital gains on the ground that the property sold was self-occupied and within the time of one year she purchased another residential house bearing door No. 10-4-35/1 at Masabtank from Mr. and Mrs. Syed Abdul Quader for a sum of Rs. 90,000. When proceedings were pending before the ITO the assessee failed to produce evidence to show that she purchased another house within one year from the date of sale of the old house to justify the claim under section 54. Ultimately under letter dated 18-12-1978 the authorised representative appearing on behalf of the assessee stated that the copies of the sale deeds as well as agreement are misplaced and the assessee was not able to trace them. The ITO found that the last piece of the property was sold on 12-8-1975 whereas the assessee filed the return of income for the assessment year 1976-77 on 15-9-1976, i.e., after lapse of one year. In the statement enclosed to her return the assessee stated that she had entered into an agreement to purchase a house from Mr. and Mrs. Syed Abdul Quader. The ITO concluded that the assessee had not purchased the property within one year from the date of sale of the old ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee purchased another house for his residence. In this case, the old house bears door No. 22-7-713 situated in Nijambagh in Divandevdi. The total extent in which a residential house is situated appears to be of 1,401 sq. yds. Before that the house and site on which the house is situated covering an extent of 975 sq. yds. was admittedly sold by the assessee to five parties and in 5 pieces. After selling away the five pieces the assessee retained an extent of 426 sq. yds. of site in the said house property which is hereinafter called as the old house property. The date of sale, the area under each sale, the amount for which it is sold and the name of the party to whom it was sold are furnished hereunder : -------------------------------------------------------------------------------------------------------------------------------------------------- Sl. No. Date Name of purchaser Area Amount sq. yds. (Rs.) -------------------------------------------------------------------------------------------------------------------------------------------------- 1. 31-5-1975 Ibrahim Mohd., 48 Masjid 216 15,000 Street, Bombay-3 2. 31-5-1975 S. Hussain, 127 Dongri 256 14,750 Stre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use was delivered to the assessee and the balance of Rs. 7,000 was agreed to be payable at the time of registration of the sale deed before the registering authority. In pursuance of the said sale agreement, registered deed of sale was executed on 22-8-1977. Copy of the sale agreement was provided at pages 5 to 8 of the paper compilation whereas photostat copy of the registered sale deed dated 22-8-1977 was provided at pages 10 to 15 of the paper compilation filed before us. There is nothing on record to doubt the authenticity or genuineness of the sale agreement or sale deed executed in pursuance thereof. The only strong contest by the revenue against the ground of exemption under section 54 was that the actual sale was not completed within one year from the date of the sale of the old house property. According to the revenue, last of the five pieces in the old house property was sold on 12-8-1975 whereas the sale deed of the new house property was obtained on 22-8-1977 which is quite beyond one year of the date of sale of the old house property. That means, according to the revenue the sale agreement dated 27-6-1976 which was obtained by the assessee towards the purchase of the n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Ltd. [1981] 127 ITR 97 (All.). On the other hand, the argument of the learned departmental representative was that unless the person acquired a full title to the property purchased he cannot be called a purchaser of that property under the provisions of section 54 of the Transfer of Property Act, 1882 a mere contract of sale does not confer any title to the property in favour of the vendee and unless and until a regular sale deed is executed in pursuance of the agreement of sale title to the property cannot be said to have been passed in favour of the vendee and the vendee cannot be termed as purchaser unless and until a full title passes to him. In support of this contention reliance was sought to be placed upon the decisions in the cases of CIT v. Nawab Mir Barkat Ali Khan 1974 Tax LR 90 (AP), CIT v. Zorostrian Building Society Ltd. [1976] 102 ITR 499 (Bom.), Divvi Suryanarayana Murthy v. Competent Authority, IAC [1979] 117 ITR 278 (AP) and CIT v. Hans Raj Gupta [1982] 137 ITR 195 (Delhi). With reference to these cases the learned departmental representative argued that inasmuch as what was obtained by the assessee was only an agreement of purchase dated 27-6-1976 and no regula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... strar. Now the question is whether by this agreement the assessee can be stated to have purchased the property. If the date of agreement is to be taken into consideration it was within one year from 12-8-1975 on which date the last of the five pieces of old property was sold and if by this agreement it can be said that the assessee purchased a new residential property intended for her residence then the requirements of section 54(1) can be fairly stated to have been met with and the assessee is entitled to claim exemption. In Desikhacharyulu v. Narasimhacharyulu AIR 1958 AP 278, it was held that though a contract for sale does not create any interest in the property, yet, if there is a clear and valid contract for sale, the property is, in equity, transferred to the purchaser by the contract, as the vendor then becomes a trustee for him and cannot be permitted to deal with the property so as to defeat the rights of the prospective vendee. So from the above statement of law it appears that the vendor would be trustee to the vendee under the agreement of sale and the vendee has got a right to demand specific performance of sale from his vendor in pursuance of the right he possesses u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ala's case the Hon'ble Supreme Court while interpreting the word 'owner' postulated that the said term has different meanings in different contexts. Under certain circumstances even a lessee may be considered as owner of the property leased to him. It is also stated that though equitable considerations are irrelevant in interpreting tax laws, but those laws like all other laws, are to be interpreted reasonably and in consonance with justice. In the case of U.P. State Agro Industrial Corpn., the Allahabad High Court is considering the claim for depreciation under section 32 of the Act. The assessee in that case had not got complete title to the agricultural workshop though the amount of consideration was paid to the U.P. Government either by allotment of equity shares or by payment of cash. The only formality that remained to be completed was the execution of registered sale deed by the U.P. Government in favour of the assessee. The question was whether depreciation can be allowed on the said workshop, building in the hands of the assessee. Their Lordships held that the expression 'building owned by the assessee' in section 32 has not been used in the sense of property, complete tit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on ground that the old house property was used by the assessee for her residence since more than two years prior to its sale and inasmuch as the new property is a residential building in which the assessee began living from 10-8-1976, when she got possession and when she paid Rs. 11,000 under the agreement to her vendor, the assessee is entitled to exemption under section 54(1). We further hold that simply because the assessee was able to get the sale deed only on 22-8-1977 she was not precluded from claiming exemption under section 54(1). It is significant that the recitals of the said sale deed clearly indicate the prior agreement of sale dated 27-6-1976 and as soon as the sale deed was obtained the purchase relates back to the date of agreement ; viz., 27-6-1976. Therefore, even by taking into consideration the subsequent event of obtaining the sale deed we can say the new property was purchased within one year after the sale of the old property. In our opinion, the orders of the lower authorities refusing exemption were wrong and, hence, they are set aside and we direct the ITO to grant exemption under section 54(1) to the assessee. There is no merit in the argument of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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