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Sri Rajaram vs Income-Tax Officer on 17 July, 1986
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registered conveyance deed, though such crystallisation took place after the expiry of the statutory period of one year, he must be deemed to have substantially complied with the condition of purchase of the residential flat within the statutory period so as to be eligible for exemption under Section 54. Shri Swamy further submitted that the word 'purchase' occurring in Section 54 must be construed liberally and not strictly so as to further the object for which that provision has been made. It was his plea that the Hon'ble Supreme Court in the case of CIT v. T.N. Aravinda Reddy [l979] 120 ITR 46, affirmed the decision of the Hon'ble Andhra Pradesh High Court in CIT v. T.N. Aravinda Reddy [l979] 116 ITR 551 and construed the release by co-owners whereby the assessee therein obtained a release of undivided interest of his brothers in the property, as a transaction of purchase within the meaning of Section 54. He pleaded that if such a liberal construction is adopted for the purpose of effectuating the intention of the Legislature, it is reasonable to construe the date of agreement of purchase as the date of purchase in a case

5. Shri N. Santhanam, the learned departmental representative, vehemently opposed the submissions of Shri Swamy. He submitted that the assessee had paid only Rs. 5,000 at 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

property, viz., the flat had not been constructed on the date of the agreement. The learned departmental representative contends that there could be no agreement for purchase of property which was to come into existence. We do not agree with such a proposition, because there could be agreements for purchase of future rights in properties and, in effect, for the properties that are to come into existence. In fact, the assessee was given proportionate right in the land existing at the time of agreement. It is not in dispute that the assessee had sold his residential flat at L.N. Gupta Marg, Hyderabad, by a registered sale deed on 5-3-1981. It is also not in dispute that the assessee had paid the amounts to Meridian Construction Co. towards the cost of the new asset as follows :

Registration Act provides that registration, as and when it takes place, takes effect from the date of execution of the deed. That may be the position so far as transfer of legal title is concerned. Here, we are not concerned with ownership and hence this legal position does not stand in the way of taking the date of the agreement (to purchase) as the date of purchase for the purposes of Section 54 in a case where the agreement has eventually crystallised into purchase, though after the statutory period of one year. In fact the Supreme Court in T.N. Aravinda Reddy's case (supra), held that acquisition through release from other co-owners amounts to purchase within the meaning of Section 54(1). In that case, the Hon'ble Supreme Court found no reason to divorce the meaning of the word 'purchase' as buying for a price or the equivalent of price by payment in kind or adjustment towards old debt or for other monetary consideration, from the legal meaning of that word in Section 54(1). Their Lordships further observed :