123 taxman 290 (delhi)
High Court of Delhi
Commissioner of Income-tax
S.B. SINHA, CJ.
AND A.K. SIKRI, J.
IT REFERENCE NO. 73 OF 1983
DECEMBER 6, 2001
Section 54 of the Income-tax Act, 1961 - Capital gains - Profits on sale of property used for residential house - Assessment year 1975-76 - Whether section 54 speaks of purchase only and for availing benefit under this section, it is not necessary that assessee should become owner of property - Held, yes - Whether, where assessee paid a sum at time of entering into an agreement for purchase of a property within a year from sale of another property, he would be entitled to benefit provided under section 54 even though there was no registration within said period - Held, yes
The assessee sold a property on 3-12-1974 for Rs. 98,000. On 6-2-1975, he entered into an agreement to purchase another property for Rs. 2.03 lakhs and paid Rs. 1.73 lakhs at the time of entering into that agreement. The assessing authorities as well as the Tribunal held that since there was no registration of the property in the assessee’s name, he could not claim benefit provided under section 54.
On reference :
For the purpose of attracting the provisions of section 54, it is not necessary that the assessee should become the owner of the property. Section 54 speaks of purchase. Moreover, the ownership of the property may have different connotations in different statutes. In view of various decisions of the Supreme Court, it was to be held that the Tribunal went wrong in holding that for the purpose of applicability of section 54, registration of document is imperative. Therefore, the assessee was entitled to exemption in terms of section 54.
CIT v. T.N. Aravinda Reddy  120 ITR 46/2 Taxman 541 (SC), CIT v. Podar Cement (P.) Ltd.  226 ITR 625/92 Taxman 541 (SC), Mysore Minerals Ltd. v. CIT  239 ITR 775/106 Taxman 166 (SC) and CIT v. R.L. Sood  245 ITR 727/108 Taxman 227 (Delhi).
C.S. Aggarwal for the Applicant. R.D. Jolly and Ms. Prem Lata Bansal for the Respondent.
S.B. Sinha, CJ. - The question which arises for consideration in this reference is as under :
“Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the assessee had not purchased the property within one year from the date of sale of his residential house so as to be entitled to exemption under section 54 of the Income-tax Act, 1961 ?”
2. The basic fact of the matter is not in dispute. The assessee sold a property, 15/16, East Patel Nagar, New Delhi, belonging to him on 3-12-1974 for Rs. 98,000. By reason of the agreement of sale coupled with possession the assessee purported to have purchased a property No. 12, West Patel Nagar, New Delhi, for Rs. 2,03,000 on 6-2-1975. It is not in dispute that if the aforementioned transaction amounts to purchase of property, the same would be within a period of one year. The only question, which, therefore, arises for consideration is whether the aforementioned agreement dated 6-2-1975 would answer the description of purchase within the meaning of section 54 of the Income-tax Act, 1961 (‘the Act’). Out of the consideration of Rs. 2,03,000, the assessee admittedly at the time of entering into the aforementioned agreement paid a sum of Rs. 1,73,000 which was more than the amount of Rs. 98,000 which he received by way of consideration in terms of the transaction which took place on 3-12-1974. Section 54 relates to profit on sale of property used for residence. The said provision reads, thus :
“54. Profit on sale of property used for residence.—(1) Subject to the provisions of sub-section (2), where, in the case of an assessee being an individual or a Hindu undivided family, the capital gain arises from the transfer of a long-term capital asset, being buildings or lands appurtenant thereto, and being a residential house, the income of which is chargeable under the head ‘Income from house property’ (hereafter in this section referred to as the original asset), and the assessee has within a period of one year before or two years after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, a residential house, then, instead of the capital gain being charged to income-tax as income of the previous year in which the transfer took place, . . .”
3. The Assessing Officer, the appellate authority as well as the Tribunal rejected the claim of the assessee in respect of the assessment year 1975-76 on the ground that he did not become the owner of the property, as the said transaction was not evidenced by registration thereof as provided under section 17 of the Registration Act. For the purpose of attracting the provisions of section 54, it is not necessary that the assessee should become the owner of the property. Section 54 speaks of purchase. Moreover, the ownership of the property may have different connotations in different statutes. The question which arises for consideration appears to be squarely covered by a decision of the Apex Court in CIT v. T.N. Aravinda Reddy  120 ITR 461 where it has been held that the word ‘purchase’ occurring in section 54(1) of the Act had to be given its common meaning, viz., buy for a price or equivalent of price by payment in kind or adjustment towards a debt or for other monetary consideration. Each release in this case was a transfer of the releasor’s share for consideration to the release and the transferee, the assessee, “purchased” the share of each of his brothers and the assessee was, therefore, entitled to the relief under section 54(1). The question now is no longer res integra having regard to the decision of the Apex Court in CIT v. Podar Cement (P.) Ltd.  226 ITR 6252. The Apex Court categorically held that section 22 of the Act does not require registration of sale deed. The meaning of the word ‘owner’ in the context of section 22 has been held to be a person who is entitled to receive income in his own right. The Apex Court in Mysore Minerals Ltd. v. CIT  239 ITR 7751 and this Court in CIT v. R.L. Sood  245 ITR 7272 have held that registration of the document is not mandatory for claiming depreciation on the property. In this view of the matter, we have no doubt in our mind that the learned Tribunal went wrong in holding that for the purpose of applicability of section 54, registration of document is imperative. We, therefore, answer the question in the negative, i.e., the assessee is entitled to exemption in terms of section 54.
4. The reference is disposed of.