Section 54 exemption denied where the assessee failed to prove timely acquisition and possession of the new residential flat.

Section 54 exemption on purchase of a new residential flat depends on the new house being acquired within the prescribed time and on reliable proof of the relevant possession date. Here, the assessee relied on an allotment arrangement and payments made before transfer of the original flat, but the evidence did not establish a clear and dependable date of possession within the statutory period. The readiness of the flat for occupation and the effect of possession in part performance under section 2(47)(v) read with section 53A were noted, yet the later possession letter was not treated as determinative. The section 54 requirement was therefore not met, and the exemption was denied.

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Issues: Whether exemption under section 54 of the Income-tax Act, 1961 was admissible on the purchase of the new flat, and whether the relevant acquisition and possession fell within the statutory time limit.

Analysis: The assessee had entered into an allotment arrangement and made payments for the new flat over a period commencing well before the transfer of the original residential flat. The documents on record showed that the flat had become ready for occupation, and the legal effect of possession in part performance had to be considered in the light of section 2(47)(v) of the Income-tax Act, 1961 read with section 53A of the Transfer of Property Act, 1882. However, the evidence did not establish a clear and reliable date of possession within the period relevant for section 54, and the later possession letter was not accepted as determinative. On these facts, the requirement that the new residential house be purchased within the prescribed time was not satisfied.

Conclusion: The assessee was not entitled to exemption under section 54 of the Income-tax Act, 1961.

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