Agreement to sell as transfer date supported section 54F relief, while agricultural land character needed fresh section 54B review.

An agreement to sell can constitute the date of transfer for section 54F where it creates enforceable rights and extinguishes the transferor's effective control, so the assessee's purchase of the new residential house fell within the prescribed period and the disallowance was unsustainable. For section 54B, the land's agricultural character could not be rejected merely because of the sale deed; the surrounding statutory setting, land use position, and conversion-related facts required proper examination. The Tribunal was directed to reconsider that issue on the correct legal basis. The appeal was therefore allowed on section 54F and remitted on section 54B.

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Issues: (i) Whether, for deduction under section 54F, the date of agreement to sell could be treated as the date of transfer so as to bring the assessee's purchase of the new residential house within the prescribed period; (ii) Whether deduction under section 54B could be denied on the ground that the land transferred was non-agricultural land at the time of sale.

Issue (i): Whether, for deduction under section 54F, the date of agreement to sell could be treated as the date of transfer so as to bring the assessee's purchase of the new residential house within the prescribed period.

Analysis: Section 54F grants relief where the assessee purchases a residential house within one year before or two years after the date of transfer of the original asset, and section 2(47) of the Income-tax Act, 1961 gives a wide meaning to transfer, including extinguishment of rights. The agreement to sell created enforceable rights in favour of the purchaser and curtailed the assessee's right to deal with the property, which brought the transaction within the extended meaning of transfer. The Court also held that the principle in Sanjeev Lal applied on the legal issue and could not be confined only to its special facts.

Conclusion: The assessee was entitled to the benefit of section 54F, and the disallowance was not sustainable.

Issue (ii): Whether deduction under section 54B could be denied on the ground that the land transferred was non-agricultural land at the time of sale.

Analysis: Section 54B depends on the character of the land being agricultural, and the legal character of land cannot be determined merely by the later registered sale deed if the surrounding statutory position and factual matrix show continued agricultural character. The Court found that the authorities had not properly examined the effect of the Bombay Tenancy and Agricultural Lands Act, 1948, the nature of the land, and the impact of conversion permissions and agreement terms. The issue required fresh consideration by the Tribunal in light of the correct legal position.

Conclusion: The question under section 54B was remitted to the Tribunal for fresh decision.

Final Conclusion: The appeal succeeded on the section 54F issue, while the section 54B issue was sent back for reconsideration, resulting in a partial allowance of the appeal.

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