Section 54F purchase requirement interpreted broadly; possession and enforceable rights under a sale agreement supported the deduction.

Deduction under section 54F was allowed where the assessee had paid consideration, taken possession under a registered sale agreement, and acquired enforceable rights of specific performance, even though no registered sale deed had been executed. The tribunal held that section 54F requires a "purchase" of a residential house and does not insist on absolute ownership through a registered conveyance. It followed the Delhi High Court's interpretation of "purchase" under section 54 and treated section 54F as pari materia with section 54. The absence of a registered sale deed was therefore not fatal on these facts, and the disallowance was reversed.

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Issues: Whether deduction under section 54F of the Income-tax Act, 1961 was allowable when the assessee had paid consideration and obtained possession under a registered sale agreement, but no registered sale deed had been executed.

Analysis: The claim turned on the meaning of "purchase" in section 54F. The authorities below treated the absence of a registered conveyance as fatal, relying on the amended registration law and the decision holding that an unregistered agreement has no effect for the purposes of section 53A of the Transfer of Property Act, 1882. The relevant distinction was that section 54F speaks of purchase of a residential house and does not require the assessee to become the absolute owner through a registered sale deed. The Delhi High Court decision construing the term "purchase" in the context of section 54 was followed, and section 54F was treated as pari materia with section 54. On the facts, the assessee had paid substantial consideration, taken possession, and the agreement conferred enforceable rights of specific performance.

Conclusion: Deduction under section 54F was held to be allowable, and the disallowance was reversed in favour of the assessee.

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