Section 54F purchase test extends to possession and full payment even without registered conveyance; improvement cost claim upheld.

Deduction under section 54F was treated as available where the assessee had paid the full consideration and taken possession of the new residential house, because the statutory requirement is purchase of the residential asset and not completed registration of title. The unregistered purchase agreement and the cited provisions on transfer and registration did not defeat relief on those facts. The indexed cost of improvement was also accepted because the property was described in the sale deed as a constructed double-storeyed house, some material bills were produced, and the absence of complete vouchers was not enough to reject the claim when construction expenditure would also include labour and other informal inputs.

---

---

Issues: (i) Whether deduction under section 54F of the Income-tax Act, 1961 was allowable where the new residential house was acquired under an unregistered purchase agreement and possession and full consideration were shown. (ii) Whether the assessee's claim for indexed cost of improvement could be disallowed for want of complete documentary vouchers despite the property being reflected as a constructed double-storeyed house in the sale deed.

Issue (i): Whether deduction under section 54F of the Income-tax Act, 1961 was allowable where the new residential house was acquired under an unregistered purchase agreement and possession and full consideration were shown.

Analysis: Section 54F requires purchase of a residential house within the prescribed period. The decisive requirement is purchase of the new asset, not acquisition of title through a registered conveyance. Where the entire consideration is paid and possession is taken, the transaction satisfies the statutory condition. The provisions of section 53A of the Transfer of Property Act, 1882 and sections 17 and 49 of the Registration Act, 1908 did not defeat the claim on the facts found. The authorities relied upon by the revenue were held distinguishable on the factual setting.

Conclusion: Deduction under section 54F was rightly allowed and the revenue's challenge failed.

Issue (ii): Whether the assessee's claim for indexed cost of improvement could be disallowed for want of complete documentary vouchers despite the property being reflected as a constructed double-storeyed house in the sale deed.

Analysis: The sale deed described the property as a double-storeyed house, and the assessee had produced some supporting bills for iron and steel. The nature of construction necessarily implied expenditure on other building materials and labour, which often arise in the unorganised sector without formal vouchers. On the overall evidence, the rejection of the entire claim was not justified.

Conclusion: The indexed cost of improvement was rightly accepted and the revenue's challenge failed.

Final Conclusion: The revenue's appeal failed in entirety, and the additions deleted by the first appellate authority were sustained.

Ratio Decidendi: For section 54F, the expression "purchased" is satisfied by a completed acquisition with payment of consideration and possession, even if the conveyance is not yet registered; and a claim for improvement cost may be accepted on a reasonable evidentiary assessment of the construction record and surrounding circumstances.

---