Property transfer on vacant possession date determines section 54F exemption timing under income-tax law

Enforceable rights under an original property agreement, including possession and tenancy-related interests, were treated as property capable of transfer under section 2(14) of the Income-tax Act, 1961. Applying section 53A of the Transfer of Property Act and section 2(47) of the Income-tax Act, the transfer was regarded as occurring only when those rights were actually surrendered and vacant possession was delivered, not on the date of the later agreement. On the stated facts, consideration was received through bank drafts and possession was handed over on 6 May 1987, making the subsequent purchase of another property fall within the two-year period for exemption under section 54F.

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Issues: Whether the assessee's rights in the property were transferred on the date of the subsequent agreement or only on the date vacant possession was handed over, and whether the assessee was therefore entitled to exemption under section 54F of the Income-tax Act, 1961.

Analysis: The assessee had acquired enforceable rights in the property under the original agreement, including possession and tenancy-related rights, and such rights amounted to property capable of transfer under section 2(14) of the Income-tax Act, 1961. By virtue of section 53A of the Transfer of Property Act and section 2(47) of the Income-tax Act, 1961, the transaction constituted a transfer only when the assessee's rights were actually given up and vacant possession was delivered. The agreement contemplated surrender of those rights on receipt of the stipulated consideration, and the record showed that the consideration was received through bank drafts and possession was handed over on 6 May 1987. The subsequent purchase of another property was within two years of that transfer date.

Conclusion: The transfer took place on 6 May 1987, not on the earlier agreement date, and the assessee was entitled to exemption under section 54F of the Income-tax Act, 1961.

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