Liberal construction of residential reinvestment exemption: agreement date can qualify as purchase despite later registration and delayed payment

Section 54 exemption is construed liberally to advance its object, so "purchase" is not confined to the date legal title passes by registration. Where an agreement to buy a residential flat is entered into within the statutory period and the transaction later matures into a completed conveyance, the agreement date may be treated as the date of purchase. Delayed payment of the substantial consideration does not by itself defeat the claim, because section 54 does not require a cash-and-carry payment structure within the prescribed period. The distinction between ownership for charging provisions and the broader meaning of purchase for exemption provisions is emphasised.

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Issues: Whether the assessee was entitled to exemption under section 54 of the Income-tax Act, 1961 where the agreement to purchase a residential flat was entered into within the statutory period but the conveyance deed was executed and registered later, and whether payment of the major part of the consideration after the period defeated the claim.

Analysis: The expression "purchase" in section 54 was construed liberally to advance the object of the provision. The Court held that purchase for section 54 need not be confined to the date when legal title vests by registration, and that the date of the agreement to purchase could be treated as the date of purchase where the transaction eventually crystallised into a completed conveyance. It was also held that section 54 does not require a "cash and carry" payment structure within the stipulated period, so delayed payment of the substantial consideration did not by itself disqualify the claim. The distinction between ownership for charging provisions and the broader meaning of purchase for exemption provisions was emphasised.

Conclusion: The assessee was entitled to exemption under section 54, the agreement date was taken as the date of purchase, and the Commissioner's order was not sustainable.

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