Section 54 exemption can apply without a registered sale deed where possession and consideration support a valid purchase claim.

Section 54 exemption may extend beyond a registered sale deed where the assessee has substantially paid consideration and taken possession in part performance; the provision is treated as beneficial and the term "purchase" is given a wider, purposive meaning. On the facts, the vendor's title objection did not defeat the claim because the conveyance deed and mutation record showed regularisation of title at the relevant time, so the exemption was allowed. Material already on record before the Assessing Officer could not be treated as additional evidence, so rule 46A was not attracted and no remand report was required.

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Issues: (i) Whether exemption under section 54 of the Income-tax Act, 1961 could be denied merely because the agreement to sell was unregistered and the vendor's title was questioned; (ii) Whether the Commissioner (Appeals) violated rule 46A of the Income-tax Rules, 1962 by considering material said to be additional evidence without calling for a remand report.

Issue (i): Whether exemption under section 54 of the Income-tax Act, 1961 could be denied merely because the agreement to sell was unregistered and the vendor's title was questioned.

Analysis: The transfer was supported by substantial payment and possession had been taken. The reasoning accepted that the expression "purchase" in section 54 has a wider meaning and is not confined to a registered sale deed. Reliance was placed on the principle that section 54 is a beneficial provision and must receive purposive interpretation. The transaction was also viewed in the light of section 53A of the Transfer of Property Act, 1882, under which part performance protects a transferee in possession even where the conveyance is not registered. The objection based on title was rejected on facts, since the conveyance deed and mutation record showed the vendor's title had been regularised and the relevant dispute did not bar the transaction on the date of agreement.

Conclusion: The exemption under section 54 was rightly allowed and the Revenue's objection on registration and title failed.

Issue (ii): Whether the Commissioner (Appeals) violated rule 46A of the Income-tax Rules, 1962 by considering material said to be additional evidence without calling for a remand report.

Analysis: The material relied upon by the Commissioner (Appeals) was already on record before the Assessing Officer, and therefore it did not amount to fresh additional evidence requiring compliance with rule 46A. In the absence of any real fresh evidence, the complaint that no remand report was called had no merit.

Conclusion: No violation of rule 46A was established.

Final Conclusion: The appellate order deleting the addition was sustained and the Revenue's challenge failed on both the substantive exemption issue and the procedural objection.

Ratio Decidendi: For section 54, "purchase" is not restricted to a registered conveyance and may be satisfied where the assessee has substantially paid consideration and taken possession in part performance; material already on record cannot be treated as additional evidence so as to attract rule 46A.

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