Section 54 exemption and unregistered agreement to sell: registration is not decisive, but investment genuineness needs verification.

Section 54 relief cannot be denied merely because the assessee relied on an unregistered agreement to sell for acquiring a new residential house, since the provision is applied purposively and the key requirement is investment of the sale consideration in purchase or construction within the stipulated period. A registered conveyance deed is not indispensable for claiming the exemption. However, the genuineness of the unregistered agreement and the actual nature of the investment remain material facts, so the matter requires fresh verification by the Assessing Officer with an opportunity to the assessee to produce evidence.

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Issues: Whether exemption under section 54 of the Income-tax Act, 1961 could be denied solely because the assessee relied on an unregistered agreement to sell for acquisition of a new residential house, and whether the genuineness of the claimed investment required fresh verification.

Analysis: The provision was applied in a purposive and beneficial manner. It was held that the decisive requirement for section 54 relief is investment of the sale consideration in purchase or construction of a residential house within the stipulated period, and that acquisition of title through a registered conveyance deed is not, by itself, indispensable. At the same time, the Revenue's challenge to the veracity of the unregistered agreement and the actual investment made was treated as relevant to the core controversy, because the assessment had not examined those factual aspects and had proceeded only on the legal premise that absence of registration was fatal.

Conclusion: Exemption under section 54 could not be rejected merely for want of registration of the agreement to sell, but the matter required fresh examination of the genuineness and factual nature of the investment by the Assessing Officer, with opportunity to the assessee to adduce evidence.

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