Section 54 residential property purchase can qualify for capital gains exemption despite delayed possession after timely investment.

Section 54 exemption for long-term capital gains may apply where a new residential property is purchased within one year before transfer of the original asset, even if possession is delivered later. The provision treats purchase as wider than registered conveyance or physical possession: allotment and payment of instalments can establish acquisition of title. Where capital gains are invested within the prescribed period, delayed completion, occupancy or possession does not by itself defeat the exemption.

---

---

Issues: Whether exemption for long-term capital gains on purchase of a new residential house under section 54 is available where the new property was purchased within one year before transfer of the original asset but possession was scheduled beyond the prescribed period.

Analysis: Section 54 permits investment in a residential house within one year before or two years after transfer, or construction within three years after transfer. The allottee obtains title through allotment and payment of instalments; delivery of possession is a consequential formality. The statutory expression "purchase" has a wider meaning and is not confined to execution of a registered conveyance or physical possession. Where capital gains have been invested in the new residential property within the stipulated period, delayed completion, occupancy, or possession beyond that period does not defeat the exemption.

Conclusion: The exemption under section 54 was allowable because the new residential property was purchased within one year before transfer of the original property; delayed possession did not disentitle the assessee from the exemption.

---