Judgment:
Mrs. Sujata Manohar, J.
1. The assessee, who is the respondent before us, had sold office premises on July 23, 1987, which resulted in long-term capital gains of Rs. 24,05,050. Prior to the sale she had entered into an agreement for purchase of a residential flat which agreement was dated September 4, 1985. The agreement was for purchase of a flat for a total consideration of Rs. 12,26,751 On the date of the agreement of sale, the assessee paid a sum of Rs. 1,35,000 as earnest money. This agreement was registered on October 27, 1985. The construction of the flat was finally completed in July, 1988. The assessee paid the consideration amount of Rs. 10,44,375 plus Rs. 47,376 on July 29, 1988, and she was put in possession of the said flat on July 30, 1988. The assessee claimed the benefit of exemption under section 54F of the Income-tax Act, 1961. She has accordingly been granted by the Tribunal exemption of Rs. 11,04,423 under section 54F of the Income-tax Act. The Department has made this application under section 256(2) of the Income-tax Act for raising the following question :
'Whether, on the facts and in the circumstances of the case, the Tribunal was right in allowing exemption of Rs. 11,04,423 under section 54F of the Income-tax Act, 1961, considering the date of possession of the new residential premises instead of the date of sale agreement and the date of registration?'
2. Under section 54F of the Income-tax Act, in the case of an assessee if any capital gain arises from the transfer of any long-term capital asset, not being a residential house, and the assessee has, within a period of one year before or two years after the date on which the transfer took place, purchased a residential house, the capital gain shall be dealt with as provided in that section. As per the section certain exemption has to be allowed in respect of the capital gains to be calculated as set out therein. The Department contends that the assessee did not purchase the residential house either one year prior to or two years after the sale of the capital asset which resulted in the long-term capital gains. According to the Department, the agreement for purchase of the new flat was entered into more than one year prior to the sale. Hence, the petitioner is not entitled to the benefit under section 54F. In our view, the Tribunal has rightly negatived this contention and has held that the new residential house had been purchased by the assessee within two years after the sale of the capital asset which resulted in long-term capital gains. The Tribunal has held that the relevant date in this connection is July 29, 1988, when the petitioner paid the full consideration amount on the flat becoming ready for occupation and obtained possession of the flat. This has been taken by the Tribunal as the date of purchase. The Tribunal has looked at the substance of the transaction and come to the conclusion that the purchase was substantially effected when the agreement of purchase was carried out or completed by payment of full consideration on July 29, 1988, and handing over of possession of the flat on the next day.
3. In the premises, the application is dismissed and the rule is discharged with costs.