1991 (12) TMI 3 - HC - Income Tax

Summary

Issues:
The issues involved in this case are:
1. Interpretation of exemption under section 54(1) of the Income-tax Act, 1961.
2. Liberal construction of the term 'purchase' in relation to the Transfer of Property Act.

Interpretation of Exemption under Section 54(1):
Late Dr. Laxmichand Nagda sold his self-occupied dwelling house and entered into an agreement to purchase a flat in Bombay. The Income-tax Officer initially denied exemption under section 54, stating that the registered sale deed for the flat was not executed within one year of the house sale. However, the Commissioner of Income-tax (Appeals) allowed the appeal, granting the exemption. The Tribunal upheld this decision, emphasizing the actual use of the flat for dwelling within a reasonable time frame.

Liberal Construction of the Term 'Purchase':
The Revenue contended that a registered sale deed and title transfer were prerequisites for considering a transaction as a 'purchase' under section 54. However, the court disagreed, citing various judicial precedents. The court highlighted that the word 'purchase' should be interpreted liberally, not just in a literal sense but in a broader context. Referring to past cases, the court emphasized that the word 'purchase' should be understood in a wider sense, focusing on the actual acquisition and use of the property rather than just legal technicalities.

Conclusion:
The court dismissed the application under section 256(2) of the Income-tax Act, stating that no question of law arose from the Tribunal's decision. The court upheld the Tribunal's ruling, emphasizing that the exemption under section 54 was correctly granted based on the actual acquisition and use of the property for dwelling purposes. The court clarified that the legal title transfer within a specific timeframe was not a mandatory condition for availing the exemption. The court also distinguished a previous Supreme Court decision, stating that its interpretation did not apply to the current case. Ultimately, the court dismissed the application and discharged the rule, with no order as to costs.