ACIT-19(3),MUMBAI, MUMBAI vs. SEVINA MARIE ANN TRAVASSO, MUMBAI

आदेश / O R D E R PER PRABHASH SHANKAR [A.M.] :- The present appeal emanating from the appellate order dated 17.08.2025 is preferred by the Revenue against the order passed by the Learned Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)”] pertaining to the assessment order passed u/s. 143(3) of the Income-tax Act, 1961 [hereinafter referred to as “Act”] dated 26.12.2022 for the Assessment Year [A.Y.] 2021-22.

ITA No. 7046/Mum/2025; Sevina Marie Ann Travasso “1. Whether in the facts and circumstances of the case and in law, the Learned CIT(A) was justified in holding that, for the purposes of claiming exemption under Section 54 of the Income Tax Act, 1961, a registered agreement for sale constitutes sufficient evidence of ownership in the absence of a registered sale deed?" 2. "Whether in the facts and circumstances of the case and in law, the Learned CIT(A) was justified in applying the principle of parity and consistency in tax treatment to allow exemption under Section 54 to co- owners equally, when arising from the same transaction and supported by identical documentation?" 3. "Whether in the facts and circumstances of the case and in law, the Learned CITA) was justified in holding that the denial of exemption under Section 54, without considering relevant judicial precedents and without affording a fair and adequate opportunity to the assessee, violates the principles of natural justice under Section 1448 of the Act?" 4. The tax effect involved in this case is Rs. 92,77,210/-, which is above the prescribed limit mentioned in the CBDT's Circular F.No.279/Misc. 142/2007- ITJ(P1) amended vide No. 09/2024 dated. 17.09.2024. Therefore, the appeal is being filed before the Hon'ble ITAT.” 3. According to the assessment order, the assessee,an individual filed the return declaring total income of Rs.41,06,100/-.During the year, she had sold two residential properties both of which were originally acquired for a consideration of Rs. 28,00,000/-. The assessee is the owner of 50% of share in both the properties alongwith her husband. Each property was sold for a sale consideration of Rs.3,80,50,000/- on 26.10.2020. Thus, the total consideration received after disposing of both the properties came to Rs. 7,61,00,000/-.After indexation, Long Term Capital Gain of Rs 6,00,46,666/- (LTCG of Rs.3,00,23,333/- for each property) was arrived at. Since, the assessee was the owner of 50% share in each property, therefore, an LTCG of Rs 3,00,23,333/ pertained to the assessee after disposing of her 50% share in both the properties. The assessee had claimed exemption of Rs. 3,00,23,333/- u/s 54 of the Act as she had purchased a property for a consideration of Rs.

ITA No. 7046/Mum/2025; Sevina Marie Ann Travasso 9,37,53,475/-. In this property, the assessee was the owner of 50% share of the property. Hence, the cost of acquisition in case of the assessee came to Rs.4,68,76,737/-. The assessee had also provided copy of bank loan amounting to Rs.7,00,00,000/- taken for the purchase of above said property. During assessment proceedings, she submitted copies of registered agreements for the properties purchased and sold during the year. She was specifically asked to furnish the copies of sale deeds for the properties referred above. In reply to the same, assessee submitted that all the transactions of sale/purchase of the property were done on the basis of registered agreement for sale and she did not have the copies of sale deeds although she provided complete set of registered copies of sale/ purchase deed for the below mentioned immovable properties. Further, she requested to allow the deduction u/s 54 in purview of the judgment pronounced by Hon’ble Supreme Court of India in the case of Sanjeev Lal vs. Commissioner of Income-tax, Chandigarh (CIVIL APPEAL Nos.5899-5900 OF 2014) which provided relief u/s 54 to the assessees based on peculiar facts of the case. The AO opined that in absence of sale deed for the above referred properties sold and purchased during the year, it was difficult to ascertain whether the purchase and sale of the properties had occurred in actual and the agreements in this context had actually been executed.

3.1 The AO further observed that in the case of Sanjeev Lal, the sale deed could not be executed for the reason that the assessee had been prevented from dealing with the residential house by an order of a competent

ITA No. 7046/Mum/2025; Sevina Marie Ann Travasso court, which they could not have violated. However, in the case of the assessee, she has repeatedly submitted vide here submissions on various dates that the entire transactions were made on the basis of registered sale agreements for the properties purchased and sold during the year. The assessee, unlike the peculiar facts of Sanjeev Lal was neither prevented from executing the deed by any legal compulsion nor she had expressed any willingness to execute the same for the property purchased and sold during the year. She had not explained with any reason, why the sale deed could not be executed for the transactions made. Further, he relied on the case of Smt. Shobha Jain vs. Commissioner of Income-tax, Agra in ITA NO. 335 OF 2006 where the Hon’ble Allahabad High Court held that that title of immovable property cannot pass unless a registered sale deed is executed. Therefore, it was evident that the assessee was required to execute a sale deed in order to claim the benefit u/s 54 of the Act. However, she had neither executed the sale deed nor shown any willingness for executing the same. In addition to this, the assessee was not under any legal compulsion for not executing the sale deeds for the transactions made in relation with immovable properties. For the lack of any explanation on part of the assessee with regard to the above, despite multiple opportunities provided the AO concluded that the explanation furnished by the assessee in support of her claim for exemption u/s 54 of the Act to the tune ofRs.3,00,23,333/- was not found tenable and the same was disallowed

ITA No. 7046/Mum/2025; Sevina Marie Ann Travasso evidences were duly furnished before the Assessing Officer, including copies of the registered agreements for sale of the properties sold and the property purchased, bank statements showing the flow of funds, loan sanction letters and disbursement proofs, proof of possession, computation of capital gains, demat account statements, salary slips, and Form 16. The assessee emphasized that the transaction was genuine, complete in all respects, and supported by registered agreements conferring rights, title, and possession in the respective properties. In support of her claim, the assessee also relied upon the judgment of the Hon’ble Supreme Court in Sanjeev Lal v. CIT(supra), wherein it was held that for the purposes of section 54, an agreement to sell could be regarded as sufficient evidence of transfer, and benefit could not be denied merely for want of a registered sale deed in peculiar circumstances.

4.1 It was also specifically highlighted that in the case of her husband, who was the co-owner in the very same transaction, the AO, vide assessment order dated 07.12.2022, had accepted the identical set of documents and allowed the claim of deduction under section 54 of the Act. On principles of consistency and parity, the assessee submitted that her claim also ought to have been allowed on the same basis.

4.2 The ld.CIT(A) observed that it was undisputed that the assessee earned above long-term capital gain on sale of her 50% share in two flats and claimed deduction u/s 54 in respect of a new investment in another flat. The Assessing Officer, however, held that the assessee had failed to furnish registered sale deeds. He noted that in the case of the assessee’s husband, arising out of the

ITA No. 7046/Mum/2025; Sevina Marie Ann Travasso very same transaction of sale and reinvestment, the Department had accepted the identical set of registered agreements for sale as sufficient proof for allowing exemption under section 54 of the Act. The assessee also produced the assessment order dated 07.12.2022 in the case of her husband, wherein exemption under section 54 was expressly allowed by the AO on identical facts and documents. This demonstrated that the Revenue had already treated the registered agreements as valid instruments of transfer and purchase in the co- owner’s case, and the same could not be disbelieved in the assessee’s case. Once the co-owner’s claim had been allowed in assessment framed under section 143(3) of the Act on the strength of the same documentation, rejection of the assessee’s claim on the ground of absence of separate sale deeds results in an inconsistency that was not sustainable in law. The exemption claimed under section 54 of the Act, was therefore directed to be allowed to the assessee in line with the treatment accorded in her husband’s case. Accordingly, the exemption u/s 54 of the Act was allowed to her and the addition made was deleted.

ITA No. 7046/Mum/2025; Sevina Marie Ann Travasso 6. We have carefully considered the factual matrix of the case,heard rival submissions. It is evident that the AO disallowed the claim of exemption u/s 54 of the Act only on the ground that the assessee failed to submit any evidence that the purchase of new property was evidenced by any registered deed and not merely a registered agreement. We find that the coordinate bench of hon’ble ITAT, Hyderabad had an occasion to adjudicate on similar claim of exemption u/s 54 of the Act where the new property was purchased by way unregistered agreement only which was denied by the AO in the case of Prasanna Lakshmi Chakka in ITA No.1599/1600/Hyd/2025 dated 15 May, 2026.Relevant parts of the order are extracted as below for the sake of brevity and clarity:

“3. During the course of assessment proceedings, the AO observed that the assessee had earned Long Term Capital Gains ("LTCG") of Rs. 2,69,30,723/- from the sale of three residential apartments and claimed exemption under section 54 of the Act on the ground that she had invested the same towards the purchase of a residential house property for a consideration of Rs. 7,35,00,000/- 4. The AO observed that the assessee had furnished only an "Agreement to Sell" dated 01.03.2021 and had failed to furnish any registered sale deed evidencing transfer of the property in her favor. The AO was of the view that an unregistered agreement of sale could not be treated as conferring ownership rights upon the assessee and, therefore, the assessee could not be held to have purchased a residential house property within the meaning of section 54 of the Act. Accordingly, the AO disallowed the exemption claimed by the assessee under section 54 of the Act and made an addition of the amount of Rs. 2,69,30,723/- to her returned income. 5. Aggrieved, the assessee assailed the impugned assessment order before the CIT(A), who deleted the addition by observing that a substantial investment had been made by the assessee towards the acquisition of the residential property and that execution of a registered sale deed was not mandatory for claiming exemption under section 54 of the Act. The CIT(A) to support his view relied upon various judicial pronouncements, including the judgment of the Hon'ble Supreme Court in the case of Sanjeev Lal vs. CIT (2014) 365 ITR 389 (SC). 6. The Revenue, being aggrieved with the CIT(A) order, has carried the matter in appeal before us.

ITA No. 7046/Mum/2025; Sevina Marie Ann Travasso 7. DR. Sachin Kumar, learned Departmental Representative (for short, "Sr. DR") strongly relied upon the assessment order, and submitted that the CIT(A) had grossly erred in law and fact of the case in granting relief merely on the basis of an unregistered agreement of sale. Elaborating on his contention, the Ld. DR submitted that the ownership of immovable property cannot pass in the absence of a registered conveyance deed and, therefore, the assessee cannot be said to have purchased a residential property within the meaning of section 54 of the Act. Apart from that, the Ld. Sr. DR raised doubts regarding the genuineness of the unregistered "agreement to sell", dated 01/03/2021, which was stated to have been entered by the assessee with her group entity. 8 Per Contra, Shri. AV Raghuram, Advocate, the learned Authorized Representative (for short, "AR") for the assessee, supported the order of the CIT(A) and submitted that the assessee had substantially invested the capital gains towards the purchase of a new residential house property within the prescribed time. It was contended that for claiming exemption under section 54 of the Act, what is relevant is the investment of capital gains towards the acquisition of a new residential property and not the execution of a registered sale deed. The Ld. AR to buttress his contention had placed reliance upon a host of judicial pronouncements in support of the proposition that beneficial provisions under section 54 are to be liberally construed. 9. We have heard the Ld. Authorized Representatives of both parties, perused the orders of the authorities below and the material available on record, as well as considered the judicial pronouncements pressed into service by them to drive home their respective contentions. 10. Admittedly, it is a matter of fact borne from record that the assessee had claimed exemption under section 54 of the Act on the basis of an unregistered agreement dated 01.03.2021, pursuant to which she claimed to have invested towards the purchase of a residential property for a consideration of Rs. 7,35,00,000/-. 11. We have given thoughtful consideration and find substance in the contention advanced by the Ld. AR that for claiming deduction under section 54 of the Act, what is required is investment of the sale consideration arising from transfer of the original capital asset towards purchase or construction of a new residential house, and not necessarily acquisition of title through a registered sale deed. The Hon'ble Supreme Court in the case of Sanjeev Lal vs. CIT (2014) 365 ITR 389 (SC), has held that the provisions of section 54 deserve purposive interpretation and that substantial compliance with the requirement of investment in a residential property would entitle the assessee to exemption. Also, we find that the Hon'ble High Court of Delhi in CIT vs. R.L. Sood (2000) 245 ITR 727 (Delhi) has held that payment of substantial consideration and acquisition of substantial domain over the property would satisfy the requirements of section 54 of the Act, even if possession or registration is delayed. A similar view has been expressed by the Hon'ble High Court in CIT vs. Kuldeep Singh (2014) 270 CTR 561 (Del), wherein it has been held that the word "purchase" in Section 54 is not confined only to the execution of a registered sale deed, and the substantial payment and acquisition of rights in the property can amount to purchase. Also, a similar view has been taken by the Hon'ble High Court of Karnataka in CIT vs. Mrs. Shakuntala Devi (2016) 389 ITR 366 (Kar), wherein it is held that utilization of capital gains in the purchase/construction of a residential house would suffice to claim the benefit of Section 54 of the Act. In fact, a view to that effect has been taken by the coordinate bench of the Tribunal in the case of DCIT (International Taxation)-1 vs. Syama Reddy Mali Reddy, ITA No.

ITA No. 7046/Mum/2025; Sevina Marie Ann Travasso 366/Hyd/2025, dated 03/09/2025. The Tribunal, based on its exhaustive deliberations, had observed as under: 17. The controversy involved in the present appeal boils down to the solitary issue, i.e. whether or not the assessee, though having made payments aggregating to Rs. 4,10,85,000/- to M/s. DSR Builders & Developers (supra) for purchase of the new residential house, viz.flat/apartment bearing No. 1102, 11th floor of the Tower, "The First" in Survey No. 66/2, at Raidurg, Panamaktha, Serilingampalli Mandal, Ranga Reddy District, Telangana, i.e. upto the date of filing of her return of income for the subject year on 22.07.2019, was entitled for claim of deduction under Section 54F of the Act, though the possession letter was issued by the builder/developer on 24.08.2020, while for the registered sale deed of the said new residential property was executed on 07.12.2021, and the occupancy certificate issued on 30.07.2021. 18. We find that the issue in hand revolves around the adjudication of the term "purchase" as used in sub-section (2) of Section 54F of the Act. In our considered view, once it is proved that the assessee had within the prescribed period invested towards purchase of the new residential property, then, despite that the legal title in the said property was not passed or transferred to her within a period of two years from the date of sale of the old property, it would not disentitle her from claiming deduction under Section 54F of the Act. We say so, for the reason that the word 'purchase' as used in sub-section (2) of Section 54F is not restricted or confined to a registered sale deed or even to possession, but has a wider connotation. We concur with the Ld. CIT(Appeals), who, after drawing support from the judgment of the Hon'ble Supreme Court in the case of CIT Vs. T.N. Aravinda Reddy (1979) 120 ITR 46 (SC), had observed that the provisions of Section 54F, being an analogous section, calls for a more liberal interpretation and application, as the intent of the section was to encourage investment in residential house by an individual or a Hindu Undivided Family out of the sale proceeds earned. Also, we find that a similar view had been taken by the ITAT, Hyderabad in the case of Pradeep Kumar Chowdhry Vs Deputy Commissioner of Income-tax, Circle- 1 (1), Hyderabad (2015) 55 taxmann.com 81 and in the case of Narsimha Raju Rudra Raju Vs. ACIT (2013) 143 ITD 586 (Hyd). 19. Apart from that, we find that Hon'ble High Court of Delhi in the case of CIT Vs. Kuldeep Singh, ITA No. 117/2014, dated 12.08.2014,has held that the word "purchase” used in sub-section (2) of Section 54 is not restricted or confined to the registered sale deed or even possession but has a wider connotation. It was observed that the basic purpose behind Section 54 is to ensure that the assessee is not taxed on the capital gain, if he replaces his house with another house and spends money earned on the capital gains within the stipulated period. For the sake of clarity, we deem it apposite to cull out the relevant observations of the Hon'ble High Court, as under: "3. The Assessing Officer referred to the copy of the flat buyers agreement dated 9th February, 2006 between the assessee and the builder and observed that the ownership in the new property would be conferred on the date of issuance of occupation certificate. Further, the expected date of completion was 36 months from the date of the agreement dated 9th February, 2006 i.e. 8th February, 2009. He held that the assessee was not entitled to benefit of Section 54 as he had not purchased the new property within a period of one year before the sale of first property on 3rd June, 2005 or within two years from the date on which the transfer took place. The assessee had not constructed residential house within three years from 3rd June, 2005. Assessing Officer observed that legal ownership of the property never vested in the assessee within the aforesaid period and therefore, the 9

ITA No. 7046/Mum/2025; Sevina Marie Ann Travasso purchase was not completed within two years which was the period stipulated and specified in Section 54 of the Act. He, accordingly, computed the long term capital gain, after granting benefit of indexation on cost of acquisition and cost of improvement, at Rs.45,36,273/-. While examining the question of capital gains, the Assessing Officer also disallowed the claim of the assessee to the extent of Rs.7,50,000/- as cost incurred for transfer. ........................................xxxx............................................... 6. This brings us to the other question whether the assessee had "purchased" the second property and, therefore, payment made of Rs.37,86,273/- was entitled to exemption under Section 54 of the Act. Section 54 of the Act as applicable to assessment year 2006-07 reads as under:- "54. Profit on sale of property used for residence.-- (1) Subject to the provisions of sub-section (2), where, in the case of an assessee being an individual or a Hindu undivided family the capital gain arises from the transfer of a long-term capital asset being buildings or lands appurtenant thereto, and being a residential house, the income of which is chargeable under the head "Income from house property"(hereafter in this section referred to as the original asset), and the assessee has within a period of onyear before or two years after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, a residential house, then instead of the capital gain being charged to income- tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that is to say,-- (i) if the amount of the capital gain is greater than the cost of the residential house so purchased or constructed (hereafter in this section referred to as the new asset), the difference between the amount of the capital gain and the cost of the new asset shall be charged under section 45 as the income of the previous year; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be nil; or (ii) if the amount of the capital gain is equal to or less than the cost of the new asset, the capital gain shall not be charged under section 45; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be reduced by the amount of the capital gain. Explanation.--Omitted by FA 87 wef 1-4-88. (2) The amount of the capital gain which is not appropriated by the assessee towards the purchase of the new assets made within one year before the date on which the transfer of the original asset took place, or which is not utilised by him for the purchase or construction of the new asset before the date of furnishing the return of income under section 139, shall be deposited by him before furnishing such return such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under sub-section (1) of section 139 in an account in any such bank or institution as may be specified in, and utilised in accordance with, any scheme which the Central Government may, by notification in the Official Gazette, frame in this behalf and such return shall be accompanied by proof of such deposit ; and, for the purposes of sub- section (1), the amount, if any, already utilised by the assessee for the purchase or construction of the new asset together with the amount so deposited shall be deemed to be the cost of the new asset:

ITA No. 7046/Mum/2025; Sevina Marie Ann Travasso Provided that if the amount deposited under this sub-section is not utilised wholly or partly for the purchase or construction of the new asset within the period specified in sub-section (1), then,-- (i). the amount not so utilised shall be charged under section 45 as the income of the previous year in which the period of three years from the date of the transfer of the original asset expires; and (ii) the assessee shall be entitled to withdraw such amount in accordance with the scheme aforesaid. Explanation.--Omitted by Finance Act, 1992, wef 1- 4-1993." 7. It is accepted position, and it is not disputed by the Revenue that Rs.37,86,273/- had been invested by the assessee for purchase of the property at Gurgaon. However, legal title in the said property was not passed or transferred to the assessee within a period of two years from the date of sale of the first property on 3rd June, 2005. The second property it is apparent was still under construction though the builder had entered into and executed the flat buyers agreement with the assessee dated 9th February, 2006. The said agreement mentions the apartment number and gives specific detail of the property. The payments were linked to stage of construction and that amount of Rs.2,90,46,250/- was payable within 27 months of booking i.e. on or before 12th February, 2008 and the total cost of flat/apartment was Rs. 3,13,09,375/-. Thus, the consideration being paid by the respondent assessee was nearly 9 times income by way of capital gains which was earned by the assessee. 8. The word "purchase” can be given both restrictive and wider meaning. A restrictive meaning would mean transactions by which legal title is finally transferred, like execution of the sale deed or any other document of title. "Purchase” can also refer to payment of consideration or part consideration along with transfer of possession under Section 53A of the Transfer of Property Act, 1882. Supreme Court way back in 1979 in CIT Andhra Pradesh vs. T.N. Aravinda Reddy (1979) 4 SCC 721, however, gave it a wider meaning and it was held that the payment made for execution of release deed by the brother thereby joint ownership became separate ownership for price paid would be covered by the word „purchase‟. It was observed that the word „purchase‟ used in Section 54 of the Act should be interpreted pragmatically in a practical manner and legalism shall not be allowed to play and create confusion or linguistic distortion. The argument that "purchase‟ primarily meant acquisition for money paid and not adjustment, was rejected observing that it need not be restricted to conveyance of land for a price consisting wholly or partly of money‟s worth. The word "purchase‟, it was observed was of a plural semantic shade and would include buying for a price or equivalent of price by payment of kind or adjustment of old debt or other monetary considerations. It was observed that if you sell a house and make profit, pay Caesar (State) but if you buy a house or build another and thereby satisfy the conditions of Section 54, you were exempt. The purpose was plain; the symmetry was simple; the language was plain. 9. Recently Supreme Court in Civil Appeal Nos. 5899-5900/2014 titled Sh. Sanjeev Lal Etc. vs. CIT, Chandigarh & Anr., again examined Section 54 in a case where the assessee had entered into an agreement to sell a house to a third party on 27th December, 2002 and had

ITA No. 7046/Mum/2025; Sevina Marie Ann Travasso received Rs.15 lacs by way of earnest money and subsequently received the balance sale consideration of Rs.1.17 crores (total being Rs.1.32 crores) when the sale deed was executed on 24th September, 2004. In the meanwhile, the assessee had purchased another house on 30th April, 2003. Benefit under Section 54 was denied by the High Court observing that the new house had been purchased prior to execution of the sale and not within one year prior to sale of original asset i.e. new house has been purchased on 30th April, 2003 whereas the earlier asset was sold only on 24th September, 2004. The Supreme Court allowing the appeal noticed that the agreement to sell was executed on 27th December, 2002 but the sale deed could not be executed because of inter-se litigation between the legal heirs, as one of them had challenged the will under which the assessee had inherited the property. The agreement to sell, it was held had given some rights to the vendor and reduced or extinguished rights of the assessee. This, it was observed was sufficient for the purpose of Section 2(47), which defines the term transfer in relation to a capital asset. In the light of the factual matrix, it was observed that the intention behind Section 54 was to give relief to a person who had transferred his residential house and had purchased another residential house within two years of transfer or had purchased a residential house one year before transfer. It was only the excess amount not used for making purchase or construction of the property within the stipulated period, which was taxable as long term capital gain while on the amount spent, relief should be granted. Principle of purposive interpretation should be applied to subserve the object and more particularly when one was concerned with exemption from payment of tax. The assessee, therefore, succeeded. The observations made in the said decision are also relevant on the question whether the payments made by the assessee to the person with whom he had entered into an earlier agreement to sell should be allowed to be set off as expenses incurred in relation to the sale deed which was executed. 10. More direct are the two decisions of Madhya Pradesh High Court in Shashi Verma (Smt.) vs. CIT [1997] 224 ITR 106 and Calcutta High Court in CIT vs. Smt. Bharati C. Kothari (2000) 244 ITR 352. In Shashi Verma (supra), the assessee had invested the sale consideration for purchase of a flat from Delhi Development Authority and had paid part installments. Reversing the decision of the Tribunal and allowing the appeal of the assessee, the High Court observed that the Tribunal had adopted a pedantic approach without noticing the fact that the capital gain was Rs.31,980/- whereas the installments paid were Rs.71,256/-, i.e. much more than the amount of capital gain. Reference was made to Circular No. 471 dated 15th October, 1986 [1986] 162 ITR (Stat.) 41. It was observed that Section 54 of the Act says that assessee could have constructed the house and not that the construction should have necessarily been completed. Noticing that it was not easy to construct a house within the time limit of three years and under the Government schemes, construction takes years. When substantial investment was made in the construction and it should be deemed that sufficient steps had been taken, and it satisfied requirement of Section 54. 11. What has been stated in the judgment of the Madhya Pradesh High Court in 1997, in practical terms and in reality still holds good. This is a matter of common knowledge that flats or apartments being constructed by builders take time. The Government Housing Boards also take time and seldom adhere to the promised date. Similar view has been taken in Bharati C. Kothari (supra) wherein reference was made to the decision of Andhra Pradesh High Court in CIT vs. Shahzada Begum (Mrs.) [1988] 173 ITR 397

ITA No. 7046/Mum/2025; Sevina Marie Ann Travasso and it was observed that assessee had entered into an agreement within two years for purchase of a flat which was under construction. Payment for the said flat was made within three years from the date of sale of the first property. No doubt the assessee was not constructing the new asset herself but she had purchased the flat. Reference was made to the decision of the Hon'ble Supreme Court in CIT vs. J.H. Gotla [1985] 156 ITR 323 (SC), wherein it has been observed: "Where the plain literal interpretation of a statutory provision produces a manifestly unjust result which could never have been intended by the Legislature, the court might modify the language used by the Legislature so as to achieve the intention of the Legislature and produce a rational construction. The task of interpretation of a statutory provision is an attempt to discover the intention of the Legislature from the language used. It is necessary to remember that language used is at best an imperfect instrument for the expression of human intention. It is well to remember the warning administered by Judge Learned Hand that one should not make a fortress out of the dictionary but remember that statutes always have some purpose or object to accomplish and sympathetic and imaginative discovery is the surest guide to their meeting." 12. Moreover, in Bharati C. Kothari's Case (supra) it was stated as under:- "The purpose behind the exemption under section 54(1) is that if any assessee sells his residential house and purchases a new house against those sale considerations that capital gains tax arising out of the sale of the earlier house should not be taxed. Whether the assessee himself constructs the house or he gets it constructed by a contractor or a third party that does not make any difference. The basic requirement for the purpose of relief under section 54(1), is that the assessee should invest the sale proceeds in the construction of a residential house, which has been constructed for the assessee. Keeping in view the above observations and reasons given by the Tribunal, no case is made out for interference." It was observed that the basic purpose behind Section 54 is to ensure that the assessee is not taxed on the capital gains, if he replaces his house with another house and spends money earned on the capital gains within the stipulated period. 13. The view we have taken gets support from sub-section (2) to Section 54. The aforesaid sub-section requires the assessee to deposit unspent amount not utilized by the assessee for purchase or construction of a new asset before the date of furnishing of return, in a specified account. It further states that the amount, if already utilized for purchase or construction of the new asset with the amount so deposited will be deemed to be cost of a new asset subject to the proviso. The word "purchase‟ is used in sub-section (2) and indicates that the said word is not restricted or confined to registered sale deed or even possession but has a wider connotation. The proviso supports the aforesaid interpretation and stipulates that the amount deposited but not utilized wholly or partly for purchase or construction of new asset within the specified period will be charged to tax under Section 45 in the previous year in which the period of three years from the date of transfer of original asset expired. The period of three years is stipulated as this is the longer period specified in the sub-section (1) to Section 54. It is only the balance amount which is not utilized which is to be brought and charged to tax. The entire amount of sale consideration or the capital gains is not to be brought to tax, but the unspent amount/figure is taxed."

ITA No. 7046/Mum/2025; Sevina Marie Ann Travasso 20. We, thus, in the backdrop of the aforesaid judicial pronouncements, principally finding no infirmity in the well-reasoned view taken by the CIT(A), who has rightly concluded that the assessee's claim for deduction under Section 54F of the Act was in order, uphold the same.” 6.1 In another case of Assistant Commissioner Of Income Tax, ... vs Prem Sapra, ITA No.1739/Del/2024, it was inter alia held that ,

“9. For the purpose of claiming deduction u/s 54, it is not necessary that the purchase of capital asset (residential flat or rights in under construction residential flat) is to be evidenced by a registered sale deed as per the requirements of Transfer of Property Act or Indian Registration Act and even unregistered Agreement to Sell is sufficient coupled with the fact that entire consideration amount of such flat stands paid and even possession of such constructed residential flat has subsequently been obtained by the Assessee within the timelines as prescribed u/s 54 of the Act. Hence, this issue is squarely covered in favour of the Assessee by not only the Delhi High Court judgment in Kuldeep Singh as referred to by CIT(A) but also by following other judgments of Supreme Court, High Court and ITAT, which were duly noted and reproduced by CIT(A) in his appellate order.” 7. In the light of the facts of case, the citations quoted above and respectfully following the same, we do not find any infirmity in the appellate order. Moreover, the AO did not take any cognizance of the fact that the Revenue did not dispute the claim of exemption u/s 54 of the Act in respect of the same property and allowed similar claim. Therefore, AOs is action is also against the principles of consistency considering the facts remaining exactly identical. Accordingly, the appellate order is upheld dismissing the grounds of appeal of the Revenue.

Order pronounced in the open court on 05/06/2026.

ITA No. 7046/Mum/2025; Sevina Marie Ann Travasso

Sd/- Sd/- SAKTIJIT DEY PRABHASH SHANKAR ( (उपाध्यक्ष/ VICE PRESIDENT) (लेखाकार सदस्य/ACCOUNTANT MEMBER)

Place: म ुंबई/Mumbai ददनाुंक /Date 05.06.2026 Soumili Das / PS

आदेश की प्रतितलति अग्रेतिि/Copy of the Order forwarded to : 1. अपीलार्थी / The Appellant 2. प्रत्यर्थी / The Respondent. आयकर आयुक्त / CIT 3. 4. विभागीय प्रविविवि, आयकर अपीलीय अविकरण DR, ITAT, Mumbai 5. गार्ड फाईल / Guard file. सत्यावपि प्रवि //True Copy// आदेशानुसार/ BY ORDER,

उि/सहायक िंजीकार (Dy./Asstt. Registrar) आयकर अिीलीय अतधकरण