The assessee, Prakash Devidas, filed his return for AY 2014-15, declaring an income of Rs. 33.13 lakh. He sold his residential flat at Anand Heritage Building on 28.10.2013 for Rs. 80 lakh and earned a long-term capital gain of Rs. 62.31 lakh. He claimed exemption under Section 54 on the basis that he invested the gains in an under-construction flat at Octacrest, Kandivali East, Mumbai.

The Assessing Officer treated 23.05.2012 (agreement date) as the date of purchase and denied exemption as it fell beyond one year prior to sale. The CIT(A)/NFAC affirmed the disallowance.

Issue Before Tribunal: Whether, for Section 54 purposes, the date of “purchase” of an under-construction flat is the agreement date or the date of completion and possession.

Tribunal Held: The Tribunal allowed the appeal and held that the assessee was entitled to exemption under Section 54. It observed that the agreement dated 23.05.2012 related to an under-construction property, with consideration payable in installments. No completed residential unit was acquired on that date. The flat became ready only on 26.12.2014 and possession was given on 07.01.2015 after full payment.

Relying on CIT v. Smt. Beena K. Jain, the Tribunal held that for Section 54, purchase is effectively completed when substantial consideration is paid and possession is handed over. Since the original asset was sold on 28.10.2013 and possession of the new flat was taken within two years therefrom, the statutory condition stood satisfied. The Assessing Officer was directed to grant the exemption.

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