1. This is an assessee's appeal against the order of the AAC dated 18-11-1981 whereby he had dismissed the appeal preferred by the assessee against the order of the assessment dated 9-3-1979 passed by the ITO.2. The facts are few and they may be stated as under : The assessee is an individual. The assessment year involved is 1976-77 for which the previous year is the financial year and, therefore, ended by 31-3-1976.
During the relevant accounting year the assessee sold a residential property bearing door No. 22-7-713 known as Zajgi Khana situated at Nijambagh, Devandevdi, Hyderabad in five pieces and obtained a sum of Rs. 88,750 in total. She retained 426 sq. yds. even after sale in that property. The assessee purchased the above property on 30-12-1969 for a sum of Rs. 15,000 and claimed to have invested Rs. 12,500 for the additions and renovations. The assessee claimed exemption under Section 54 of the Income-tax Act, 1961 ('the Act'), the resultant capital gains on the ground that the property sold was self-occupied and within the time of one year she purchased another residential house bearing door No. 10-4-35/1 at Masabtank from Mr. and Mrs. Syed Abdul Quader for a sum of Rs. 90,000. When proceedings were pending before the ITO the assessee failed to produce evidence to show that she purchased another house within one year from the date of sale of the old house to justify the claim under Section 54. Ultimately under letter dated 18-12-1978 the authorised representative appearing on behalf of the assessee stated that the copies of the sale deeds as well as agreement are misplaced and the assessee was not able to trace them. The ITO found that the last piece of the property was sold on 12-8-1975 whereas the assessee filed the return of income for the assessment year 1976-77 on 15-9-1976, i.e., after lapse of one year. In the statement enclosed to her return the assessee stated that she had entered into an agreement to purchase a house from Mr. and Mrs. Syed Abdul Quader. The ITO concluded that the assessee had not purchased the property within one year from the date of sale of the old house property and, hence, the exemption claimed cannot be allowed. So also, out of Rs. 12,500 claimed towards the value of the additions as well as repairs alleged to have been made to the old house the ITO disallowed Rs. 7,500 on the ground that no evidence was produced to prove the expenditure and also on the ground that the proportionate expenditure which can be ascribed to 975 sq. yds. out of 1401 sq. yds. would justify the disallowance of Rs. 7,500 from the total expenditure said to have been incurred. Thus as against the returned income of only Rs. 8,800 the ITO computed the taxable income at Rs. 61,165.
3. Aggrieved by the rejection of the exemption claimed under Section 54 and also aggrieved by the disallowance of Rs. 7,500 towards the cost of repairs and renovations claimed to have been carried out to the old house, the assessee went in appeal before the AAC. The claim for exemption under Section 54 was reiterated. However, the claim was rejected even by the AAC by observing that the exemption under Section 54 is available only when the house property sold is one used for residential purposes by the assessee and within one year of the sale of such house the assessee purchased another house for his residence. In this case, the AAC observed that the assessee did not Purchase another house within one year from the date of sale of original property. There was only an agreement to purchase and no actual purchase had taken place. The ITO was perfectly right in refusing to allow exemption under Section 54. So also the AAC held that in the absence of any evidence in support of the expenditure incurred towards the additions made to the old house, disallowance of a sum of Rs. 7,500 out of Rs. 12,500 claimed as expenditure towards the additions and improvements is justifiable.
4. Aggrieved by the impugned orders of the AAC dated 18-11-1981, the assessee came up in further second appeal before this Tribunal and thus the matter stands for our consideration.
5. We heard Shri V. Krishna Rao, learned counsel for the assessee and Shri S. R. Deshpande, learned departmental representative. The first ground urged was about the exemption claimed by the assessee under Section 54. It is no doubt true that such exemption was available only when the house property sold was used for residential purposes by the assessee and within one year of the sale of such house the assessee purchased another house for his residence. In this case, the old house bears door No. 22-7-713 situated in Nijambagh in Divandevdi. The total extent in which a residential house is situated appears to be of 1,401 sq. yds. Before that the house and site on which the house is situated covering an extent of 975 sq. yds. was admittedly sold by the assessee to five parties and in 5 pieces. After selling away the five pieces the assessee retained an extent of 426 sq. yds. of site in the said house property which is hereinafter called as the old house property. The date of sale, the area under each sale, the amount for which it is sold and the name of the party to whom it was sold are furnished hereunder :---------------------------------------------------------------Sl. Date Name of purchaser Area AmountNo. sq. yds. (Rs.)1. 31-5-1975 Ibrahim Mohd., 48 Masjid 216 15,000 Street, Bombay-32. 31-5-1975 S. Hussain, 127 Dongri 256 14,750 Street, Bombay-93. 18-6-1975 Mohd. Yousuf, Second Club 173 15,000 Back Road, Flat No. 24. 18-6-1975 Fatima Bai, Hasham Allu 126 14,000 Bldg., Dongri Market, Bombay-95. 12-8-1975 Shoukat Ali, Iramiyalli Hyd. 204 30,000 2 Ibrahim Mohd. 48, Masjid The old property was stated to have been purchased on 30-12-1969 from Smt. Noorjahan Begum for a consideration of Rs. 15,000. As already stated some improvements were said to have been made to the old property of the value of Rs. 7,500 in 1970 and of the value of Rs. 5,000 in 1972. According to the assessee the total to be deducted from out of Rs. 88,750 which represents the total sale price is an amount of Rs. 27,500 as per the particulars shown at page 2 of the paper compilation : House No. 22-7-713, purchased on 30-12-1969 from Smt. Noorjahan Begum 5-9-98, Fateh Maidan Road, Hyderabad.Area 1401 sq. yds.
Rs.Add : Cost of improvements 15,000 May, 1970 7,500 In the paper compilation filed before us a photostat copy of the agreement of sale dated 27-6-1976 entered into by the assessee with one Sayed Mahmood is found. Under the said agreement of sale the vendor was stated to be the absolute owner of the house bearing Door No. 10-4-35/1 situated at Masabtank, Humanyun Nagar, admeasuring 594.5 sq. yds. fully described in the Schedule to that document was agreed to be sold to the assessee for Rs. 47,000. Under the terms of the deed the vendor has to comply with the provisions of Urban Land (Ceiling and Regulation) Act, 1976 as the sale was free from all incum-brances either public or private and after due compliance of provisions of the aforementioned Act. Further at the time of sale agreement the house property (which is hereinafter called new property) was in the occupation of tenant and the vendor agreed to vacate the tenant and deliver the vacant possession of the house to the vendee (the assessee). Out of the total sale consideration of Rs. 47,000 an amount of Rs. 29,000 was given as earnest money under cheque dated 27-6-1976 drawn on State Bank of Hyderabad, Gunfoundry office. Further amount of Rs. 11,000 was agreed to be payable as soon as vacant possession of the house was delivered to the assessee and the balance of Rs. 7,000 was agreed to be payable at the time of registration of the sale deed before the registering authority. In pursuance of the said sale agreement, registered deed of sale was executed on 22-8-1977. Copy of the sale agreement was provided at pages 5 to 8 of the paper compilation whereas photostat copy of the registered sale deed dated 22-8-1977 was provided at pages 10 to 15 of the paper compilation filed before us. There is nothing on record to doubt the authenticity or genuineness of the sale agreement or sale deed executed in pursuance thereof. The only strong contest by the revenue against the ground of exemption under Section 54 was that the actual sale was not completed within one year from the date of the sale of the old house property. According to the revenue, last of the five pieces in the old house property was sold on 12-8-1975 whereas the sale deed of the new house property was obtained on 22-8-1977 which is quite beyond one year of the date of sale of the old house property. That means, according to the revenue the sale agreement dated 27-6-1976 which was obtained by the assessee towards the purchase of the new house property does not assume any significance whatsoever and does not amount to an outright sale and does not have potentiality of conveying the ownership of the new house property to the assessee, and, therefore, there was change of ownership only after obtaining a regular registered sale deed dated 22-8-1977 which is quite beyond one year and, hence, the assessee is not entitled to claim exemption under Section 54. On the other hand the contention on behalf of the assessee is that the term used under Section 54 is 'purchase' as against the word 'sale'. What is to be established is that within one year of the sale of the old house property a new house property is purchased. There need not be any complete conveyance in order to prove purchase. The agreement of sale obtained in this case by the assessee clearly evidences purchase of a residential house property within one year especially when a considerable amount of Rs. 29,000 was paid as earnest money and Rs. 11,000 was agreed to be paid as soon as the delivery of possession of the house is given to the assessee. But the word 'purchase' is not synonymous to the word 'owner' or the word 'sale'. A person who had purchased the property need not become a full owner before he claims to be a purchaser of the property. Even if one were to be an owner of the property before he can claim exemption under Section 54, the Hon'ble Supreme Court in R.B. Jodha Mal Kuthiala v. CIT  82 ITR 570, 578 held that the word 'owner' had different meanings in different context. Under certain circumstances a lessee may be considered as the owner of the property leased to him. They further held that for purposes of Section, 9 of the Evacuee Property Act the owner must be that person who can exercise the rights of the owner, not on behalf of the owner but in his own right. When that was the extended meaning or liberal meaning given to the word 'owner' the word 'purchaser' occurring in Section 54 should also bear a liberal meaning and in that context 'purchase' need not be a completed sale and an agreement whereunder valuable consideration passed and can as well be said to be a document of purchase. In support of this contention of the assessee reliance was sought to be placed on the decisions in R.B.Jodha Mal Kuthiala's case (supra), CIT v. T.N. Aravinda Reddy  120 ITR 46 (SC) and Addl. CIT v. U.P. State Agro Industrial Corporation Ltd.  127 ITR 97 (All.). On the other hand, the argument of the learned departmental representative was that unless the person acquired a full title to the property purchased he cannot be called a purchaser of that property under the provisions of Section 54 of the Transfer of Property Act, 1882 a mere contract of sale does not confer any title to the property in favour of the vendee and unless and until a regular sale deed is executed in pursuance of the agreement of sale title to the property cannot be said to have been passed in favour of the vendee and the vendee cannot be termed as purchaser unless and until a full title passes to him. In support of this contention reliance was sought to be placed upon the decisions in the cases of CIT v. Nawab Mir Barkat Ali Khan 1974 Tax LR 90 (AP), CIT v. Zorostrian Building Society Ltd.  102 ITR 499 (Bom.), Divvi Suryanarayana Murthy v. Competent Authority, IAC  117 ITR 278 (AP) and CIT v. Hans Raj Gupta  137 ITR 195 (Delhi). With reference to these cases the learned departmental representative argued that inasmuch as what was obtained by the assessee was only an agreement of purchase dated 27-6-1976 and no regular sale deed was obtained within one year from the date of the last sale dated 12-8-1975, she cannot be considered to have been purchaser within one year from the date of sale of the old house property and, therefore, she is not entitled to the exemption under Section 54(1).
6. We have fully considered the arguments, documents and the authorities cited on either side. We are inclined to agree with the arguments advanced on behalf of the assessee. The term 'purchase' was not defined in the Act. Section 54(1) as far as relevant is as follows : Where a capital gain arises from the transfer of a capital asset to which the provisions of Section 53 are not applicable, being buildings or lands appurtenant thereto the income of which is chargeable under the head 'Income from house property', which in the two years immediately preceding the date on which the transfer took place, was being used by the assessee or a parent of his mainly for the purposes of his own or the parent's own residence...and the assessee has within a period of one year before or after that date purchase...a house property for the purposes of his own residence, 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....
As can be seen from the above in order to claim the exemption the assessee should have purchased a house property for his own residence within a period of one year of the sale of the original asset from which capital gains resulted. The meaning of the word' purchase' should be obtained from the dictionary in view of the fact that no special definition of that word was given in the Act. That means the ordinary meaning of the term 'purchase' should be taken to be its meaning.
According to the Oxford & Chambers Dictionaries the word 'purchase' carries the meaning acquire or to buy. So under the terms of agreement dated 27-6-1976 an amount of Rs. 29,000 was given as earnest money.
Possession of the house (new property) was sought to be given as soon as the tenant in it would be vacating the house and on that occasion another amount of Rs. 11,000 was agreed to be paid and on the date of execution of the sale deed and the registration of the deed an amount of Rs. 7,000 was agreed to be paid in the presence of the Registrar.
Now the question is whether by this agreement the assessee can be stated to have purchased the property. If the date of agreement is to be taken into consideration it was within one year from 12-8-1975 on which date the last of the five pieces of old property was sold and if by this agreement it can be said that the assessee purchased a new residential property intended for her residence then the requirements of Section 54(1) can be fairly stated to have been met with and the assessee is entitled to claim exemption. In Desikhacharyulu v.Narasimhacharyulu AIR 1958 AP 278, it was held that though a contract for sale does not create any interest in the property, yet, if there is a clear and valid contract for sale, the property is, in equity, transferred to the purchaser by the contract, as the vendor then becomes a trustee for him and cannot be permitted to deal with the property so as to defeat the rights of the prospective vendee. So from the above statement of law it appears that the vendor would be trustee to the vendee under the agreement of sale and the vendee has got a right to demand specific performance of sale from his vendor in pursuance of the right he possesses under the agreement. A contract of sale is stated to be a document to obtain another document of sale and when ultimately the sale crystallises in favour of the vendee under the agreement either by the vendor executing a regular registered sale deed or by the vendee obtaining a decree for specific performance as the basis is the agreement and the moment the sale is executed it dates back to the date of the agreement. This is the ratio laid down by the Punjab and Haryana High Court in Ishar Singh v. Maluk Singh AIR 1977 Punj. 38, 40 and Gurdial Singh v. Sewa Singh AIR 1973 Punj. 254, 256.
Therefore, having considered the terms of the sale agreement the consideration passed under it, the rights that accrued in pursuance of the sale agreement in favour of the vendee and keeping in view the date from which the sale would be said to have been effected after the execution of regular sale deed we hold that that for purposes of Section 54 the date of purchase can be taken to be the date on which the agreement for purchasing a new house property was obtained by the assessee. The Hon'ble Supreme Court held in the case of T.N. Aravinda Reddy (supra) that the word 'purchase' under Section 54(1) had to be given its common meaning, viz., buy for a price or equivalent of price by payment in kind or adjustment towards a debt or for other monetary consideration. In the case before the Hon'ble Supreme Court the release by other sharers (brothers) of the property in favour of one of the brothers towards his right to 'jeshtabhagam' amounts to a purchase or is equivalent in a purchase and the exemption under Section 54(1) was extended to such an assessee who had obtained the release from the other brothers. In their Lordships' view 'purchase' does not convey the notion of 'cash and carry'. To highlight the legal maxim that in the absence of a definition word used in any statute should carry its ordinary meaning their Lordships held as follows : ...The signification of a word of plural semantic shades may, in a given text, depend on the pressure of the context or other indicia.
Absent such compelling mutation of sense, the speech of the lay is also the language of the law. (p. 48) It is common knowledge that in common parlance a person who had paid some money and obtained an agreement regarding an immovable property would be stated to have purchased that property. In R.B. Jodha Mal Kuthiala's case (supra) the Hon'ble Supreme Court while interpreting the word 'owner' postulated that the said term has different meanings in different contexts. Under certain circumstances even a lessee may be considered as owner of the property leased to him. It is also stated that though equitable considerations are irrelevant in interpreting tax laws, but those laws like all other laws, are to be interpreted reasonably and in consonance with justice. In the case of U.P. State Agro Industrial Corporation (supra), the Allahabad High Court is considering the claim for depreciation under Section 32 of the Act. The assessee in that case had not got complete title to the agricultural workshop though the amount of consideration was paid to the U.P.Government either by allotment of equity shares or by payment of cash.
The only formality that remained to be completed was the execution of registered sale deed by the U.P. Government in favour of the assessee.
The question was whether depreciation can be allowed on the said workshop, building in the hands of the assessee. Their Lordships held that the expression 'building owned by the assessee' in Section 32 has not been used in the sense of property, complete title for which vests in the assessee. The assessee will be considered to be an owner of the building under Section 32 if he is in a position to exercise the rights of the owner not on behalf of the person in whom the title vests but in his own rights. Therefore, it appears that the word 'purchase' is not synonymous to the word 'own' and in our opinion, to claim exemption under Section 54 one need not become a complete owner of the newly acquired property and it is enough if he is in a position to exercise rights in the said property on his own rather than on behalf of his vendor. Viewed in this angle also we feel that the assessee acquired a right to deal with the property on his own. We found that several decisions cited on behalf of the revenue would only lay down the proposition that ownership in a particular property would not pass to the vendee unless the transfer is completed by obtaining a regular registered sale deed. Title passes from one to the other only on the execution of such a sale deed and until such time one cannot be called owner of the property. In none of the decisions cited for the revenue the relative scope of the word 'purchase', vis-a-vis, 'ownership' was considered. In the case before Delhi High Court in the case of Hans Raj Gupta (supra) full consideration was paid but no formal sale deed was executed conveying the properties in favour of the assessee. The question was whether income derived from those properties purchased can be taxed in the, hands of the assessee. It was held that the resolutions of the purchasing company and the payment of purchase price by them could not have the effect of depriving the seller of his ownership. So also it was held that the purchasers continuing possession of the property without payment of rent assuming it to be constructive delivery of possession cannot be equated with a conveyance. In that case their Lordships were interpreting Section 22 of the Act, but not Section 54. In our opinion none of the decisions cited on behalf of the revenue aptly apply to the facts of the case. We are, therefore, of the considered opinion that as soon as the assessee purchased the new house property under the agreement dated 27-6-1976 she can be stated to have purchased the new property and inasmuch as the date of the said agreement is within one year from the date of sale of the old house property and inasmuch as it is common ground that the old house property was used by the assessee for her residence since more than two years prior to its sale and inasmuch as the new property is a residential building in which the assessee began living from 10-8-1976, when she got possession and when she paid Rs. 11,000 under the agreement to her vendor, the assessee is entitled to exemption under Section 54(1). We further hold that simply because the assessee was able to get the sale deed only on 22-8-1977 she was not precluded from claiming exemption under Section 54(1). it is significant that the recitals of the said sale deed clearly indicate the prior agreement of sale dated 27-6-1976 and as soon as the sale deed was obtained the purchase relates back to the date of agreement, viz., 27-6-1976.
Therefore, even by taking into consideration the subsequent event of obtaining the sale deed we can say the new property was purchased within one year after the sale of the old property. In our opinion, the orders of the lower authorities refusing exemption were wrong and, hence, they are set aside and we direct the ITO to grant exemption under Section 54(1) to the assessee. There is no merit in the argument of the assessee relating to second ground. On facts the disallowance of Rs. 5,000 is confirmed.