Section 54F Relief Cannot Be Denied Just Because Sale Deed Wasn’t Registered in Time
The Surat Bench of the Income Tax Appellate Tribunal (ITAT) has ruled that a taxpayer cannot be denied Section 54F exemption simply because the sale deed for the new property was not registered within the statutory period — as long as the possession and ownership rights were effectively transferred within time.
Case Snapshot
Facts:
The assessee (HUF) sold a piece of land in AY 2017–18.
Within the prescribed time, the assessee entered into an Agreement of Sale with Possession for a flat.
Under the agreement, the seller handed over vacant and direct possession of the property along with all ownership rights, effectively making the assessee the sole and absolute owner.
AO’s View:
Deduction under Section 54F was denied because the sale deed was not registered within the one-year/two-year window prescribed in the Act.
What the Law Says
Under Section 54F, exemption from long-term capital gains is available if:
A taxpayer purchases a residential house within 1 year before or 2 years after selling a long-term asset (or constructs within 3 years), and
The property is a residential house in the taxpayer’s name.
The section talks about purchase or construction, but it does not specifically mandate that registration must be completed within the period — only that the purchase or construction must be completed.
Tribunal’s Reasoning
The ITAT observed:
The agreement expressly transferred possession and ownership rights within the allowed time.
In property law, “purchase” doesn’t always mean “registered sale deed.”
If possession and ownership are transferred through a valid agreement, the purpose of Section 54F is met.
Conclusion:
Even without registration within time, the assessee purchased the house when possession was handed over under the agreement.
The Verdict
The ITAT held in favour of the assessee, allowing the Section 54F claim.
Ruling: Arvindbhai Ramniklal Raval (HUF) vs. ITO[2025] 174 taxmann.com 120 (Surat-Trib.) [28-04-2025]
Why This Ruling Matters
Many property buyers face delays in registration due to procedural bottlenecks, developer delays, or state stamp duty issues. This ruling confirms that:
Possession + ownership rights within time = compliance with Section 54F.
Registration delay alone cannot be the reason for denial.
Practical Takeaways
1. Ensure possession transfer within time
Get an Agreement of Sale with Possession if registration might be delayed.
2. Include explicit ownership clauses
Agreement should clearly state that ownership rights are transferred to you.
3. Keep payment records
Show that substantial or full payment was made within the allowed period.
4. Document possession
Possession letter, electricity meter transfer, or maintenance society entry strengthens your case.
Final Word
This judgment is a welcome relief for taxpayers who genuinely invest in a new house but get stuck in the paperwork maze. The ITAT has reminded tax officers to focus on real ownership transfer, not just on whether the sale deed stamp was inked in time.
In other words — if you’ve got the keys and the rights, you’ve got the exemption.
