1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY O. O. C. J. INCOME TAX APPEAL NO.2307 OF 2009 The Commissioner of Income Tax-19. ...Appellant. Vs. Mr.Kashyap L. Shah. ...Respondent. .... Mr. A.S.Shivsharan for the Appellant. Ms.Usha Dalal for the Respondent. ..... CORAM : DR.D.Y.CHANDRACHUD AND J.P.DEVADHAR, JJ. January 6, 2010. P.C. : The following question of law has been formulated in the appeal by the revenue under Section 260A of the Income Tax Act, 1961: “The substantial question of law arises in the present appeal is regarding the correct interpretation of Section 54 and other section of the Income Tax Act, 1961 and whether on the facts and circumstances of the case and in law, the Hon’ble Tribunal was right in holding that assessee is entitled for exemption u/s.54 of the IT Act, 1961.” 2. The dispute in the present case, relates to Assessment Year 1997-98. The assessee sold a residential flat situated in Windermere Premises Co-operative Society Ltd., at Santacruz (West), Mumbai, for a consideration of Rs.75 lakhs on 26th March 2 1996. The assessee filed his return of income and claimed exemption under Section 54. Prior to the sale of the residential flat, the assessee had acquired a property in a building by the name of Kukul Kunj at Khar (West), on 5th June 1995. The property at Kukul Kunj was acquired by the assessee with a co-sharer for a consideration of Rs.1.01 crores. The assessee, as noted by the Tribunal, made a substantial investment in 1997-98 and 1998-99 and the property was redeveloped. However, the completion certificate was delayed. The assessee claimed an exemption under Section 54. The Assessing Officer declined to grant the benefit of exemption. The exemption was, however, allowed in appeal by the CIT(A) and the order has been confirmed by the Tribunal. 3. In Commissioner of Income Tax vs. Hilla J.B. Wadia, 216 ITR 376, a Division Bench of this Court held that in determining as to whether an assessee is entitled to the exemption under Section 54, what is to be seen is whether the assessee has acquired a right to a specific flat in a building and whether the assessee has made a substantial investment within the prescribed period which will entitle the assessee to obtain possession of the flat so constructed in which he/she intends to reside. The material 3 test in this connection is domain over the flat and investment in it. In the present case, the acquisition of the Kukul Kunj property by the assessee was within a period of one year of the date on which the transfer took place of the premises at Windermere. The property was subsequently redeveloped by the assessee. The Tribunal has entered a finding of fact that during the year 1997-98 and 1998-99 the assessee had made a substantial investment in the Kukul Kunj property. Applying the test laid down by the Division Bench, it is evident from the finding of the Tribunal that the substantial investment made by the assessee entitled the assessee to obtain possession of the flat. The assessee had full domain over the flat and had made a substantial investment therein within the prescribed period. In these circumstances, the Tribunal was correct in holding that the assessee was entitled to the benefit of the exemption contained in Section 54 of the Act. In view of the aforesaid findings, the appeal stands disposed of. ( Dr.D.Y.Chandrachud, J.) ( J.P.Devadhar, J.)