Case Law Details
It is important to understand the legislative intent behind the introduction of section 54 of the I.T. Act. It was introduced with a view to encourage house construction in India as explained by CBDT in its Circular No. 348 dated 30.06.1982. We are of the opinion that unless the assessee has violated the provisions of section 54 in such a way that by allowing the exemption, the purpose of the legislation would be defeated, the assessee cannot be denied the exemption. In the case before us, we find that the assessee has invested in purchase of the residential flats within two years after sale of the original asset and is eligible for exemption u/s 54 of the Act subject to the fulfillment of the other conditions stipulated in the section. In the paragraphs above, in the peculiar circumstances of this case, we have already held that the deposit in Term Deposit A/c can be considered as compliance u/s 54(2) of the Act, provided the assessee has deposited the entire capital gains and has not availed any loan against the said A/c and has utilized the same for purchase of the new property. The issue is therefore, set aside to the file of the AO only for verification of this aspect.
Full Text of the ITAT Order is as follows:-
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