It is clear from the order of the CIT(A) that the assessee had commenced construction of the building within a period of three years from the date on which the property on the transfer of which capital gain arose. In fact even at the stage of purchasing the plot of land on which construction was put up by the Assessee, the entire capital gain had been invested. The intention of the assessee was to construct a residential house and in this regard, we find that the assessee had applied for a sanction of the building plan and got sanction of the building plan as early as on 02.06.2010. The construction, however, could not be completed by the assessee, though construction had been started.
The Hon’ble Karnataka High Court, in the decision rendered in the case of Sambandam Udaykumar (supra), had taken a view that under the provisions of section 54F of the Act, the condition precedent was that the capital gain realized from sale of capital asset should have been parted by the assessee and invested in constructing a residential house. If the money is invested in constructing the residential house, merely because the construction was not complete in all respects and was not in a condition to be occupied within the stipulated period, that cannot be a ground for rejecting the benefit of deduction u/s. 54F to the assessee. The Hon’ble Court observed that the essence of the provisions of section 54F is whether the assessee who received the capital gain has invested in the house. Once if it is demonstrated that the consideration received on transfer has been invested in construction of the residential house, then though the construction is not complete in all respects and as required under law, the assessee should be given the benefit of section 54F. A reading of the aforesaid decision of the Hon’ble Karnataka High Court would show that there is no particular stage of completion of construction that is contemplated. It is not in dispute that the assessee later completed the construction and has occupied the residential house. In such circumstances, we are of the view that no fault can be found with the order of the CIT(Appeals) allowing benefit of deduction u/s. 54F of the Act to the assessee. We therefore confirm the order of the CIT(A) and dismiss the appeal of the revenue.