Section 54F Exemption Cannot Be Denied for Using Other Funds: ITAT Agra

Kamlesh Tandon Vs ACIT (ITAT Agra)

Section 54F Exemption Cannot Be Denied Merely Because New House Was Funded from Sources Other Than Capital Gains Account: ITAT Agra

Summary: The Agra Bench of the Income Tax Appellate Tribunal has held that section 54F does not require the very same sale consideration received from the original asset to be utilised for purchasing or constructing the new residential house. If the assessee purchases or constructs the eligible residential house within the prescribed period and otherwise satisfies the statutory conditions, the exemption cannot be denied merely because a part of the investment was made from another bank account or from independent sources.

The assessee sold a plot of land situated at Tulsi Enclave, Agra, on 16.04.2013 for ₹65.22 lakh. The resultant capital gain was deposited in a Capital Gains Account with Andhra Bank on 27.09.2013, before the due date for filing the return under section 139(1). In the return of income filed for A.Y. 2014-15, the assessee claimed exemption of ₹59,58,600 under section 54F.

The original assessment was completed under section 143(3) accepting the returned income. Subsequently, the PCIT invoked section 263 and held that the assessment was erroneous and prejudicial to the interests of the Revenue because the Assessing Officer had not properly examined the assessee’s claim under section 54F. The assessment was consequently set aside with a direction to conduct fresh verification.