Section 54F Income Tax Relief allowed if Investment in House made from Loan : High Court

Section 54F Tax Relief if Investment in House made from Loan and not from Sale Consideration of Capital Asset

Facts of the Case

Assessing Officer made the addition of Rs. 1.21 crores by disallowing the claim for exemption under section 54F of the Income Tax Act, 1961 as the same amount of sale consideration had not been utilized towards the purchase of property prior to the date of sale as per the said provisions.

Assessee View : section 54F of the Act did not put any restriction whether the investment was made out of loan amount or from the sale consideration. For availing the benefit of Section 54F of the Act, amount invested in the new asset need not be entirely sourced from capital gain.

Section 54F of the Act nowhere envisages that the sale consideration obtained by the assessee from the original capital asset is mandatorily required to be utilized for the purchase or construction of a house property. No provision has been made by the statute that in order to avail benefit of Section 54F of the Act, the assessee has to utilize the amount received by him on sale of original capital asset for the purposes of meeting the cost of the new asset. Once that is so, the assessee was entitled for benefit under section 54F of the Act.

Decision of High Court

section 54F do to put any restriction that only capital gain would be utilized for purchase of the new house. The law permits utilization of capital gain within the specified time, the assessee may use such funds for other purposes and may find resources from other source for investment in time.