Law:

Section:

Section 54F of the Income-tax Act,1961 - Capital gains - Exemption of, in case of investment in residential house - Assessment year 2006-07 - Whether section 54F is a beneficial provision for promoting construction of residential house, and, therefore, it has to be construed liberally for achieving purpose for which it was incorporated in statute - Held, yes - Whether once it is demonstrated that consideration received on transfer of a capital asset has been invested either in purchase or in construction of a residential house, even though these transactions are not complete in all respects as required under law, same would not disentitle assessee from benefit of exemption under section 54F - Held, yes - Assessee sold certain shares and earned capital gains and within 12 months made investment for construction of a residential house - Exemption under section 54F was claimed by assessee with regard to said portion - Assessing Officer, however, denied exemption under section 54F on ground that construction was not complete within three years as certain work like flooring, electrical fittings, fittings of door shutters, etc., were still pending - However, registered sale deed was executed showing transfer of property in assessee's favour and assessee was in possession and occupation of said property - Whether assessee was entitled to benefit of exemption under section 54F - Held, yes [In favour of assessee] FACTS During the previous year assessee sold shares of a company for a consideration of Rs. 4.18 crores. Part of the proceeds of the said sale consideration was invested in purchase of house property to the extent of Rs. 2.16 crores. Accordingly, the assessee claimed exemption under section 54F to the extent of such investment. On enquiry, the Assessing Officer found that the construction activities with regard to the residential property were stopped. The flooring work, electrical work, fitting of door shutters and window shutters were still pending. The Assessing Officer, therefore, concluded that the construction was not complete even after lapse of three years of time from the date of transfer of the shares on which capital gain was derived. The Assessing…

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