Section 54F – Deduction to be allowed even if construction of the house has commenced before the sale of the capital asset

CIT vs. Bharti Mishra (2014) 98 DTR (Del.) 1

The assessee had sold share the proceeds of which were invested in the construction of a house property and claimed deduction u/s. 54F. The assessee invested part of the amount in the construction and the balance was deposited in a capital gains account.

The AO disallowed the deduction as the assessee had commenced construction of the house before the sale of the capital asset, which in this case was shares. On appeal the CIT(A) and Tribunal held in favour of the assessee. On appeal to the High Court, the High Court while dismissing the appeal held that it is not stipulated in anywhere in the section that construction of the house should commence before the sale of the capital asset, and since section 54F is a beneficial provision and is applicable to an assessee when the old capital asset is replaced by a new capital asset in the form of a house, then the said provision should be liberally interpreted and therefore in the instant case the assessee is eligible for deduction u/s. 54F.