2010 (4) TMI 1202 - AT - Income Tax

Summary

Issues involved: Interpretation of provisions u/s. 54F of the Income Tax Act for claiming exemption on long term capital gains.

Facts:
The assessee earned income from various sources including capital gains from the sale of shares. The assessee purchased a residential house using a housing loan and claimed exemption u/s. 54F of the Act. The Assessing Officer restricted the exemption amount based on his interpretation that the investment in the new house should be out of the capital gains earned from the sale of shares.

Arguments before CIT(A):
The assessee argued that the Act does not mandate that the purchase of the new asset must be made out of the capital gain on the transfer of the old asset. The assessee contended that the Assessing Officer cannot impose his own interpretation inconsistent with the Act.

CIT(A) Decision:
The CIT(A) upheld the Assessing Officer's decision, stating that the assessee did not satisfy all conditions u/s. 54F as the capital gain from the sale of shares was not invested in the acquisition of the new residential house.

Appellate Tribunal Decision:
The Tribunal considered various decisions and held that the source of funds for purchasing the new house is irrelevant as long as the assessee complies with the time frame for investment specified in the Act. The Tribunal set aside the CIT(A)'s order and allowed the assessee's appeal for deduction u/s. 54F.

Conclusion:
The Appellate Tribunal allowed the assessee's appeal, emphasizing that the requirement for claiming exemption u/s. 54F is the purchase of a residential house within the specified period, irrespective of the source of funds used for the investment. The Tribunal's decision was based on the interpretation that the law does not necessitate the use of the same funds from the sale of assets for purchasing the new house.