Section 54F exemption cannot be denied merely because a new residential house was built without municipal plan approval.

Section 54F exemption is available where the assessee constructs a new residential house within the prescribed period, and municipal approval of the building plan is not a mandatory statutory for the relief. The authorities had denied exemption because the construction proceeded without approved plans, but the record still evidenced a new residential building, including a municipal order noting unauthorised construction. The governing requirement is completion of residential construction, not prior approval by the local authority, so absence of sanctioned plans by itself does not defeat the exemption.

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Issues: Whether exemption under section 54F of the Income-tax Act, 1961 was unavailable merely because the residential house was constructed without approval of the building plan by the municipal authority, where the construction of a new residential house was otherwise evidenced.

Analysis: The assessee claimed exemption on the footing that long-term capital gains were invested in construction of a new residential house after demolition of the existing structure. The rejection by the authorities below rested principally on the absence of an approved building plan. The record included an interim order from the municipal corporation stating that a new building had been put up without permission, which supported the fact of new construction. Section 54F requires construction of a residential house within the prescribed period, but does not make municipal approval of the building plan a condition for the exemption.

Conclusion: Exemption under section 54F could not be denied merely for want of approval of the building plan, and the assessee was entitled to the exemption.

Ratio Decidendi: For claiming exemption under section 54F, the statutory requirement is construction of a residential house within the prescribed period, and prior approval of the building plan by the municipal authority is not a mandatory condition.

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