Section 54F relief turns on actual net consideration, substantial residential investment, and compliant capital gains deposit rules.

For section 54F, the relevant consideration is the actual net consideration received on transfer, and section 50C cannot be used to enlarge that base for denying or reducing relief. Substantial investment in a residential plot with a construction agreement and payments to a developer can satisfy the requirement of purchase or construction of a residential house within the prescribed time, even if construction is incomplete. A Capital Gains Account Scheme deposit is not disqualified merely because the funds used were borrowed, provided statutory conditions are met. Earlier part-performance transfer with delivery of possession is relevant in assessing ownership of residential houses for section 54F.

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Issues: (i) Whether, for deduction under section 54F, the net consideration actually received must be taken or the enhanced value adopted under section 50C; (ii) whether investment in a residential plot with construction agreement and payments to the developer entitled the assessee to deduction under section 54F; (iii) whether deposit in the Capital Gains Account Scheme was disqualified because the funds were borrowed; and (iv) whether the assessee was in possession of two residential houses so as to deny the benefit of section 54F.

Issue (i): Whether, for deduction under section 54F, the net consideration actually received must be taken or the enhanced value adopted under section 50C.

Analysis: Section 50C creates a deeming fiction for computation of capital gains under section 48. The expression "net consideration" in section 54F is not controlled by section 50C. The benefit under section 54F turns on investment of the actual consideration received or accruing on transfer, not on the stamp duty valuation adopted for section 48 purposes.

Conclusion: Section 50C could not be applied to enlarge the consideration for denying or reducing deduction under section 54F, and the assessee was entitled to be considered on the basis of the net consideration.

Issue (ii): Whether investment in a residential plot with construction agreement and payments to the developer entitled the assessee to deduction under section 54F.

Analysis: Section 54F is a beneficial provision and has to be construed liberally. What is material is that the assessee has invested the sale proceeds in purchase or construction of a residential house within the prescribed period. Substantial investment made in a residential plot coupled with a construction agreement and payments to the developer satisfies the statutory requirement, even if construction is not fully complete. The evidence produced by the assessee was not rebutted by any contrary enquiry.

Conclusion: The assessee's investment in the plot and construction arrangement qualified for deduction under section 54F.

Issue (iii): Whether deposit in the Capital Gains Account Scheme was disqualified because the funds were borrowed.

Analysis: The statute does not require that the very sale proceeds alone must be used for the Capital Gains Account Scheme deposit. What is relevant is that the amount is deposited within the prescribed time for the intended residential investment. The source of the funds used for the deposit is not ative, provided the statutory conditions are otherwise met.

Conclusion: The deduction could not be denied merely because the deposit in the Capital Gains Account Scheme was made from borrowed funds.

Issue (iv): Whether the assessee was in possession of two residential houses so as to deny the benefit of section 54F.

Analysis: The earlier transfer of the Gurgaon property had been effected in 2003 by general power of attorney and possession documents. The later decision in Suraj Lamp was treated as prospective and not affecting completed transactions of that kind. In any event, transfer in part performance coupled with delivery of possession falls within section 2(47) read with section 53A of the Transfer of Property Act, 1882.

Conclusion: The assessee was not to be treated as owning two residential houses on the relevant date, and the objection to section 54F relief failed.

Final Conclusion: The assessee satisfied the requirements for deduction under section 54F on the net sale consideration invested, and the long-term capital gain was to be recomputed accordingly.

Ratio Decidendi: For section 54F, the relevant consideration is the actual net consideration received on transfer, section 50C is confined to section 48 computation, and substantial investment in purchase or construction of a residential house within the prescribed time is sufficient even where the construction is not fully complete or the funding source for deposit is not the sale proceeds themselves.

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