Reinvestment Exemption: purchase funded by assessee and later vested by gift qualifies for Section 54F deduction.

Reinvestment in residential property funded from sale proceeds qualifies for deduction under Section 54F where statutory conditions are met; here the tribunal accepted that the assessee's sale proceeds funded the purchase, provisional allotment and payments were in the assessee's name or account, and documentary evidence (MOU, confirmation by the sister, gift deed, municipal khata and tax receipts) showed registration in the sister's name was a convenience during the assessee's absence and the property ultimately vested in the assessee. Outcome: Section 54F deduction allowed.

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Issues: Whether deduction under Section 54F of the Income-tax Act, 1961 is allowable to the assessee where the new residential property was registered in the name of the assessee's sister at the time of registration but the purchase consideration was paid from the assessee's funds and the property was subsequently transferred to the assessee by way of gift.

Analysis: The legal framework permits exemption for reinvestment in residential property where the investment is made out of sale proceeds of the original asset and other statutory conditions are satisfied; courts have extended this relief where property is purchased in the name of the assessee, spouse or unmarried children, but such liberal construction does not automatically extend to purchases made in the names of other relations absent supporting facts. The material examined includes evidence of initial booking advance paid from the assessee's bank account, provisional allotment issued to the assessee, the full purchase consideration paid from the assessee's joint bank account, a memorandum of understanding and confirmation by the sister that registration in her name was for convenience, a subsequent gift deed transferring the property to the assessee, and municipal records and tax receipts linking the khata to the assessee. On these facts the purchase was funded by the assessee's sale proceeds, the registration in the sister's name was for convenience due to the assessee's absence abroad, and the property was ultimately vested in the assessee by gift, satisfying the substance of reinvestment required for Section 54F.

Conclusion: Deduction under Section 54F of the Income-tax Act, 1961 is allowable in favour of the assessee.

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