Section 54F relief preserved where residential house investment is completed within time despite no Capital Gain Account Scheme deposit.

Deduction under section 54F cannot be denied merely because the unutilised capital gain was not deposited in the Capital Gain Account Scheme by the due date under section 139(1), where the assessee invested the full capital gain in a residential house within the statutory period. The provision is a beneficial exemption intended to promote residential investment, so substantive compliance with the investment requirement prevails over the procedural deposit requirement. As the genuineness of the investment was not disputed and the flat-description objection was explained by authenticated documents, the disallowance was unsustainable.

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Issues: Whether deduction under section 54F of the Income-tax Act, 1961 could be denied merely because the unutilised capital gain was not deposited in the Capital Gain Account Scheme before the due date under section 139(1), when the entire amount was invested in the residential house within the statutory period.

Analysis: The statutory purpose of section 54F is to encourage investment in a residential house and it is to be construed liberally as a beneficial provision. Once the substantive condition of investing the capital gain in acquisition or construction of the residential property within the prescribed time is satisfied, failure to deposit the unutilised amount in the Capital Gain Account Scheme is only a procedural lapse. The Revenue did not controvert the genuineness of the investment, and the earlier objection regarding the flat description was treated as explained on the basis of authenticated documents.

Conclusion: The deduction under section 54F could not be denied on the ground of non-deposit in the Capital Gain Account Scheme, and the disallowance was unsustainable.

Ratio Decidendi: A beneficial exemption for residential investment cannot be defeated by a mere technical non-compliance with the Capital Gain Account Scheme requirement where the assessee has otherwise made the qualifying investment within the prescribed period.

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