Section 54F exemption allowed where residential house investment was made within time despite no Capital Gains Account Scheme deposit

Section 54F exemption cannot be denied solely because unutilised sale proceeds were not deposited in the Capital Gains Account Scheme by the section 139(1) due date, where the assessee actually invested the amount in construction of a residential house within the prescribed period. The deposit requirement in section 54F(4) applies only when the assessee seeks to retain unutilised capital gains while still claiming exemption, and it is not attracted when the substantive investment condition under section 54F(1) is satisfied. The deduction was therefore allowable as claimed, following binding High Court decisions on the same issue.

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Issues: Whether exemption under section 54F can be denied merely because the unutilised sale consideration was not deposited in the Capital Gains Account Scheme before the due date for filing the return, when the amount was invested in construction of a residential house within the prescribed period.

Analysis: The deduction under section 54F was disallowed only on the basis of sub-section (4) for non-deposit of the unutilised amount in the Capital Gains Account Scheme by the due date under section 139(1). The governing requirement of sub-section (4) applies where the assessee seeks to retain the unutilised capital gains while still claiming exemption. Where the amount is actually invested in the purchase or construction of a residential house within the period prescribed under section 54F(1), the deposit requirement in sub-section (4) is not attracted. The issue was treated as covered by binding High Court decisions on the same point.

Conclusion: The exemption under section 54F could not be denied on the ground of non-deposit in the Capital Gains Account Scheme, and the deduction was allowable as claimed.

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