Opinion Of Eminent Legal Luminaries On Controversial Issues

Whether Amount Appropriated Towards The Residential House But Not Deposited In Capital Gain Account Scheme Be Entitled For Benefit Of Section 54?

QUERY: ‘A’ constructed residential house within 3 years of sale of long-term asset. First year investment made was of Rs. 70 lakhs and filed return u/s. 139(1). Balance Rs. 70 lakhs invested in next two years. No investment in Capital Gain Account Scheme. Whether exemption u/s. 54 available?
ANSWER: From the facts, it is clear that ‘A’ is constructing a residential house for which he must have taken estimate from the architect /developer for construction of residential house. Now, if he keeps balance of Rs. 70 lakhs in separate bank account or in any other account and not necessary in Capital Gain Account Scheme, he would be appropriating the said amount towards the construction of residential house and he would be entitled to claim exemption u/s. 54(2)

Section 54(2) reads as under:

“The amount of the capital gain which is not appropriated by the assessee towards the purchase of the new asset made within one year before the date on which the transfer of the original asset took place or which is not utilised by him for the purchase or construction of new asset before the date of furnishing the return of income under section 139, shall be deposited by him before furnishing such return….”.

Thus, reading the aforesaid section it is clear that the said section would come into play when the amount is not appropriated. Once the amount is appropriated, then, the section would not come into play.
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