From the desk of NAVNEET SHUKLA

Detailed Case Summary – Smt. Goenka (ITA No. 2129/Kol/2025)

The Income Tax Appellate Tribunal allowed the assessee’s claim of exemption under Section 54F on long-term capital gains arising from the sale of listed equity shares amounting to about ₹26 crore. The assessee had invested in the construction of a residential house; however, the construction activity had commenced prior to the date of transfer of the original asset, and the Assessing Officer denied the exemption on the grounds that

(i) the investment was not made out of the same sale proceeds and

(ii) construction started before the transfer.

On appeal, the Tribunal observed that Section 54F only requires the assessee to construct a residential house within three years from the date of transfer and does not mandate that construction must begin after the sale. It further held that the law does not require a one-to-one correlation between the capital gain and the actual funds utilised for construction. What is relevant is the fact of investment and completion within the prescribed time.

Since the assessee successfully demonstrated that the residential house was completed within the statutory period and other conditions of Section 54F were satisfied, the exemption could not be denied.

Key principles laid down:

• Construction may commence before the date of transfer.
• Completion within three years is the decisive condition.
• Direct utilisation of the same sale consideration is not compulsory.

The ruling adopts a liberal and purposive interpretation of Section 54F, granting relief where the substantive investment condition is fulfilled.