CIT vs. Dr. P. S. Pasricha (Bombay High Court)

DATE: (Date of pronouncement)
DATE: October 13, 2009 (Date of publication)

Click here to download the judgement (pasricha_s_54_relief.pdf)

S. 54 relief allowable even if new house purchased from borrowed funds

S. 54 provides that if an assessee has LTCG on transfer of a residential house and he purchases or constructs a residential house within the specified period then the amount appropriated towards the new house shall be deducted from the LTCG. The assessee sold a house and used the sale proceeds to buy commercial property. Subsequently (but within the specified period) he borrowed funds and purchased a new house. The AO denied deduction u/s 54 on the ground that the new house had been purchased out of borrowed funds and not out of the consideration received for the old house. On appeal, the Tribunal and High Court upheld the claim on the ground that s. 54 merely required the purchase of the new house to be within the specified period. The source of funds for the purchase was irrelevant.

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