Assessee acquired a property by way of a gift deed executed by her brother and subsequently sold the said property. She deposited the sale consideration amount in a Capital Gain SB Account to avail relief under S. 54F. She, however, constructed the residential property by borrowing the funds from her daughter and son-in-law and the money deposited in the Capital Gain SB Account was used to repay these debts. The assessee submitted two letters before the Assessing Officer, requesting permission to close the said Capital Gain account and to release the entire amount to the assessee. This was rejected.

On a writ, the High Court held that S. 54F does not preclude the assessee from arranging funds from other sources for fulfilling the obligation of purchasing or constructing a residential building within the period stipulated. However, the assessee is obliged to satisfy the authorities that the funds were spent by the assessee either through borrowing or arranging from other sources at his/her own risks and costs, in anticipation of or with an intention to appropriate the sale consideration. For this purpose, materials will have to be produced before the appropriate Authority, and such Authority has to scrutinise such materials to conclude on the utilisation.

The Kerala High Court also held, considering the facts in that case, that the authorities wrongly rejected the Assessee’s request in toto but should have permitted the Assessee to withdraw the excess amount after retaining the amounts payable by the Assessee towards tax.