Whereas the assessee in Smt. P G Bhanumathy v. CIT (2007) 160TAX107 took the interest income generated from out of investment of net consideration of asset sold as part of amount eligible for reinvestment in another specified asset for claiming exemption u/s 54E the Kerala High Court held that net consideration is only sale value obtained on transfer of capital asset, which is a full value received as reduced by expenditure incurred for and in connection with the transfer. Further it held that any diversion or application of the sale consideration, if proved, disentitles the assessee from the benefit of exemption under section 54E. IT also clarified that there is no requirement that the same cash or the same amount should be deposited for the purpose of exemption.
It is often noticed that owners of plot of land for the purpose of exploiting the appreciation enter into an agreement with builders for raising construction. In a case before the Delhi High Court the owner entered into a similar agreement with a builder to get a multistoried residential complex constructed on a plot of land where a single story house occupied by the assessee for a very long time. The Tribunal had held that the assessee’s entering into an agreement with the builder to get the multistoried residential units constructed on the plot of land where a single storied house occupied by the assessee since 1973 existed upto 1989 did not constitute an adventure in the nature of trade and the entire exercise undertaken by the assessee was for realization of a capital asset, and