The Kerala High Court in the case of ITO v. K.C. Gopalan (107TAXC591) held that there is no restriction under the law that the sale consideration itself should be utilized by the assessee for the purchase or construction of the new house property. In other words, one can use any other source for this purpose.
Further on the question of rollover exemption available u/s 54 for reinvestment of proceeds in a new property the Allahabad High Court in the case of Commissioner of Income-tax Vs. Kapoor (H.K.)(Decd.) (234ITR753) held that it was immaterial that the construction of the new building was started before the sale of the old building. In this case the ITO rejected the contention of the assessee that the construction of the house at place ‘X’ had been completed by the assessee within a period of two years from the date of sale of the house at place ‘Y’. The assessee alternatively sought relief with reference to another property ‘z’ of which he started construction even before the sale of the impugned property. The ITO, however, took the view that the assessee had started construction of the ‘z’ property even before the sale of ‘ x’ house.
The second case by necessary implication affirms the finding in the first case as per infra.