Section 54F does not put any restriction on source of investment in new asset. Therefore, exemption couldn’t be denied on ground that investment was made out of loan and not from sale consideration received on transfer of original capital asset.
Whether it is mandatory for availing of benefit of section 54F that investment in new asset should be entirely sourced from capital gain?
The Punjab and Haryana High Court held as under-
1) Section 54F nowhere envisages that sale consideration obtained by assessee from original capital asset is mandatorily required to be utilized for purposes of meeting cost of new asset.
2) Therefore, where investment made by assessee, although not entirely sourced from capital gain, but was within stipulated time and more than capital gain earned by him, assessee was entitled to exemption under section 54F-  66 taxmann.com 191 (Punjab & Haryana)