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Income Tax Appellate Tribunal, “I” Bench, Mumbai
Before: Shri R.C. Sharma (AM) & Shri Pawan Singh (JM)
O R D E R Per R.C. Sharma (AM) :
This is an appeal filed by the Revenue against the order of learned CIT(A) for A.Y. 2014-15 in the matter of order passed u/s. 143(3) of the Act.
2. First grievance of the Revenue relates to allowing deduction u/s. 54 of the Act in respect of new house property purchased outside India.
We have heard rival contentions and gone through the orders of the authorities below and found that the assessee has claimed exemption u/s. 54 of the Act with respect to new house property purchased outside India.
4. By the impugned order, learned CIT(A) allowed assessee’s claim after observing as under :-
8.The next issue arising out of Ground 1 is allowance of deduction under section 54 on investment in property outside India. The AO is of the view that invt within India is only eligible for deduction. He relied on decision of Hon. ITAT, Ahmedabad in Leena J Shah vs ACIT, circle 1(1), Baroda [2006]6 SOT 721 (Ahd).
The latest judicial position on the matter is as under:
a. The decision of Hon. ITAT in case of Leena J. Shah has been reversed by Gujarat High Court in [2017] 392 ITR 18 b. In ITO vs Mr. Nishant LalitJ adhav [ITA No. 6883/MUM/2014] dated 26.04.2017 Hon. ITAT, Mumbai has followed above decision.
Both the above has ruled that prior to 01.04.2015, there is no explicit requirement that investment in new residential house is to be made in India.
10. Since the matter stands in favour of assessee as per latest judicial position, the same need to be followed. Accordingly I direct Assessing officer to grant deduction under section 54 on basis of actual investment in USA on property. Ground 1 is accordingly allowed.
We have heard rival contentions and found that the issue is squarely covered by the decision of the Tribunal in the case of Jaideep Nagesh Desai (ITA No. 832/Mum/2018 dated 28.2.2019), wherein the Tribunal held as under :-
2. Grievance of the Revenue relate to allowing deduction u/s. 54 of the Act.
3. We have gone through the orders of the authorities below and found that the assessee’s case was reopened on the basis of information received from DDIT(Inv) with regard to deposit of cheque in respect of house property sold by the assessee. From the record, we find that assessee purchased residential house in December 2002, for Rs. 65 lakhs including (Stamp duty and registration) from NRE Funds. This property was sold in 2008 for Rs. 1.75 Crs. and the entire sale proceeds were deposited in HSBC bank account. Out of the sale proceeds, Rs. 22 lakhs was placed as Fixed deposits in HSBC Bank and also utilized for purchase of Residential Property in Dubai in November, 2008.In computation of income, the assessee has claimed exemption u/s. 54 of the Act with respect to new residential property purchased in Dubai. However, the Assessing Officer declined the assessee’s claim on the plea that the house property was not purchased in India therefore the assessee is not eligible for deduction u/s. 54 of the Act.
4. By the impugned order, learned CIT(A) allowed assessee’s claim after observing as under :-
4. The reason for appeal is disallowance of claim u/s 54 (relating to computation of taxable long term capital gain) on the ground that investment in new residential house is located outside India. This aspect is to be viewed in the context of situation prior to amendment made by Finance Act 2014. The Assessing officer held that investment outside India is not eligible for deduction under section 54.
5. The latest judicial position on the matter is as under: a. The decision of Hon. ITAT in case of Leena J. Shah has been reversed by Gujarat High Court in [201 7] 392 ITR 18 b. In ITO vs Mr. Nishant Lalit Jadhav dated 26.04.201 7 Hon. ITAT, Mumbai has followed above decision.
Both the above has ruled that prior to 01.04.2015, there is no explicit investment in new residential house is to be made in India.
6. Since the matter stands in favour of assessee as per latest judicial position, the same need to be followed. Accordingly I direct Assessing officer to grant deduction under section 54 on basis of actual investment in Dubai on residential property.
6. Respectfully following the decision of the Tribunal, we do not find any infirmity in the order passed by learned CIT(A) for allowing claim of deduction u/s. 54 of the Act in respect of house property purchased outside India prior to A.Y. 2015-16.
7. The Revenue is also aggrieved for allowing indexation with reference to year of acquisition by the earlier owner in respect of property acquired through inheritance. Assessing Officer has allowed indexation only with respect to the year assessee has acquired the property, whereas learned CIT(A) has allowed assessee’s claim with reference to year in which property was acquired by earlier owner and acquired by the assessee through inheritance. By the impugned order, learned CIT(A) allowed the assessee’s claim by observing as under :-
Ground 2 is taken up first. The issue is determination of year of acquisition of capital asset for the purpose of computation of long term capital gain. The Assessing officer adopts year in which property came to be owned by appellant by inheritance as against 01.04.1981 adopted by appellant since property was owned prior to that date by previous owner and same came to his possession by inheritance.
5. The Assessing officer is assessment declined adopting 01.04.1981 as base year for computation of capital gain. The claim of assessee before him was by relying as section 49(1)(iii)(a). Before Assessing officer, the assessee quoted decision in CIT-12 vs Manjula J Shah (2012) 204 Taxman 691. The proposed addition was retained by Assessing officer as SLP filed by department before Hon'ble Supreme Court is pending.
6. Before me AR of appellant reiterated decision in CIT-12 vs Manjula J Shah (2012)204 Taxman 691.
7. The matter is examined. The decision of jurisdictional High Court is binding. The Hon'ble Supreme Court has not given the verdict on SLP. As judicial discipline is needed in decision making in appeal, I following the decision in CIT-12 vs Manjula J Shah (2012) 204 Taxman 691 and allow the grounds of appeal as facts and circumstances of case are identical.
Issue is covered by the orders of the Tribunal in the case of Shri Sanjiv Hira Mirchandani (ITA No. 573/Mum/2018 dated 26.2.2019), wherein it has been held as under :-
“This is an appeal filed by the Revenue against the order of learned CIT(A) for A.Y. 2014-15 against the order passed u/s. 143(3) of the I.T. Act, wherein following grounds has been taken by the Revenue :-
Whether on the facts and in the circumstances of the case and in law, the learned CIT(A) was erred in including the period of holding of the assets by the previous owner for the purpose of computation of long term capital gain, whereas the indexed cost of acquisition has to be computed with reference to the year in which the assessee had become the owner of the property after the death of his father and mother.
2. The appellant prays that the order of learned CIT(A) on the above ground(s) be set aside and that of the Assessing Officer restored.
We have gone through the orders of the authorities below and found that the Assessing Officer has declined the assessee’s claim of indexation of cost of house with reference to year in which his late father acquired the property. Since property was acquired by the assessee’s father before A.Y. 1981-82, therefore indexation was claimed with reference to A.Y. 1981-82.
3. By the impugned order, learned CIT(A) allowed assessee’s claim by following decision of Hon'ble Hon'ble Jurisdictional High Court in the case of Manjula J. Shah (2011) 16 Taxamnn.com 42.
4. Similar case has been decided by us in the case of Mr. Firdaus D. Madon in 574/Mum/2018 dated 26.2.2019, wherein the Tribunal held as under :-
“This is an appeal filed by the Revenue against the order of learned CIT(A) for A.Y. 2014-15, in the matter of order passed u/s. 143(3) of the Income Tax Act.
2. Grounds taken by the Revenue reads as under :-
1. "Whether on the facts and in the circumstances of the case and in law, the Ld. CIT (A) has erred in erred in including the period of holding of the assets by the previous owner for the purpose of computation of long term capital gain, whereas the indexed cost of acquisition has to be computed with reference to the year in which the assessee had become the owner of the property after the death of his previous owner."
2. "The appellant prays that the order of the Ld. CIT(A) on the above ground(s) be set aside and that of the Assessing Officer be restored."
3. "The appellant craves leave to amend or alter any ground or add a new ground or add a new ground which may be necessary."
3. Rival contentions heard and record perused. Facts in brief are that the assessee was joint owner of an ancestral residential property, known as ‘Gool Villa’ alongwith his brother Mr. Naushad Madon. The assessee has had inherited 50% share therein. During the year the assessee sold property and claimed capital gain as per indexation cost of house relating to F.Y. 1981-82. The learned Assessing Officer vide his order dated 23.12.2016 has disallowed the appellant's claim for indexation from the financial year 1981-82 on the ground that as per the explanation (iii) of Section 48 of the Income Tax Act, 1961 for computing the indexed cost of acquisition, the base year has to be the first year in which the asset was held by the assessee and not the previous owner of the asset. The legal fiction of the previous owner of the property has been created only for the purpose of determining the date of acquisition and the cost of acquisition.
4. By the impugned order, learned CIT(A) allowed assessee’s claim after observing as under :-
I agree with the submission of the appellant that the date of acquisition of the property should be taken 1981-82 when the first owner purchased it. In terms of section 49(1 )(2) of the IT Act. The decision of the Bombay High Court in the case of CIT vs Manjula Shah in Appeal No. 3378 of 2010 has put to rest the controversy. The Hon'ble High Court has categorically given ruling that the index cost of acquisition has to be computed in which the previous owner held the asset and not the year in which the appellant become the owner of the asset. Hence, I direct the AO to recompute capital gains by taking the index cost of acquisition of 1981-82.
5. Against the above order of learned CIT(A), the Revenue is in further appeal before us.
We have considered the rival contentions and found that the property was acquired by the assessee through inheritance from his father, therefore was eligible for indexation of cost as per the year of holding of the property by the father. Since father was acquired property prior to A.Y. 1981-82, the assessee has correctly claimed deduction as per indexed cost of acquisition in A.Y. 1981-82 following the Hon'ble Jurisdictional High Court decision in the case of CIT Vs. Manjula J. Shah (16 Taxman 42), we do not find any infirmity in the order of learned CIT(A).
In the result, appeal of the Revenue is dismissed”.
5. As the facts and circumstances are same, respectfully following the order of the Tribunal as well as order of Hon'ble Hon'ble Jurisdictional High Court, we do not find any infirmity in the order of learned CIT(A) for allowing indexation cost with reference to cost of acquisition in A.Y. 1981-82, in so far as property was acquired by late father of the assessee prior to A.Y. 1981-82”.
9. Respectfully following the same, we do not find any infirmity in the order of learned CIT(A) in respect of deduction allowed u/s. 54 of the Act and indexation of cost of acquisition.
In the result, appeal filed by the Revenue is dismissed. Order has been pronounced in the Court on 28.2.2019.