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Income Tax Appellate Tribunal, MUMBAI BENCHES “SMC”, MUMBAI
Before: SHRI G.S. PANNU (AM) & SHRI RAM LAL NEGI (JM)
O R D E R
PER RAM LAL NEGI, JM
This appeal has been filed by the revenue against order dated 30.06.2016 passed by the Ld. Commissioner of Income Tax (Appeals)-56, Mumbai, for the assessment year 2012-13, whereby the Ld. CIT (A) has allowed the appeal filed by the assessee against assessment order passed u/s 143 (3) of the Income Tax Act, 1961 (for short ‘the Act’).
Brief facts of the case are that the assessee a non-resident Indian filed its return of income for the assessment year under consideration declaring the total income of Rs. 13,23,444/-. The return was processed u/s 143 (1) of the Act. The case was selected for scrutiny and accordingly the AO issued statutory notices u/s 143 (2) and 142 (1). In response thereof the authorized 2 Assessment Year: 2012-13 representative of the assessee appeared and filed the details called for by the AO. It was observed that the assessee along with other co-owners have surrendered the tendency rights in property for a total consideration of Rs. 17,75,00,000/-. The assessee got Rs. 4,25,00,000/- as his share and the amount of Rs. 4,25,29,917/- was shown as long term capital gain in his return of income. Since, the entire sale consideration received was deposited in capital gain scheme account with the State Bank of India, the assessee claimed exemption u/s 54 of the Act. The assessee thereafter purchased a residential property in Singapore and the remitted the entire amount from the capital gain scheme account State Bank of India. The AO disallowed the claim of the assessee holding that exemption u/s 54F could be granted only in respect of purchase of residential house in India and not outside India.
In the first appeal, the Ld. CIT (A) allowed the appeal of the assessee and decided this issue in favour of the assessee by following the decision of the ITAT, Mumbai in the case of Dhun Jehan Contractor ITA NO. 7058/M/2013. The revenue is in appeal against the said order of the Ld. CIT (A).
The revenue has challenged the impugned order passed by the Ld. CIT
(A) on the following effective grounds:-
1. “Whether on the facts and circumstances of the case and in law, the Ld. CIT (A) has erred in holding that the investment in the house at Dubai would be entitled to exemption u/s 54F of the IT Act, 1961.
2. Whether on the facts “Whether on the facts and circumstances of the case and in law, the Ld. CIT (A) has erred in allowing the exemption u/s 54f of the I.T. Act, 1961, to the assessee basing on the decision of the Hon’ble ITAT in the case of Dhun Jehan Contractor dated 13th May, 2015 ignoring the 3 Assessment Year: 2012-13 fact the decision was not challenged by the revenue only due to low tax effect and was not accepted on merit. 3. “Whether on the facts and circumstances of the case and in law, the Ld. CIT (A) has erred in ignoring the decision in the case of Leena, J Shah 6 SOT 721 (2006) Ahmedabad wherein the AO’s action of denial of exemption u/s 54F of the IT Act, 1961 on the ground that the investment was made by the assessee in purchasing the residential house outside India. 4. “Whether on the facts and circumstances of the case and in law, the Ld. CIT (A) has erred ignoring the memorandum explaining the provisions of the Finance bill 1982 which explained that the exemption u/s 54 f of the IT Act, 1961 was granted with a view to encourage the construction of a house which naturally meant that the house to constructed in India and not outside India. 5. “Whether on the facts and circumstances of the case and in law, the Ld. CIT (A) has erred ignoring that the legislative intent behind introduction of section 54f was to be gathered from the notes, Memorandum and the Circular which in the Tribunal’s view provided that the investment was to be in the residential house located in India. The Tribunal cited several decision in support of the view that the external aids like Notes, etc. were available for interpretation of the law and the meaning of the provision of section 54F could be gathered from such aids. In the light of the above settled rulings of interpretation of tax statutes, the Tribunal found appropriate that a residential house purchased/constructed must be in India and not outside India in the USA. It noted that the interpretation put forth by it was strongly supported by the marginal note to section 54F.”
4 Assessment Year: 2012-13
Before us, the Ld. Departmental Representative (DR) submitted that the Ld. CIT (A) has wrongly allowed the exemption u/s 54F of the Act by following the decision of ITAT in the case of Dhun Jehan Contractor (supra) ignoring the fact that the decision was not challenged by the revenue on account of low tax effect and not on merits. The Ld. DR further submitted that the Ld. CIT (A) has erred in ignoring the legislative intention behind introduction of section 54F. The Ld. DR further submitted that since the decision of the Ld. CIT (A) is contrary to the memorandum explaining the provisions of Finance Bill 1982 which explained that the exemption u/s 54F of the Act was granted with a view to increase the construction of house which naturally meant that the house to construct in India and not outside India, the decision is liable to be set aside.
On the other hand, the Ld. counsel for the assessee submitted that since the Ld. CIT (A) has decided this issue in favour of the assessee by following the decision of the Mumbai Bench of the Tribunal rendered in the case of Dhun Jehan Contractor (supra), wherein it has been held that the non residential house acquired may or may not be situated in India, there is no infirmity in the order passed by the Ld. CIT (A). The Ld. counsel for the assessee further pointed out that the transaction pertains to pre amendment period i.e., pertaining to the assessment year 2012-13 whereas, the amended provisions were made applicable with effect from 01.04-2015. The Ld. counsel further submitted that since the appeal of the revenue has no merit the same is liable to be dismissed.
We have heard the rival submissions’ and also perused the material on record. The only grievance of the revenue is that the Ld. CIT(A) has erred in 5 Assessment Year: 2012-13 holding that the assessee is entitled to claim exemption u/s 54F of the Act in making investment in house in Dubai. We notice that the Ld. CIT (A) has decided this issue in favour of the assessee by following the decision of the coordinate Bench of the Tribunal rendered in the case of Dhun Jehan Contractor (supra), wherein it has been held that the new residential house acquired may or may not be situated in India. The Ld. CIT (A) has further fortified his findings with the other instances in which the coordinate Benches of the Mumbai Tribunal have decided the identical issue in favour of the assessee. The relevant part of the order of the Ld. CIT (A) reads as under:-
“I have carefully considered the facts of the case, contentions of the AO & submissions of the appellant. The said case pertains to Assessment Year 2012-13. The appellant has contended that that the Income Tax Act, 1961 and Rules 1962 have not given any specific prohibition under any section/explanation/rule to invest in a house property for the purpose of claiming exemption u/s 54F of the Act outside India till the financial year ending 31/03/2014 [ AY 2014-15]. The prohibition to buy a house outside India was specifically introduced in the Finance Act 2014 wherein it is stated that claim for exemption u/s 54/54F shall be allowed if the house property is purchased in India only. Thus, there was no intention of the Government to prohibit such investment to claim exemption prior to FY 31-03-2014. The appellant further contended that this amendment has been made prospective w.e.f. 01.04.2015 and not retrospective, therefore the claim made by the appellant in the return of income of AY 2012-13 for exemption u/s 54/54F cannot be denied. However, the AO was of the view that the Income Tax Act, 1961, extends to whole of India only and not to any transaction for purchase outside India. He relied on the case of Leena J. Shah v ACIT, 6 SOT 721 (Ahd.). Therefore, declining to allow the transaction of purchase of residential property outside India by the Appellant as 6 Assessment Year: 2012-13 exempt against sale of tenancy rights to give benefit of Sec 54/54F.
The issue to be decided in this appeal is whether the exemption available under Section 54F for the Assessment Year in question in this case would be available if the newly constructed/purchased property happened to be located out of India. The AO based himself on the decision in the case of Leena J Shah (supra). The appellant has on the other hand referred to the number of decisions including the decision of the Hon’ble Mumbai Tribunal in the case of Dhun Jehan Contractor dated 13.05.2015 wherein it has been held that the new residential house acquired may or may not be situated in India. The appellant has also referred to number of other decisions referred supra of the Hon’ble Mumbai ITAT which have decided in favour of the appellant on this issue.
Further, one of the other co-owner, Kunal Lilani, upon transferring the tenancy rights in the above mentioned property had claimed exemption u/s 54F for purchase of a residential property outside India. The exemption u/s 54F so claimed was also similarly denied by the AO and against which appeal was filed before CIT (Appeals)-57. In this case, CIT (Appeals)-57 has passed an order dated 30.05.2016 in the favour of the assessee.
Therefore, respectfully following the decisions, the grounds of appeal are allowed in that the investment in the house outside India for AY 2012-13 would be entitled to exemption u/s54F of the Act.
The ground of appeal is accordingly allowed.”
8. The coordinate bench has decided the identical issue in favour of the assessee in the case of Dhun Jehan Contractor (supra) and since the Ld. CIT(A)
7 Assessment Year: 2012-13 has decided the identical ground of appeal by following the decision of the coordinate Bench we do not find any infirmity in the impugned order. Moreover, the transaction pertains to the pre amendment period. We, therefore, uphold the findings of the Ld. CIT(A) and dismiss the appeal of the revenue. We accordingly direct the AO to grant the exemption u/s 54F of the Act. In the result, appeal filed by the revenue for assessment year 2012-2013 is dismissed.