ITO (INTERNATIONAL TAXATION) - 3(1)(1), MUMBAI vs. KUNAL VATSAL LILANI, MUMBAI

O R D E R PER C.N. PRASAD 1. This appeal is filed by the Revenue against order of the Ld. Commissioner of the Income-tax (Appeals)-57 Mumbai dated 30.05.2016 for the Assessment Year 2012-13.

(A.Y: 2012-13) Shri Kunal Vatsal Lilani 2. The only issue in the appeal of the Revenue is that Ld.CIT(A) erred in holding that the investment in the house at Dubai would be entitled to exemption u/s. 54F of the Act.

(A.Y: 2012-13) Shri Kunal Vatsal Lilani 5. We have heard the rival submissions, perused the orders of the authorities below and the decisions relied on. The only question to be decided is as to assessee is entitled for exemption u/s. 54F of the Act when the investment was made by the assessee outside India by purchasing the residential flat. The contention of the Assessing Officer was that the assessee could claim exemption u/s. 54F only when the property is purchased within the territory of India and not outside India. In the case on hand the assessee purchased residential flat in Dubai and claimed exemption u/s. 54F of the Act on the sale proceeds invested in such residential flat.

“5. We have considered rival contentions and perused the material on record including cited case laws before us. After hearing both the parties, we are of the view that there is an amendment by Finance Act 2014 in Section 54F, with effect

(A.Y: 2012-13) Shri Kunal Vatsal Lilani from 01.04.2015 wherein the benefit of deduction u/s 54F will be allowed only when reinvestment in residential house property is made within India. Prior to the aforesaid amendment, there was no bar for the taxpayer making investments outside India in residential house property to get the benefit of deduction u/s. 54F provided other conditions are fulfilled. We are presently concerned with appeal for AY 2011-12 which is prior to amendment of Section 54F by Finance Act, 2014 w.e.f. 01-04-2015. There is no dispute between rival parties so far as compliance of the other conditions by the assessee as stipulated u/s 54F of the 1961 Act to get the benefit of deduction u/s 54F are concerned. The Hon’ble Gujarat High Court in the case of Leena Jugalkishore Shah(supra) has allowed the deduction u/s. 54F to the taxpayer making investments outside India in residential house properties. The relevant portion of the decision of Hon’ble Gujarat High Court in the case of Leena Jugalkishore Shah(supra) is reproduced here under: - “9. We have heard learned counsel for the parties. We have perused the order of the Tribunal. There is no finding recorded by the authorities below that the appellant assessee has not invested the sale proceeds in a residential house. It is also not in dispute that the appellant has not purchased the residential house in United States of America. In fact, she has purchased a residential house in U.S.A. out of the capital gain on sale of the plot in India and thus she has fulfilled the conditions stipulated in section 54F of the Income-tax Act. She has invested the capital gains in a residential house within the stipulated time. There was no condition in section 54F of the Income-tax Act at the relevant time that the capital gain arising out of transfer of capital asset should be invested in a residential house situated in India. The language of section 54F of the Income-tax Act before its amendment was that the assessee should invest capital gain in a residential house. It is only after the amendment to section 54F of the Income-tax Act by the Finance (No. 2) Act, 2014, which came into effect with effect from 1.4.2015 that the assessee should invest the sale proceeds arising out of sale of capital asset in a residential house situated in India within the stipulated period. Thus on a plain reading of section 54F of the Income-tax Act before its amendment by the Finance (No. 2) Act leaves no room for any doubt that the assessee should restrict her investment within India or outside India. The only condition was that the assessee should invest in a residential house. The Tribunal has wrongly interpreted section 54F of the Income-tax Act by holding that the assessee should purchase the residential house situated in India. Prior to amendment to section 54F of the Act, the only condition stipulated was investment in a residential house. When the section 54F of the Income-tax Act was clear and unambiguous, there is no scope for importing into the statute the words which are not there. Such importation would be not to construe but to amend the statute. If there is any defect in the Act, it can be remedied only by the legislation and not by judicial interpretation.

by the assessee in its memo of appeal filed with the tribunal related to the methodology adopted and valuation of the property used for computation of capital gains by the AO have become academic and did not require adjudication and hence we refrain from adjudicating the same. We order accordingly.”

7. Since facts being Identical, respectfully following the said decision we uphold the order of the Ld.CIT(A) in allowing the exemption u/s. 54F of the Act to the assessee.

Order pronounced in the open court on the 15th June, 2018.