ITO (IT) 3(1), MUMBAI vs. NISHANT LALIT JADHAV, MUMBAI

(AY. 2011-12) ORDER PER G.S.PANNU,A.M:

The captioned appeal filed by the Revenue and Cross Objection by the assessee pertaining to assessment year 2011-12 are directed against an order passed by CIT(A)-10, Mumbai dated 31/07/2014, which in turn, arises out of an order passed by the Assessing Officer under section 143(3) of the Income Tax Act, 1961 (in short ‘the Act’) dated 20/01/2014.

“1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in allowing the claim of exemption u/s 54 of the I.T. Act by the assessee for the investment of Rs.1,12,75,000/-, being the sale consideration of immovable property in India, in buying the residential apartment in New York, USA of Rs.2,20,00,000/- without appreciating the fact that the exemption is available only when investment is carried out in India.

2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in relying on the decision of Mumbai Tribunal in the case of Mrs. Prema P. Shah & Sanjiv P. Shah Vs. ITO(100 ITR 60(Mum)) without appreciating the fact that reference appeal u/s 260A of the IT. Act, was . earlier preferred, but later on withdrawn in this, case on the ground of lower tax effect and not on Merit.

3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in allowing the exemption u/s 54 of the IT. Act for the capital gain arising from the sale of residential property in India in investing the same in the residential apartment in New York, USA(Outside India) without appreciating the fact that claim of exemption of Section 54F of the I T. Act, has not been allowed by the Ahmedabad ITAT in the case of Leena J Shah 6 SOT 721 (ITO Ahmedabad)”

3. In this appeal, although Revenue has raised multiple Grounds of appeal, but the solitary grievance is against the decision of the CIT(A) in allowing assessee’s claim for exemption under section 54 of the Act. Briefly put, the relevant facts are that the respondent assessee is a Non-resident Indian(NRI) and during the year under consideration he, inter-alia, earned a long term capital gain of Rs.67,06,652/- from sale of residential property located at Mumbai. In the computation of income assessee claimed

(AY. 2011-12) exemption under section 54 of the Act on the ground that the capital gain arising on the sale of property was utilized in the purchase of a residential property at New York, USA. The Assessing Officer denied the claim of exemption under section 54 of the Act on the ground that investment in new residential property did not meet the requirements of section 54 of the Act as the property was acquired outside India. In coming to such conclusion, the Assessing Officer relied upon the decision of the Ahmedabad Tribunal in the case of Smt. Leena J. Shah , 6 SOT 721(Ahd). In appeal before the CIT(A), assessee contended that during the relevant period, there was no requirement in section 54 of the Act that the investment in the new property is to be made in India. The CIT(A) noticed that the requirement of making the investment in a property in India India was inserted by the Finance (No.2) Act, 2014 w.e.f. 01/04/2015 and, therefore, in the instant assessment year the claim of exemption under section 54 of the Act could not be denied on this ground. In coming to such conclusion, the CIT(A) also relied upon the decision of the Mumbai Tribunal in the case of Mrs. Prema P. Shah & Sanjiv P. Shah vs. ITO, 100 ITD 60 (Mum) , ITO vs. Girish M. Shah in and Vinay Mishra vs. CIT , in ITA No.895/(bang) of 2012.Against such a decision of the CIT(A), Revenue is in appeal before us.

(AY. 2011-12) (1) Mrs. Prema P. Shah vs. ITO, (2006) 100 ITD 60(Mum) (2) ITO vs. Dr. Girish M. Shah, dated 17/2/2010. (3) ITO vs. Shri Anil P. Mukhi, ITA 6803/Mum/2010 dated 16/02/2012. (4) Vinay Mishra vs. CIT , in of 2012 dated 12/10/2012.