IT 24(3)(4), MUMBAI vs. RUPANG C SUCHDE, PUNE

The above titled appeal by the Revenue and the cross objections by the assessee have been preferred against the order dated 24.09.2014 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2011-12.

Now coming to the appeal of the Revenue. The Revenue, in this appeal, has agitated the action of the Ld. CIT(A) in allowing the claim of the assessee under section 54 of the Act for reinvestment of long term capital gains in house property in Saudi Arabia. At the outset, the Ld. A.R. of the assessee has stated that the facts in this case have not been disputed. The legal proposition involved in this case is whether the assessee is eligible to claim benefit under section 54 of the Act on purchase of a residential house outside India. He has stated that the issue is now squarely covered in favour of the assessee by the decision of the Hon’ble Gujarat High Court in the case of “Leena Jugalkishor Shah vs. ACIT” (2016) 72 taxman.com 185 and further by the decision of the co-ordinate bench of the Tribunal in the case of “ITO vs. Shri Farokh Jal Debbo” vide order dated 05.02.16. Further, he has also relied upon the following decisions in this respect: 1. Girdhar Mohanani vs. ITO (ITA No.4591/M/2013) dated 06.05.2010 2. ITO vs. Dr. Girish M. Shah (ITA No.3582/M/2009 dated 17.02.2010 3. N. Ranganathan vs. ITO 33 ITR (Trib) 444 4. Vinay Mishra v. ACIT (141 ITD 301) 5. ACIT vs. Iqbal Jafar 151 ITD 364

We have gone through the decision of the Hon’ble Gujarat High Court (supra). Considering the identical issue, the Hon’ble Gujarat High Court while analysing the provision of section 54F has observed that there was no condition in section 54F before its amendment by Finance (2) Act, 2004, which came into effect w.e.f. 01.04.15, that sale proceeds arising out of transfer of capital asset should be invested in a residential house situated in India. That the said amendment brought in section 54F has been made applicable prospectively. The Hon’ble High Court has further held that even 3 & CO No.84/M/2016 Shri Rupang C Suchde when the language of a taxing provision is ambiguous of capable of more meaning than one, then court has to adopt the interpretation which favours the assessee. The Hon’ble High Court has further held that section 54F of the Act before its amendment was clear that the assessee should invest in a residential house and that the words ‘in India’ could not be imported into the language of the section. The concluding part of the order of the Hon’ble Gujarat High Court is reproduced as 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.

In the present case the assessee has purchased the residential house in U.S.A. out of the sale proceeds of the plot in India and thus she has fulfilled the conditions of section 54F of the Income-tax Act before its amendment by the Finance (No. 2) Act. Moreover, when the language of a taxing provision is ambiguous or capable of more meanings than one, then the court has to adopt the interpretation which favours the assessee. Section 54F of the Act before its amendment was clear that the assessee should investment in a residential house. The language of section is clear and unambiguous. Therefore, we cannot import into the statute the words 'in India' as interpreted by the authorities. Thus, taking into consideration the above facts, we are of the opinion that benefit of section 54F before its amendment can

A similar view has been adopted in the following cases of the Tribunal: 1. Mumbai Bench in the case of “Girdhar Mohanani vs. ITO” (ITA No.4591/M/2013) dated 06.05.2010 2. Mumbai Bench in the case of “ITO vs. Dr. Girish M. Shah” (ITA No.3582/M/2009 dated 17.02.2010 3. Chennai Bench in the case of “N. Ranganathan vs. ITO” 33 ITR (Trib) 444 4. Bangalore Bench in the case of “Vinay Mishra v. ACIT” (141 ITD 301) 5. Lucknow Bench in the case of “ACIT vs. Iqbal Jafar” 151 ITD 364

In the light of above decisions of the Tribunal, we do not find any infirmity in the order of the Ld. CIT(A) on this issue. The order of the Ld. CIT(A) is therefore upheld.

In the result, the cross objections of the assessee as well as the appeal of the Revenue are hereby dismissed.