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Income Tax Appellate Tribunal, “C ” BENCH, CHENNAI
Before: SHRI A.MOHAN ALANKAMONY & SHRI. G. PAVAN KUMAR
आदेश / O R D E R PER G. PAVAN KUMAR, JUDICIAL MEMBER:
The appeal filed by the assessee is directed against order of Commissioner of Income Tax (Appeals)-16, Chennai in ITA No.8.CIT(A)-16/2014-15, dated 20.05.2015 for the assessment year 2011-12 passed u/s.143(3) and 250 of the Income Tax Act, 1961.
ITA No.1830/Mds/2015. :- 2 -:
The only substantive ground raised by the assessee with regard to Commissioner of Income Tax (Appeals) erred in confirming the order of the Assessing Officer on the investment in residential property outside India.
The Brief facts of the case the assessee is an Non Resident filed Return of income for assessment year 2011-12 with total income of �2,62,12,453/-. As per scrutiny norms under CASS, the case was selected for scrutiny and notice u/s.143(2) of the Act was issued by ITO, International Taxation I(1), Chennai on 03.08.2012.
Subsequently, after modification of the jurisdiction another notice u/s.143(2) r.w.s.129 of the Act was issued on 07.02.2013. In compliance to the notice, the ld. Authorised Representative of the assessee appeared from time to time and filed the information. The assessee has disclosed income from Capital Gains and income from Other Sources. On verification of computation of income, the ld. Assessing Officer found the assessee has sold residential house situated at Anna Nagar, Chennai for a consideration of �4,75,00,000/- and assessee has claimed indexed cost of acquisition of �51,83,750/- and worked out long term capital gains at �.4,23,16,250/- The assessee has claimed exemption n u/s.54 of the Act on purchase of residential property at West Palm Beach, Florida, USA $351305 equal to �1,65,11,335/- and filed details and documents pertaining to ITA No.1830/Mds/2015. :- 3 -: purchase and sale. The Assessing Officer alleged though the assessee has complied the provisions of Sec. 54 of the Act but investment in residential property outside India is not valid. The ld. Authorised Representative submitted that the provisions of Sec.54 of the Act requires only purchase or construction of a residential property and words “India’’ or ‘’outside India’’ are not specified and there is no bar on the assessee to buy or construct residential house outside India.
The ld. Assessing Officer considered the detailed submissions of the assessee and examined in depth the provisions applicable to nonresident and came to a unilateral conclusion that the word residential house referred in Sec.54 of the Act means a residential house within the territory of India, since there is no explanation of investment at abroad. The Indian legislative governs the India territory and functions for development of the Indian economy, social structure provides such deduction to a person only to have further developments in India and not other parts of world. Considering this observations and presumptions, the ld. Assessing Officer has denied the claim under provisions of Sec.54 of the act to the assessee and brought long term capital gains to tax �4,23,16,250/- Aggrieved by the order of the Assessing Officer, the assessee filed an appeal before the Commissioner of Income Tax (Appeals)
ITA No.1830/Mds/2015. :- 4 -:
In the appellate proceedings, the ld. Authorised Representative reiterated his submissions made before the Assessing Officer and relied on the judicial decisions and provisions of Sec.54 of the Act. The ld. Commissioner of Income Tax (Appeals) observed the findings of the Assessing Officer at page no.3 & 4 of the order. The ld. Authorised Representative relied on the decision of Mumbai Tribunal of Mrs. Prema Shah vs. ITO (2006) 100 ITD 60 (Mum) and further argued that the Finance Act, 2014 amended the provisions of Secs.54/54F of the Act. The claim of deduction is allowed only if the property is purchased within India and amendment is prospective and effective from assessment year 2015-16 onwards. The ld. Commissioner of Income Tax (Appeals) emphasized on the findings of the Assessing Officer and legislature intent and Finance Minister Speech also made a detailed observations on the applicability and distinguished the decision of Mumbai Tribunal and concurred with the findings of the Assessing Officer by confirming the Assessing Officer order and dismissed the appeal of the assessee. Aggrieved by the order of the Commissioner of Income Tax (Appeals), the assessee assailed an appeal before the Tribunal.
Before us, the ld. Authorised Representative reiterated his submissions made before Assessing Officer and Commissioner of Income Tax (Appeals) on law and provisions and also substantiated
ITA No.1830/Mds/2015. :- 5 -: his arguments on the ground that the assessee is an Non Resident Indian claiming exemption u/s.54 of the Act by reinvesting in residential property outside India and the provisions are not restricting such re-investment as referred in Sec.54 of the Act and also the amendment of restriction in Sec.54 and 54F are effective from assessment year 2015-16 in respect of purchase of property within India and substantiated his arguments with the decision of Mumbai Tribunal in Mrs. Prema P. Shah (2006) 282 ITR (AT) 211 Mumbai and also decision of Bangalore Tribunal in Vinay Mishra vs. ACIT in and Mumbai Tribunal decision in ITO vs. Dr. Girish M. Shah in ITA No.3582/Mum/2009 and further relied on the legislature intent of allowing exemption and prayed for allowing the appeal.
Contra, the ld. Departmental Representative relied on the findings of the lower authorities orders and objected to the submissions of the ld. Authorised Representative.
We heard the rival submissions of both the parties and perused the material on record and also judicial decisions cited and provisions of law and legislature intent in applicability of provisions of Sec.54 of the Act. The assessee is a Non Resident Indian and filing Income Tax Return in India and the assessee has sold a residential
ITA No.1830/Mds/2015. :- 6 -: property and claimed exemption u/s.54 of the Act and reinvested the long term capital gains in another residential property. The assessee has complied with requisite conditions for claiming deduction u/s.54 which the Assessing Officer and Commissioner of Income Tax (Appeals) has not disputed except on the reinvestment in residential house. In the present case, the assessee has invested in purchase of residential house in USA as he is an non-resident. The ld. Authorised Representative drew our attention to the provisions of Sec.54 of the Act were there is no restrictive clause or barring the assessee from purchasing property outside India and also the amendment to Sec.54 made in Finance Act, 2014 were the purchase of property should be within India is applicable from the assessment year 2015-16. We find the current assessment year is before amendment of provisions and the facts of the case are supported by the Co-ordinate Bench decision in the case of N. Ranganathan vs. ITO in dated 26th July, 2014 observed at para no.7 as under:-
‘’7. We have heard the Revenue and perused the case file. The CIT(A) has disallowed the assessee’s claim of deduction u/s. 54 for the reason that he had purchased his new house in Singapore; paid his consideration in foreign currency, the said amount turned out to be more than sale consideration realized from sale of Chennai house and his accounts statement did not provide exact information about flow of money. So far as, the first reason is concerned, we find that in a recent decision of Vinay Mishra Vs. ACIT (2012) 20 ITR 129 (Bangalore) has summarized all case law; both in favour and against the Revenue in holding that ITA No.1830/Mds/2015. :- 7 -: a sec.54 claim cannot be rejected merely for the reason that the new house purchased is in a foreign country. We find that all case laws relied upon by the Assessing Officer as well as the CIT(A) have been taken care of by the learned co-ordinate bench. On being grant opportunity, the Revenue has failed to draw any distinguishing features therein. So, the CIT(A) first reason is not sustainable in the eyes of law’’. Considering the legislature intent and ratio of judicial decision on claiming deduction u/sec. 54 of the Act for reinvestment in purchase of new residential property in foreign country is allowed. Therefore, we set aside the order of the Commissioner of Income Tax (Appeals) and direct the Assessing Officer to allow deduction to the assessee for reinvestment in residential property at USA.
In the result, the appeal of the assessee is allowed.
Order pronounced on Friday, the 4th day of March, 2016, at Chennai.