DAVID CLEOPHAS PEREIRA,MUMBAI vs. ITO (IT) 4(1), MUMBAI

(Assessment Year:2008-09) David Cleophas Pereira 123-A, Bazar Road, Bandra West, Mumbai - 400050 Appellant Vs. Income Tax Officer (International Taxation) - 4(1), Scinida House, Ballard Estate, Mumbai Respondent PAN: ADRPP5495Q अपीलाथ� क� ओर से /By Appellant :Shri Vishwas V. Mehendale, A.R. ��यथ� क� ओर से/By Respondent :Shri Chandra Vijay, D.R. सुनवाई क� तार�ख/Date of Hearing : 24.09.2015 घोषणा क� तार�ख/Date of Pronouncement : 30.10.2015 ORDER PER SHAILENDRA KUMAR YADAV, J.M:

A.Y. 08-09 [David Cleophas Pereira vs. ITO(IT)] Page 2

This appeal has been filed by assessee against the order of Commissioner of Income-Tax (Appeals) - 11, Mumbai, dated 28.02.2013 for A.Y. 2008-09 on following grounds: “1. On the facts and circumstances of the case and in law, Hon. CIT-A-11, Mumbai erred in disallowing appellant’s claim for exemption u/s 54 of the Act in respect of the re-investment of the proceeds on the sale of ancestral house property situated in India in Residential House situated in New Zealand.

2. On the facts and circumstances of the case and in law, Hon. CIT-A-11, Mumbai erred in initiating Penalty Proceedings u/s 271(1)(c) of the Act.”

2. Assessee is NRI staying in New Zealand. During A.Y. 2007-08 relevant to previous year 2008-09, he has shown income under the head “income from salaries” amounting to Rs.44,076/-, income under the head “income from house property” amounting to Rs.39,377/- and income under the head “income from other sources” amounting to Rs.17,132/- and long term capital gain on sale of property was shown as Nil after claiming exemption u/s.54 of the Act amounting to Rs.54,64,498/- for purchase of new residential house. During year under consideration, assessee has sold a residential property situated at Flat No. D/4, 3rd Floor, Marian House, Plot No. 159, 29th Road, T.P.S. III, Bandra (W), Mumbai- 400050 to Mr. Melroy Savio Pereira and Mrs. Carolyn Ann Pareira for a total consideration of Rs. 70,00,000/-, on which long term capital gain amounting to Rs.47,79,852/- had been derived and claimed exemption u/s. 54 of the Act amounting to A.Y. 08-09 [David Cleophas Pereira vs. ITO(IT)] Page 3 Rs.54,64,498/- for investment made for purchase of residential house No.26, Macmurdo Ave, Hamilton, New Zealand. Assessee was asked by concerned Assessing Officer to show as to why assessee's claim of exemption u/s. 54 of the Act amounting to Rs.54,64,498/- being investment made for purchase of residential house in New Zealand should not be disallowed. The stand of learned Authorized Representative of assessee has been that assessee has complied with provisions Section 54 since he has invested in residential house in terms of provisions of Section 54. Assessing Officer observed that in view of facts that assessee’s income from abroad was not taxable in India, the investment made by assessee for purchase of house abroad was not exempted u/s.54 of the Act, hence assessee’s claim of exemption u/s.54 of the Act amounting to Rs.54,64,498/- was disallowed by Assessing Officer.

3. In appellate proceedings, it was observed that assessee claimed to have purchase property at 26, Mac Murdo, Avenue, Hamilton as discussed above. The said agreement for purchase of said property for a consideration of $ 340,000. However, subsequently, the said agreement was cancelled. Accordingly, same was not purchased. Subsequently, learned Authorized Representative filed another document for purchase of a property at 85, Rostrevor Street, Hamilton by auction on 30.4.2009. However, CIT(A) found that this document was only a description of the property and notice of auction. It was not a purchase agreement or transfer document of the property in A.Y. 08-09 [David Cleophas Pereira vs. ITO(IT)] Page 4 any manner. Assessee had filed a 'search copy' apparently issued by Registrar General of Land but unsigned and dated 26.02.1993 regarding a property located in South Auckland which is mortgaged to ANZ national Bank and assessee is stated to be the proprietor. According to CIT(A), it did not constitute any transfer agreement. Assessee filed settlement statement apparently issued by Solicitors M/s O'Sheas of Hamilton regarding purchase of a property at 100, Houchens Road, Hamilton. Therefore, CIT(A) observed that this statement was neither in connection with property for which auction was conducted as per the said notice nor for property as per the 'search copy'. None of these documents constitute sufficient evidence to hold that assessee has purchased any residential house from sale proceed of house sold and that it does not have any other residential house when the house in India was sold. The stand of assessee vide its letter dated10.10.2011 has been that the property originally agreed to be purchase has not been purchased but second property was purchased. Hence deduction U/S 54 is admissible. According to CIT(A), assessee could not explain as to why and under what circumstances, the residential house at 26, Macmurdo Avenue, Hamilton, New Zealand was stated to have been purchased and deduction u/s 54 was claimed though it was never purchased. Fresh document filed during appellate proceedings on behalf of assessee, was forwarded to Assessing Officer for verification ITA No.3526/Mum/13 A.Y. 08-09 [David Cleophas Pereira vs. ITO(IT)] Page 5 and enquiry by way of remand. Remand report has been received vide letter dated 28.12.2012 which reads as under:

“Kindly refer to the above.

2. The report called for is as under :

The assessee vide submission dated 25.10.2011 has filed certain additional evidences under Rule 46A of the I. T. Rule 1962. The assessee has claimed that the above documents were not required for submission during Scrutiny proceeding and because the same have been requirement during the appellate proceedings (Para 7 of the AR's submission). The assessee vide letter dated 25-10-2011 submitted before your honour, vide para 2 & 3, brought a new fact that the seller was not able to finalize the sale as he was not able to find a suitable alternate new property for himself and therefore, as per the advice of the Solicitors, the appellant cancelled the previous purchase agreement against the refund of the down payment of NZ$ 1,75,000/-. The Seller refunded the said amount on 9th January, 2009. AND Finally, on 30th April, 2009, the appellant got an opportunity to buy another house through, "Auction Sale by Monarch Real Estate, wherein appellant made an agreement to purchase the said new house at 100 Houchens Road, Hamilton for NZ$ 7,47,500/-.

It is relevant to motion that the issue of deduction u/s. 54C was raised during the course of assessment proceedings. During the course of assessment proceedings, the assessee has filed submission vide letter dated 19th October, 2010, relevant portion of the same is reproduced as "under:

A.Y. 08-09 [David Cleophas Pereira vs. ITO(IT)] Page 6

"5.0 Sale of Immovable Property:

5. 1 During the year the assess e has sold his residential Flat No. D/4, 3rd Floor, Marian House, 29th Road, Plot No. 159, TPS III, Bandra West, Mumbai-400050 for a consideration of Rs. 70 lacs. A copy of agreement for sale dated 18th February, 2008 registered on the same date vide document No. 1466 of 2008 is enclosed (Ann. 3). The said flat was purchased by him vide agreement dated 7th August, 2001. A copy of the said agreement is enclosed (Ann.4)

5.2 A statement showing the Long Term Capital Gains on sale of the said Flat at Marian House is enclosed (Ann. 5).

5.3 A copy of the Order u/s. 197 is enclosed (Ann. 6).

The assessee has claimed a deduction u/s.54 in 5.4 respect of the Investment in residential house No.26, Macmurdo Ave, Hamilton New Zealand. The payment for the said house is made as under: Date Amount in NZ$ Conversion Rate Amount in Rs. 25th July, 2008 175000 31.2257 54,64,498/- 5.5. The assessee has complied with the Sec. 54 since he has invested in the residential house in terms of the said section. A copy of the document dated 25th July, 2008 for purchase of the house at New Zealand is enclosed ( Ann. 7)" It is to be noted that this letter was filed on 19.10.2010 and the fact of cancellation of first agreement and purchase of new house was not disclosed before the A.O. Though the new house was already been purchased on 30.04.2009. Thus the assessee has deliberately concealed this fact during the course of assessment proceeding and thus the same should not be allow to file at the appellate stage.

reported in [2006] 6 SOT 721 (Ahd), where it was held that the exemption is not available for purchase of property located abroad. The Hon'ble ITAT further stated that a residential house purchased/ constructed must be in India and not outside India, in USA. This interpretation is strongly supported by the marginal note to Section 54F. Section 54F inserted by the Finance Act, 1982, with effect from 1-4-2003. It has been explained in Circular No. 346, dated 30-6-1982 - Explanatory· notes on the provisions of Finance Act, 1982 in para 20.2 “with a view to encouraging house construction, the Finance Act, 1982, has inserted a new Section 54F.” (138 ITR (St.) 10).

"The amount of capital gain which is not appropriated by the assessee, towards the purchase of the new asset made within one year before the date on which the transfer of the original asset took place, or which is not utilized by him for the purchase or construction of the new asset before the date of furnishing of return of income under section 139, shall be deposited by him before furnishing Such return [such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under sub-section (1) of section 139] in an account in any such bank or institution as may be specified in, and utilized in accordance with, any scheme which the A.Y. 08-09 [David Cleophas Pereira vs. ITO(IT)] Page 8

Central Government may, by notification in the Official Gazette, frame in this behalf and such return shall be accompanied by proof of such deposit and for the purposes of sub-section (1), the amount, if any, already utilized by the assessee for the purchase or construction of the new asset together with the amount so deposited shall be deemed to be the cost of the new asset: Provided that if the amount deposited under this sub- section is not utilized wholly partly for the purchase or construction of the new asset within the period specified in sub-section (1), then,- (i) the amount not so utilized shall be charged under section 45 as the income of the previous year in which the period of three years from the date of the transfer of the original asset expires; and (ii) the assessee shall be entitled to withdraw such amount in accordance with the scheme aforesaid.”

not eligible for exemption u/s. 54.

7. In view of the above arid considering the facts, the assessee is not entitled to avail exemption ufs.54 of the LT. Act.

Subsequently, learned Authorized Representative of the assessee has filed a written submission vide letter dt. 05.02.2013 which reads as under:

"The above appeal had been fixed for today's hearing. In this connection, we have been copy of the Remand Report dated 20-12-2012 of the ld. ITO (IT) - 4(1), Mumbai (the “AO"). We have perused the same and also discussed the same with the appellant and as advised by our above client we have to make further submissions as under; 1. The basic facts of this case are already submitted before your Honour vide our letter dated 10-10- 2011 and 25-10-2011. During the said proceedings, we had furnished the fresh evidence and requested your Honour to invite the Remand Report of the ld. AO as the said documents were not furnished and hence not available before the ld. AO during the scrutiny assessment.

A.Y. 08-09 [David Cleophas Pereira vs. ITO(IT)] Page 10 Therefore, after due consultation with his Solicitors, the appellant cancelled his Agreement to Purchase the First New House and decided to Purchase the Second New House in Auction. All the Facts and explanations regarding the New Documents are already stated in the said previous letters, the same are not repeated here.

3. In the remand report the ld. AO has said everything about why the Additional Evidence should not be admitted. He has not stated anything about verifying the Facts about the purchase of the Second New House against cancellation of the First New House. His contentions can be summarized as under; a. Appellant's submission dated 19-10-2010 does not mention anything about the purchase of Second New House even though it was within the knowledge of the appellant that he had cancelled this purchase of the First New House and purchased Second New House on the date of making the submission, Hence, this fact was deliberately not disclosed to the ld. AO. In this respect, appellant has to submit that, during the scrutiny assessment proceedings, appellant was never asked to furnish any details of the Net» House purchased in New Zealand. In fact, as per the assessment order, all the discussion was centered on resolving the question whether appellant should be eligible to the exemption u/s. 54 of the Act in respect of tile Net House because it was purchased in New Zealand. Para 3 of the Assessment Order mentions that, 'The assessee’s representative vide order sheet notings dated 19-10-2010 was asked to show cause as to why the assessee's claim of exemption u/s.54 of the Act amounting to Rs. 54,64,498/- being investment made for purchase of residential house in New Zealand should not be A.Y. 08-09 [David Cleophas Pereira vs. ITO(IT)] Page 11

disallowed……. In view of the fact that the assessee's income from abroad is not taxable in India, the investment made by the assessee for purchase of house abroad is not exempt u/s 54 of the I.T. Act, the assessee's claim exemption u/s. 54 of the I.T. Act, the assessee's claim of exemption u/s. 54 of the I.T. Act, the assessee's claim of exemption u/s.54 of the I.T. Act, 1961 amounting to Rs.54,64,498/- is disallowed". This clearly shows that, appellant was not required to give any details of the New House. b. Ld. AO has Objected to Appellant's claim u/s 54 by relying on the decision of Hon. Ahd. ITAT in case of Leena J. Shah - 6 SOT 721. Ld. AO has also referred to the Marginal Note to S.54F and Contents of Circular 346 dated 30-06·1982 wherein it is stated that the said exemption was introduced "with a view to encouraging house construction". In this respect, we have already furnished a copy of Hon. Mumbai ITAT in case of Mrs. Prema P. Shah – 100 ITD 60, wherein Hon. ITAT has decided various issues from purchase of Leasehold Property in Foreign Country to use of borrowed funds for the purchase of New House. The said decision is from Hon. Mumbai ITAT, which is binding on all the lower appellate authorities in Mumbai and Maharashtra. Hence, the said decision has to be followed in appellant’s case. Secondly, with due respect, it is submitted that, in Appellant's case, the exemption is claimed u/s 54 and not u/s 54F. It need not be explained that the exemption u/s 54F is in respect of the purchase of a new house against the sale proceeds of any asset other than a Residential A.Y. 08-09 [David Cleophas Pereira vs. ITO(IT)] Page 12

House. Therefore, it is obvious that, there will be such a pre-requisite. In the said cited decision of Ahd. ITAT, the appellant had sold Plot of Land and purchased New House in USA. In this connection, it may be worthwhile to note the language of the said circular, "Para 20.2 With a view to encouraging house construction, the Finance Act, 1982 has inserted a new Section 54F to provide that where any Capital gain arises from the transfer of any long term capital asset, other than a residential house, and the assessee purchases within one year before or after the date on which the transfer took place or constructs within a period of three years after the date of transfer, a residential house, the capital gain arising from the transfer will be treated in a concessional manner as under:" In appellant's case, there is no dispute that he had sold his house in India. Therefore, the new purchase was against the sale of old house. Hence, he is eligible for an exemption u/s 54 and not u/s 54F. In the said circumstances, the said marginal note and the circular cannot be made applicable to appellant's case. c. Ld. AO has also mentioned that, as the appellant had cancelled his previous deal for purchase of New House and purchased another New House, he has not complied with the provisions of S.54(2) of the Act. In his support, the ld. Assessing Officer has referred to the language of the said section.

In this respect we have to submit that, appellant's decision to cancel the old agreement and purchase of Second New House proves his intention about purchasing New House. He had cancelled the old agreement only because the seller was not delivering the said First New House. The said decision was taken after consulting the Solicitors. In New Zealand, all the A.Y. 08-09 [David Cleophas Pereira vs. ITO(IT)] Page 13 transactions of purchase and sale are made through the Solicitors and the amounts are deposited in the "in trust account". Same is confirmed by Solicitors. The date of original sale was on 18.02.2008. Appellant's Agreement for Purchase of First New House was on 25- 07-2008. The same was cancelled on 09-01-2009. The second New House was purchased on 30-04-2009. Thus, the purchase of the New House is within two years. The purchase was complete on 29-05-2009 when appellant paid the balance money. In the circumstances, Appellant has fulfilled all the conditions u/s 54(2) of the Act. In this connection, appellant places reliance on the decision of Hon. Mumbai ITAT in case of Mukesh G. Desai HUF – 2008 – 24 SOT 312, wherein, it was held as under;

"The sequence of events in the instant case revealed that the assessee's intention to invest the capital gains in the residential house to avail of the exemption under section 54 was beyond any doubt. The Assessing Officer had not brought anything on record to derive any mala fide intention in the assessee's decision to pay the capital gains to 'D' as per the agreement and in receiving the refund of the same owing to the possible threat to the proposed row house. The Assessing Officer had not established that the agreement dated 26-8-1996 and the agreement for cancellation were bogus. Therefore, the cancellation of the agreement by the assessee would fall within the ambit of the doctrine of caveat emptor (i.e., buyers beware) and surrender of row house was legally justified. The assessee was not expected to proceed to buy a defective residential house (new asset), which was prone to demolition by the Municipal A6thorities in order to quality for exemption under section 54F. Therefore, the decision of the lower authorities in treating the row house as the new asset was misplaced. [Para 12] A.Y. 08-09 [David Cleophas Pereira vs. ITO(IT)] Page 14

Sub-section (3) of section 54F stipulates that the 'new asset' purchased or constructed must not be transferred within the lock in period of 3 years from the date of such purchase or construction of 'new asset'. The Assessing Officer denied the claim of exemption under section 54F for the reason of violation of said condition, considering the row house as the 'new asset'. The assessee did not actually purchase the 'new asset' and, therefore, the refund received by the assessee from 'D' in respect of the surrender of the row house was not relatable to any transfer of the new asset. Resultantly, the violation of said condition in sub-section (3) of section 54F did not arise. (Para 13]

Sub-section (4) of section 54F provides for depositing the un utilized capital gains in the bank as per the prescribed Capital Gain Scheme and manner of taxing such gains if not utilized before the due date for furnishing the return of income under section 139. In the instant case, the capital gain was given to the seller of the 'row house'. Therefore, the same was not in the possession of the assessee from August, 1996 to June, 1997. There was no mala fide intention made out by the Assessing Officer of the said transaction of giving the capital gain to the seller of the 'row house'. The assessee had successfully invested in construction of 'new asset' before March 1998. Since the assessee had already parted with the capital gain before the due date for filing the return in connection with the 'row house' acquisition, there was no way in which the assessee would have complied with the condition of depositing it in the bank as per sub-section (4) of section 54F. Therefore, there was no violation of the condition of sub-section (4) of section 54F by the assessee. [Para 14]

The assessee had entered into an agreement with A.Y. 08-09 [David Cleophas Pereira vs. ITO(IT)] Page 15 the company 'S' which was engaged in the construction of building called 'Abhijit'. The assessee paid Rs. 30.50 lakhs on 28-3-1998 and purchased the 'block of shares' of the company 'S' and got them transferred to his name under respective agreements to sell shares from the respective shareholders of 'S' and became entitled to an allotment of a flat of the proposed under construction building. The said building was constructed and the assessee got occupancy certificate from the Municipal Corporation of Greater Mumbai (MCGM) on 4-12-1998. The assessee gave possession letter dated 5-12-1998 to the builder. On examination of the above facts ignoring the events involving the surrendered row house, the assessee's investment of capital gain on 28-3-1998 in the purchase of block of shares of company 'S', which, in turn, got him entitled to a flat in the Abhijit building, was within the period of three years. After all the purchase of block of shares of company 'S' and procuring the entitlement to a flat were the composite transactions which were interlinked. Therefore, the investment in block of shares of the company 'S' was the investment of capital gain in the flat. [Para 15]

Therefore, the assessee had not violated the provisions of sub-sections (3) and (4) of section 54F relating to transfer of new asset during lock in period and depositing the capital gains before the due date for filing the return of income. Further, the investment in the flat at 'Abhijit' building was the case of construction and, therefore, 3 years time-limitation was applicable. Accordingly, the assessee had complied with the condition of 3 years specified in sub-section (1) of section 54F. Therefore, the assessee was entitled to exemption under section 54F as claimed. [Para 17] A.Y. 08-09 [David Cleophas Pereira vs. ITO(IT)] Page 16

It is submitted that, in the said decision, the relevant section is 54F. However, there are similar provisions in both the sections 54 and 54F. Hence, the ratio of the said decision is squarely applicable to appellant's case.

4. Ld. AO has not stated anything further or anything adverse about the factual aspects of dates of purchase / cancellation / new purchase and corresponding Receipts / Payments thereof. In the circumstances, it should be presumed that, there is no dispute regarding the validity of all the documents.

We hope the aforesaid submissions will suitably answer the objections raised by the ld. AO in the remand report and adequately support appellant's contentions and find favour of your Honour. In case your Honour needs any further details / submissions, please do let us know.”

4. Having considered the remand report and written submissions of learned Authorized Representative, CIT(A) observed that property at 26, Macmurdo Ave, Hamilton, New Zealand was never purchased by assessee though as per documents originally filed during appeal in support of deduction u/s.54 where in, it was stated that this property was purchased. According to CIT(A), assessee failed to discharge his obligation for claiming deduction. CIT(A) after taking into consideration the facts and circumstances and its legal scrutiny, dismissed the appeal of assessee.

5. Before us, learned Authorized Representative drew our attention to the written submission dated 10.10.2011 filed before concerned CIT(A) placed on page nos. 1 & 2 of paper book along with certificate from assessee’s Solicitors in New A.Y. 08-09 [David Cleophas Pereira vs. ITO(IT)] Page 17 Zealand regarding purchase of properties and payments thereof along with proof of payments and search report etc., which is placed on record on page nos. 3 to 6 of Paper book. Assessee has placed purchase agreement of second property on page nos. 7 to 14 of Paper book inter alia filed assessee’s bank statement disclosing various payments/receipts for purchase/cancellation and re-purchase of property in New Zealand as appearing on page nos. 15 to 20 of Paper book filed by Assessee. He also filed details of sale of property at Bandra, Mumbai. He also filed assessee’s remittance of sale proceeds of house property and bank balance in India to New Zealand and bank statement disclosing the said remittance and assessee’s correspondence with his Bank in India. He also filed assessee’s loan agreement in New Zealand as placed on page 62 to 72 of Paper book filed by Assessee. All these documents claimed to be filed before CIT(A) which has not been dispute on behalf of revenue. In this background, he submitted that undisputedly, assessee has purchased property at No.26, Macmurdo Ave, Hamilton at New Zealand which is duly certified by concerned Solicitors of assessee at New Zealand as discussed above. In common wealth laws solicitors are competent to certify such transaction. Assessee has also relied on the decision of Chennai ‘C’ Bench in case of N. Ranganathan vs. ITO [2014] 51 taxmann.com 56 (Chennai – Trib.), wherein profit on sale of property used for residential house (foreign house property). It was held that as per ITA No.3526/Mum/13 A.Y. 08-09 [David Cleophas Pereira vs. ITO(IT)] Page 18 provisions of Section 54, claim for deduction cannot be rejected on grounds that new house was purchased in a foreign country, in currency of said country and purchase amount was more than sale proceeds of Indian house property. This was decided in favour of assessee. Learned Authorized Representative submitted that ITAT, Lucknow ‘A’ Bench in case of ACIT vs. Iqbal Jafar [2014] 52 taxmann.com 189 (Lucknow – Trib.), wherein exemption in case of investment in residential house (Investment outside India), assessee was held to be entitled for deduction u/s.54F in respect of purchase of residential house out of India as all other conditions provided in that Section had been fully complied with by assessee company. The said amendment whereby “In India” was inserted in the provision 54 of Income Tax Act by Finance No.2 Act,2014 with effect from 01/04/2015 which is perspective one. So, the claim of assessee should be allowed. In view of above factual and legal discussion, learned Authorized Representative submitted that claim of assessee exemption u/s.54, as prayed allowed. On the other hand, learned Departmental Representative supported the orders of authorities below and submitted that assessee is not entitled for exemption for alleged purchase of property in New Zealand and learned Departmental Representative also submitted that it is not clear whether assessee has purchased property at all New Zealand which entitled him for claiming exemption u/s.54 A.Y. 08-09 [David Cleophas Pereira vs. ITO(IT)] Page 19 of the Act. Accordingly, orders of authorities below should be confirmed.

6. After going through rival submissions and material on record, we find that assessee is non residential Indian in New Zealand. He has undisputedly sold his property at Bandra as mentioned above for consideration of Rs.70lacs and claimed exemption u/s.54 of the Act amounting to Rs.54,64,498/- for investment made for purchase of residential house at No.26, Macmurdo Ave, Hamilton, New Zealand. Revenue authorities below have doubted the purchase a residential house at Hamilton, New Zealand and also taken a legal ground for not allowing exemption u/s.54 for purchase of property abroad. During remand proceedings, assessee furnished fresh evidence and requested CIT(A) to invite remand report of concerned Assessing Officer, as said documents were not furnished earlier, hence not available for consumption of concerned Assessing Officer during scrutiny assessment. Assessee clarified the facts regarding purchase of second new house against cancellation of first new house at New Zealand. Assessee furnished relevant documentary evidences to support that the said decision to cancel the first new house was not as per his wish. It was explained with proof that the said decision was required to be taken because it was the seller's failure to deliver the vacant possession of the said house. Therefore, after due consultation with his Solicitors, assessee cancelled his A.Y. 08-09 [David Cleophas Pereira vs. ITO(IT)] Page 20 agreement to purchase the first new house and decided to Purchase the second new house in Auction. Assessee cannot penalized to cancel original agreement which was attributable to original seller’s inability to execute the same. All the Facts and explanations regarding new documents were already stated in letters filed before revenue authorities. In remand proceeding, Assessing Officer has opposed the admission of additional evidence with regard to purchase of second house. He has not stated anything about verification the facts about the purchase of second new house against cancellation of first new house. The Solicitor of the assessee has confirmed the fact of date of original sale was on 18.02.2008. Assessee’s agreement for Purchase of first new house was on 25.07.2008. Same was cancelled on 09.01.2009. Second new house was purchased on 30.04.2009. Thus, purchase of the new house was within two years. The purchase was completed on 29-05- 2009 when assessee paid the balance money. Thus, assessee fulfilled all the conditions u/s 54(2) of the Act. In case, Assessing Officer or CIT(A) had any doubt at any stage, they could have sought clarification from concerned Solicitor or in any legal manner available to them as per law. No such effort has been made by lower revenue authorities. Thus, the position emerged that assessee after selling the property at Bandra has purchased new property at New Zealand after cancellation of first property as discussed above. It is also supported by the report of Solicitor as well and the A.Y. 08-09 [David Cleophas Pereira vs. ITO(IT)] Page 21 transactions subsequently took place at New Zealand was within stipulated time for claiming exemption under the provisions of Section 54 of the Act. Thus, issue before us by revenue regarding purchase of house in New Zealand and allowability of exemption for purchase of property abroad. We find that ITAT Chennai ‘C’ Bench in case of N. Ranganathan vs. ITO (supra) has held that assessee can claim deduction with regards to purchase of new house in foreign country if other conditions are fulfilled. Similar view has been taken by Lucknow Bench in case of ACIT vs. Iqbal Jafar (supra), it has been held that assessee would be entitled to deduction u/s.54F in respect of purchase of residential house out of India as all conditions provided in that Section had been fully complied with by assessee. Even, in case before us, all conditions have been complied with by assessee, in terms of sale and purchase along with dates. So, assessee is entitled for claiming deduction. The ratio of decisions relied by CIT(A) have been taken care in above two decisions, regarding insertion of India in the provisions of 54 of Act by Finance No. (2) Act ,2014 w.e.f 01/04/2015. There is nothing on record to suggest that said amendment of inserting “in India” under the provisions of 54 has retrospective effect. Practically, assessee cannot be put to advance position by subsequent amendment. Thus, the claim of assessee is allowed. Assessing Officer is directed accordingly. A.Y. 08-09 [David Cleophas Pereira vs. ITO(IT)] Page 22

Pronounced in the open Court on this the 30th day of October, 2015.

Sd/- Sd/- (ASHWANI TANEJA) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai: Dated 30/10/2015 S.K.SINHA आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. राज�व / Revenue 2. आवेदक / Assessee 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त- अपील / CIT (A) 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, मुंबई / DR, ITAT, Mumbai 6. गाड� फाइल / Guard file. By order/आदेश से,

उप/सहायक पंजीकार, आयकर अपील�य अ�धकरण, मुंबई ।