SH. JASWINDER SINGH LOTA,MOHALI vs. DY. DIRECTOR OF INCOME TAX, CHANDIGARH

PER DIVA SINGH, JM

The present appeal has been filed by the assessee assailing the correctness of the order dated 22/09/2015 of CIT(A)-43 New Delhi pertaining to 2008–09 assessment year. Although various grounds have been raised by the assessee in the present appeal, however the arguments were confined to ground No. 1. The other grounds, it was submitted, are supportive of the said ground and can be treated as arguments. For ready reference the grounds are reproduced hereunder : i) That the order passed u/s 143(3) r/w Sec 148 of the Income Tax Act, 1961 is against the law and facts on the file in as much as the Ld. CIT (A) was not justified to uphold the action of the Ld. AO in refusing the exemption claimed by the appellant u/s 54 of the Act ibid on the sole ground that the appellant had purchased/constructed a residential property in foreign country. ii) The furthermore, the Ld. CIT (A) has failed to notice the facts of the case that the appellant had sold a residential house for a sum of Rs 320.00 lacs in A.Y 2008-09 and further reinvested its long term capital gain in buying a residential house in UK for sum of Rs.369.60 lacs, after raising Housing loan from HSBC, London. However, the Id. AO had arbitrarily made addition to its total income to the tune of Rs.2,08,18,700/- under the head of "Capital Gain" and assessed total income of Rs 2,09,04,320/- for the A.Y. 2008-09.

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iii) That furthermore, the present case was for the A.Y. 2008-09 and in that particular year, there was no bar in reinvesting long term Capital Gain in buying a residential property in Foreign Country. Meaning thereby, to claim exemption u/s 54 of the Act ibid, there were no restrictions in regard to the location of the new residential property, it can be located very well outside India. However, an amendment u/s 54 of Income Tax Act, 1961 has been made by introducing Finance Act, 2014, wherein only residential house property purchased in India qualifies for exemption. iv) That furthermore, the Ld. CIT (A) is erroneous in upholding the additions made by the Ld. AO on the account of alleged income under the head of Capital gain whereas the income under the head of capital gain is NIL. v) That the impugned order dated 22.09.2015 passed by the Ld. CIT (A) is highly excessive, unreasonable and unjustified and outside the scope of natural justice. Further, it has been made without resorting to proper provisions of the Income Tax Act, 1961. 2. Ld. AR inviting attention to the decision of the Hon’ble Gujarat High Court in the case of Leena J Kishore Sharma Vs ACIT in ITA 483/2006 dated 14/06/2016 submitted that the controversy has been set at rest by virtue of the said decision as the Court in categorical terms has held that investment in residential house property outside India before the amendment to section 54F made by Finance Act,2014 which has come into effect from 01/04/2015 will be entitled for deduction under section 54F of the Income Tax Act,1961. Inviting attention to paragraph 2 of the assessment order, it was submitted that the AO had rejected the claim on the reasoning that the ITAT had held that investment outside India was not allowable u/s 54F by relying upon Leena J. Shah decision reported in 6 SOT 721 (AHD) which decision has been upset by the Hon’ble Gujrat High Court. The CIT(A) in the impugned order also did not have the benefit of the said decision as the Hon'ble Gujrat High Court’s decision is dated 14.06.2016. 3. The Ld. Sr.DR who had specifically been given time on earlier occasions to consider the facts of the case as considered by the Hon’ble Gujrat High Court, qua the facts of the present case relies upon the assessment order. No distinction on facts or any contrary decision was cited before the Bench to take a contrary view. 4. We have heard the rival submissions and perused the material available on record. The record shows that the assessee sold a specific house No. 2531 in sector 35 Chandigarh on 01/01/2008 i.e. in

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financial year 2007–08 for an amount of Rs. 3.20 Crore. In the meantime the assessee made an investment in house number 1205/1 in sector 51 on 27/12/2007 out of the sale proceeds of Sector 35 house. The assessee filed a certificate to this extent qua the purchase of the sale proceeds from house in Sector 35. The remaining amount was deposited by the assessee in NRO account in HSBC Sector 9 Chandigarh. Subsequently, the remaining amount of Rs. 2.95 crore was invested in purchase of house in UK. Funds were transferred from HSBC account Sector 9 Chandigrah. The 15CA certificate was filed claiming deduction under section 54F on account of purchase of new house the taxes or reduce it is seen allowed the claim qua the purchase of house in sector 51 however qua the investment made in UK, the claim was rejected primarily relying upon the fact that the investment was made in UK and not in India. Accordingly the reliance placed upon the assessee on the decision of the ITAT in the case of Mrs Prema P Shah versus ITO in ITA 02/07/2006/Mum/1997 dated 29.11.2005 was held to be not relevant and the decision of the ITAT Ahmedabad Bench in the case of Leena J. Shah was held to be applicable. The Hon’ble High Court has set the controversy at rest and the decision of the ITAT has not been approved. The year under consideration in the facts of the present case being 2008–09 assessment year, we find that the issue is no longer res integra and thus cannot be said to be any longer covered in favour of the revenue. For ready reference, we extract para 9 of the decision of the Gujrat High Court where the Court in unambiguous terms was pleased to hold 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

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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. 10. 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 i n 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 be extended to a residential house purchased outside India. In that view of the matter, the appeal is allowed. The order of the Tribunal is set aside. We answer the question in favour of the assessee and against the revenue.

4.1 The Ld. AR in the course of the hearing had also filed copy of the order dated 15.02.2018 in ITA 3429/MUM/2016 in the case of Ashok Keshavlal Tejuja versus ACIT. Relying on the said decision it was submitted by the Ld. AR the decision being latest in point of time wherein the ITAT has relied on the decision of the Hon’ble Gujarat High Court and in the absence of any contrary decision, it was his prayer that the same may be followed. A perusal of the said order further brings out the fact that the coordinate Bench sitting at Mumbai took cognizance of an earlier order also of the Mumbai Bench in the case of IT0 versus Nishant Lalit Jadhav in ITA 68 83/Mum/2014 which also relied on the aforesaid decision. Accordingly, in the peculiar facts and circumstance of the present case which have been set out herein above considering the position of law as also discussed in detail in the earlier portion of this order, we find that in the peculiar facts of the present case the claim of the assessee has to be allowed. It is seen that the amendment by the Finance Act of 2014 in section 54F comes into effect only from 01/04/2015. Thus from the said date the benefit of deduction under section 54F for investments made outside India undisputedly can be denied as it can be said to be limited to the investment in residential house property made only within India. However prior to the said date when the amendment kicks in, there is no statutory bar for the

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taxpayer to make investments outside India in residential house property in order to get the benefit of deductions 54F provided other conditions were fulfilled. Thus, since the assessment year under consideration is prior to the amendment of section 54F by the Finance Act, 2014 the law as on date stands that the claim of the assessee has to be allowed. Accordingly, the issue is restored back to the assessing officer with a direction to grant necessary relief in accordance with law.

Sd/- Sd/-

( Dr.B.R.KUMAR) ( DIVA SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER

‘Poonam’ Copy to: 1. The Appellant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR

Asstt. Registrar ITAT,Chandigarh.