Case Law Details
CIT Vs. Vinay Mishra (Karnataka High Court)
The issue under consideration is whether the assessee is entitled to claim exemption u/s 54F of the Income Tax Act in respect of investment made in the house property in USA?
High Court states that, it is axiomatic that residential property, for which investment is made needs to be situated in India for the purpose of claiming exemption under Section 54F from Assessment year 2015-16 only and not prior to that period. In the instant case, the investment in a residential house was made in USA prior to 01.04.2015, whereas, the requirement of making an investment in a residential house, which was incorporated by way of amendment, came into force w.e.f. 01.04.2015. In the light of well settled legal principles as well as the memorandum of objects of Finance Act, 2014, which clearly provide that amendments will take effect from 01.04.2015 and will apply to Assessment year 2015-16 onwards as well as the CBDT’s Circular dated 21.01.2015, it is evident that amendment incorporated in Section 54F(1) of the Act is prospective in nature. Therefore, the substantial question of law framed by this court is answered in the affirmative and against the revenue.
FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT
This appeal under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as the Act for short) has been preferred by the revenue. The subject matter of the appeal pertains to the Assessment year 2009-10. The appeal was admitted by a bench of this Court vide order dated 28.02.2013 on the following substantial question of law:
(i) Whether on the facts and in the circumstances of the case, the Tribunal justified in law in holding that the assessee is entitled to claim exemption under Section 54F of the Income Tax Act in respect of investment made in the house property in USA?
2. Facts leading to filing of this appeal briefly stated are that assessee is a Director of M/s Marketics Technologies (India) Pvt. Ltd Bangalore. The assessee filed the return of income on 20.07.2009 for the Assessment year 2009-10 declaring total income of Rs.1,53,44,940/- under the head income from salary, business, capital gains and other sources. The return of income was processed under Section 143(1) and the case of the assessee was selected for scrutiny and notice was issued on 20.08.2010. The Assessing officer vide order dated 29.12.2011 denied the exemption of Rs.11,30,20,000/- with regard to investment made in residential property holding that exemption is not available for investment in property made outside India and created a demand of Rs.6,53,96,362/-
3. Being aggrieved, the assessee filed an appeal before the Commissioner of Income Tax (Appeals), who by an order dated 16.06.2012 inter alia held that decision of the Mumbai Bench of the Tribunal is applicable only to non residents and is not applicable to the facts of the case as assessee is a resident of India. It was further held that investment should be made in India for claiming the benefit of exemption under Section 54(1) of the Act. In the result, the appeal was dismissed. The assessee thereupon filed an appeal before Income Tax Appellate Tribunal (hereinafter referred to as ‘the Tribunal’, for short). The Tribunal vide order dated 12.10.2012 held the assessee entitled to exemption under Section 54F of the Act and allowed the appeal preferred by the assessee. In the aforesaid factual background, this appeal has been filed by the revenue.
4. Learned counsel for the revenue at the outset submitted that the subject matter of the appeal is prior to amendment of the Act by Finance Act, 2014 w.e.f. 01.04.2015. It was submitted that the assessee was not entitled to exemption as the assessee had not fulfilled the condition prescribed under Section 54 of the Act, as he had not purchased the house in India. It is also urged that if there is an ambiguity in an exemption provision, like Section 54 of the Act, the benefit should go in favor of the revenue and not in favor of the assessee. Alternatively, it is submitted that the amendment incorporated by Finance Act, 2014 w.e.f. 01.04.2015 is clarificatory in nature. In support of aforesaid submissions, reference has been made to Circular No.346 dated 30.06.1982 containing explanatory notes on the provisions of the Finance Act, the relevant extract of the Finance (No.2) Bill, 2014, extract of relevant provisions of Finance (No.2) Bill, 2014, notes on clauses and decision of the Supreme Court in ‘COMMISSIONER OF CUSTOMS (IMPORTS) MUMBAI VS. DILIP KUMAR & COMPANY’, 2018 69 GST 239 (SC).
5. On the other hand, learned counsel for the assessee submitted that the Supreme Court in case of DILIP KUMAR supra was not dealing with a statutory provision but an exemption notification. While inviting the attention of this court to paragraph 12 of the aforesaid decision, it is submitted that in the matter of interpretation of a charging section of a taxation statute, strict rule of interpretation is mandatory and if there are two views possible in the matter of interpretation of charging section, the one favorable to the assessee needs to be applied. It is further submitted that the amendment to Section 54F of the Act made by Finance Act, 2014 w.e.f. 01.04.2015 is prospective in nature and the aforesaid issue is no longer res integra and has been answered in favour of the assessee in cases of ‘LEENA JUGALKISHOR SHAH VS. ACIT’, 392 ITR 18 (GUJ), ‘DIPANKAR MOHAN GHOSH IN RE’, 401 ITR 129 (AAR-NEW DEL) AND ‘CIT VS. ANURAG PANDIT IN I.T.A.NO.1169/2018 DATED 14.05.2019 (NEW DEL). Reliance has also been placed on the decision of the Supreme Court in ‘COMMISSIONER OF INCOME TAX VS. VATIKA TOWNSHIP P.LTD.’, (2014) 367 ITR 466 (SC).
6. We have considered the submissions made by learned counsel on both the sides and have perused the record. Admittedly, the dispute in the appeal pertains to Assessment year 2009-10 i.e., prior to amendment of Section 54F of the Act by the Finance Act, 2014 w.e.f. 01.04.2015. The seminal issue, which arises for consideration in this appeal is whether an assessee was required to purchase a residential house within India for the purposes of claiming exemption under Section 54F of the Act. Before proceeding further, we deem it appropriate to take note of relevant extract of Section 54F(1) of the Act as it existed prior to and post amendment w.e.f. 01.04.2015:
Prior to 01.04.2015:
54 F (1) [Subject to the provisions of sub-Section (4), where, in the case of an assessee being an individual or a Hindu
Undivided Family], the capital gain arises from the transfer of any long-term capital asset, not being a residential house (hereafter in this section referred to as the original asset), and the assessee has, within a period of one year before or [two years] after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, a residential house (hereafter in this section referred to as the new asset), the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say,-
…………………………..
…………………………..
Post 01.04.2015
54F(1) Subject to the provisions of sub-Section (4) where, in the case of an assessee being an individual or a Hindu undivided family, the capital gain arises from the transfer of any long-term capital asset, not being a residential house (hereafter in this section referred to as the original asset), and the assessee has within a period of one year before or two years after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, one residential house in India (hereafter in this section referred to as the new asset), the capital gain shall be dealt within in accordance with the following provisions of this section, that is to say.-
…………………………..
Thus, it is evident, that requirement of construction of a residential house in India in order to claim exemption under Section 54F(1) of the Act has been incorporated w.e.f. 01.04.2015.
7. Before proceeding further, we may advert to certain well settled legal principles. The Supreme Court in ‘GOVIND DAS vs. I.T.O’, (1976) 1 SCC 906 held that unless the terms of a statute expressly so provide or necessarily require it, retrospective operation should not be given to a statute so as to take away or impair an existing right or create a new obligation or impose a new liability otherwise than as regards matters of procedure. The general rule as stated by Halsbury in Vol. 36 of the Laws of England (3rd Edn.) and reiterated in several decisions of this Court as well as English courts is that all statutes other than those which are merely declaratory or which relate only to matters of procedure or of evidence are prima facie prospective and retrospective operation should not be given to a statute so as to affect, alter or destroy an existing right or create a new liability or obligation unless that effect cannot be avoided without doing violence to the language of the enactment. If the enactment is expressed in language which is fairly capable of either interpretation, it ought to be construed as prospective only. The aforesaid principle was quoted with approval by the Supreme Court in ‘Vatika Township P. Ltd.’, supra. It is a cardinal principal of law that law to be applied is that in force in the Assessment year, unless otherwise provided expressly or by necessary implication. [See: ‘Reliance Jute & Industries Ltd. vs. Commissioner of Income Tax’, AIR 1980 SC 251]. The aforesaid view was quoted with approval in ‘Commissioner of Income Tax vs. Sarkar Builders’, (2015) 7 SCC 579.
8. The relevant extract of CBDT Circular No.1/2015 dated 21.01.2015 reads as under:
20.5 Applicability: These amendments take effect from 1st April, 2015 and will accordingly apply in relation to Assessment year 2015-16 and subsequent Assessment years.
Thus, it is axiomatic that residential property, for which investment is made needs to be situated in India for the purpose of claiming exemption under Section 54F from Assessment year 2015-16 only and not prior to that period. In the instant case, the investment in a residential house was made in USA prior to 01.04.2015, whereas, the requirement of making an investment in a residential house, which was incorporated by way of amendment, came into force w.e.f. 01.04.2015. In the light of aforesaid well settled legal principles as well as the memorandum of objects of Finance Act, 2014, which clearly provide that amendments will take effect from 01.04.2015 and will apply to Assessment year 2015-16 onwards as well as the CBDT’s Circular dated 21.01.2015, it is evident that amendment incorporated in Section 54F(1) of the Act is prospective in nature. Similar view has been taken in ‘LEENA JUGALKISHOR SHAH VS. ACIT’, 392 ITR 18 (GUJ), ‘DIPANKAR MOHAN GHOSH IN RE’, 401 ITR 129 (AAR-NEW DEL) AND ‘CIT VS. ANURAG PANDIT IN I.T.A.NO.1169/2018 DATED 14.05.2019 (NEW DEL). We concur with the view taken by Delhi, Gujarat and Madras High Courts.
In view of preceding analysis, the substantial question of law framed by this court is answered in the affirmative and against the revenue.
In the result, the appeal fails and the same is hereby dismissed.
