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Section 54 Exemption allowed on House Property acquired Outside India for A.Y. 2014-15 and for earlier A.Ys.

ITO Vs Arshia Basith (ITAT Bangalore)

we find that the assessment year in this appeal is 2014-15 and the provision in section 54F comes w.e.f. 01.04.2015 according to which it was clarified that the residential house is to be acquired only in India meaning thereby before this amendment it was not clear as to whether the benefit of section 54F can be given to residential house acquired in India or abroad. This issue was examined by the Tribunal in the case of ACIT Vs. Iqbal Jafar (supra) which was authored by one of the members of this Bench and it was held by the Tribunal that before the amendments, the benefit can also be given to the residential house acquired in abroad.

FULL TEXT OF THE ITAT JUDGMENT

This appeal is preferred by the Revenue against the order of the CIT(A), inter alia, on following grounds:

1. The learned Commissioner of Income Tax( Appeals)-12, Bengaluru ought to have considered the fact that in view of the statutory provisions of section 54, the residential house must be in India.

2. The learned Commissioner of Income Tax( Appeals)-12, Bengaluru failed to appreciate the fact that in view of settled ruling of interpretation of the tax statute, the residential house purchased/constructed must be in India and not outside India.

3. The learned Commissioner of Income Tax( Appeals)-12, Bengaluru failed to consider the Memorandum explaining provisions in the Finance Bill 1982 that the exemption in section 54 is granted with a view to encouraging house construction. This would naturally mean that house construction/purchase would be encouraged by provisions of this section in India and not outside India. Further, the Memorandum explaining the provisions of the Finance(No.2) Bill 2014 also notes that the benefit under the existing provisions of section 54 and 54F of the Income-tax Act, 1961 was intended for investment in one residential house in India. The amendment to the Act with effect from 01/04/2015 was only to explicitly express the intent which was earlier available but implicit in sections 54 and 54F.

4. The learned Commissioner of Income Tax( Appeals)-12, Bengaluru failed to consider the fact that the decisions of the Jurisdictional Tribunal in the cases of Shri. Vinay Mishra and Sri. Satya Prakash N Makam(HUF) have not been accepted and the same are still pending before the Hon’ble High Court of Karnataka.

5. For these and other grounds that may be adduced at the time of hearing, it is prayed that the order of the learned Commissioner of Income Tax(Appeals) -12, Bengaluru may be cancelled and that of the AO may be restored.

2. During the course of hearing, the learned Counsel for the assessee has contended that this ground is squarely covered by the order of the Tribunal in the case of ACIT Vs. Iqbal Jafar (2014) 51 com189 (Lucknow – Trib.) and Vinay Mishra Vs. ACIT (2013) 30 taxmann.com 341 (Bangalore – Trib.) in favour of the assessee. The learned DR placed a reliance upon the orders of the CIT(A).

3. Having carefully examined the orders of authorities below in the light of rival submissions, we find that the assessment year in this appeal is 2014-15 and the provision in section 54F comes w.e.f. 01.04.2015 according to which it was clarified that the residential house is to be acquired only in India meaning thereby before this amendment it was not clear as to whether the benefit of section 54F can be given to residential house acquired in India or abroad. This issue was examined by the Tribunal in the case of ACIT Vs. Iqbal Jafar (supra) which was authored by one of the members of this Bench and it was held by the Tribunal that before the amendments, the benefit can also be given to the residential house acquired in abroad. The relevant observation of the Tribunal is extracted hereunder for the sake of reference:

“9. Having heard the rival submissions and from a careful perusal of the orders of the authorities below, find that it has been repeatedly held by the Hon’ble Apex Court and various High Courts that cardinal rule of interpretation is that the statute must be construed according to its plain language and neither should anything be added nor subtracted therefrom unless there are adequate grounds to justify the inference that the legislature clearly so intended. It is also well settled that in a taxing statute one has to look merely at what is clearly stated The meaning and extent of the statute must be collected from the plain and unambiguous expression used therein, rather than from any notions which may be entertained by the Court as to what is just or expedient.

10. In the case of TV. Sundaram lyyengar & Sons (P.) Ltd. (supra), their Lordships have held that if the language of the statute is clear and unambiguous, the court cannot discard the plain meaning, even if it leads to an injustice.

11. Again in the case of Smt. Tarulata Shyam v. CIT’ (supra), it was held that there is no scope for importing into the statute words which are not there. Such importation would be, not to construe, but to amend the statute. Even if there be a casus omissus, the defect can be remedied only by Legislation and not by judicial interpretation.

12. Further, in the case of Sodra Devi (supra), it was held by the Hon ‘ble Apex court that unless there is an ambiguity, it would not be open to the Court to depart from the normal rule of construction which is that the intention of the legislature should be primarily to gather from the words which are used. It is only when the words used are ambiguous that they would stand to be examined and considered on surrounding circumstances and constitutionally proposed practices.

13. We have also examined the order of the Tribunal in the case of Vinay Mishra (supra), in which it has been held that the words ‘in India; cannot be read into section 54F when Parliament in its legislative wisdom has deliberately not used the words ‘in India’ in section 54F of the Act. The Tribunal accordingly held that assessee ‘s claim for exemption under section 54F of the Act shall be allowed since all conditions laid down in this section are satisfied for availing the said exemption, though he has acquired house property in U.S.A.

14. Similarly in the case of Mrs. Prema P. Shah (supra), the Tribunal has again held that the assessee was entitled to the benefit under section 54 of the Act, which does not exclude the right of the assessee to claim property purchased in a foreign country, if all other conditions laid down in the section are satisfied, merely because the property acquired was in a foreign country.

15. Again in the case of Dr. Girish M Shah (supra), the Mumbai Bench of the Tribunal has taken a view by holding that the assessee is entitled for exemption under section 54F of the Act for of house property outside India i.e. in Canada.

16. Having carefully examined various judicial pronouncements and the order of the Id. CIT(A), we find pt in the case of Leena J. Shah v. Assts. (2006) 6 SOT 721 (Ahd.), the Tribunal has taken a t view that the words “in India” cannot be inserted in section 54F of the Act and as per plain of section 54F of the Act, the sale proceeds of capital asset shall be invested in residential house or outside India. We, accordingly, following the judgment of the Hon’ble Apex Court in the case v. Vegetable Products Ltd [1973j 88 ITR 192, hold that the view favourable to the assessee taken ous Benches of the Tribunal should be followed and accordingly following the same, we hold that the assessee is entitled for exemption under section 54F of the Act. We, therefore, do not find any infirmity in the order of the Id. CIT(A), who has rightly adjudicated the issue in the light of the ratio laid down by the Tribunal in a number of cases. Accordingly, the order of the ld. CIT(A) is confirmed and the appeal of the Revenue is dismissed.”

4. Since the Tribunal has taken a view in similar set of facts, we find no justification to take a contrary view in this appeal. Accordingly, following the same, we hold that the assessee is entitled for deduction under section 54F of the Act. Therefore, we find no infirmity in the order of the CIT(A). We accordingly confirm the same.

5. In the result, appeal of the Revenue is dismissed.

Pronounced in the open court on 14thAugust, 2018.

Categories: Income Tax
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