2013 (9) TMI 80 - AT - Income Tax

Tax Tribunal: Exemption granted under Section 54F for foreign property. Assessee wins appeal.

Vinay Mishra Versus Assistant Commissioner of Income-tax

Vinay Mishra Versus Assistant Commissioner of Income-tax - [2012] 20 ITR 129 Issues Involved:1. Eligibility of the assessee to claim exemption under section 54F of the Income-tax Act, 1961 for investment in house property located outside India.Detailed Analysis:Background:The assessee, a director of M/s. Marketics Technologies (India) P. Ltd., filed a return for the assessment year 2009-10 declaring a total income of Rs. 1,53,44,940. The assessee claimed an exemption under section 54F of the Income-tax Act, 1961, for long-term capital gains (LTCG) invested in a house property in the USA. The Assessing Officer (AO) rejected this claim, stating that the Act applies only to India and thus the property must be situated in India. This decision was upheld by the Commissioner of Income-tax (Appeals) [CIT(A)].Assessee's Arguments:1. Legislative Intent and Statutory Interpretation:- The assessee argued that section 54F does not specify that the new residential house must be situated in India.- Cited several judicial precedents, including the Karnataka High Court's decision in *Director of Income-tax (International Taxation) v. Mrs. Jennifer Bhide*, which emphasized that courts should not read into the statute words that are not there.- Argued that beneficial provisions should be interpreted liberally in favor of the taxpayer, referring to *Bajaj Tempo Ltd. v. CIT* and *CIT v. Ravinder Kumar Arora*.2. Precedents from Tribunal Decisions:- The assessee relied on the Mumbai Tribunal's decision in *Mrs. Prema P. Shah and Sanjiv P. Shah v. ITO*, which allowed exemption under section 54F for a property purchased outside India.- Highlighted that the Mumbai Tribunal in *ITO v. Dr. Girish M. Shah* followed the same reasoning.3. Ambiguity and Interpretation:- Contended that the Ahmedabad Tribunal's decision in *Leena J. Shah v. Asst. CIT* was based on an assumed ambiguity and lacked detailed reasoning.- Emphasized that when two views are possible, the one favoring the taxpayer should be adopted, citing *CIT v. Strawboard Mfg. Co. Ltd.*.Department's Arguments:1. Inherent Requirement:- The CIT-Departmental representative argued that the provisions inherently required the investment to be in India.- Cited the Supreme Court decisions in *Oxford University Press v. CIT* and *American Hotel and Lodging Association Educational Institute v. CBDT*, which dealt with section 10(22) of the Act, to support their stance.Tribunal's Findings:1. Statutory Interpretation:- The Tribunal found that section 54F does not explicitly require the new residential house to be situated in India.- Cited the Karnataka High Court's decision in *Mrs. Jennifer Bhide*, emphasizing that introducing words not present in the statute amounts to legislating.2. Precedents and Consistency:- The Tribunal preferred the detailed reasoning of the Mumbai Tribunal in *Mrs. Prema P. Shah and Sanjiv P. Shah* and *Dr. Girish M. Shah* over the Ahmedabad Tribunal's decision in *Leena J. Shah*.- Recognized that the provisions of sections 54 and 54F are pari materia and thus the reasoning applied in section 54 cases should apply to section 54F cases as well.3. Beneficial Interpretation:- Agreed with the assessee's contention that beneficial provisions should be interpreted liberally in favor of the taxpayer.Conclusion:The Tribunal concluded that the assessee is eligible for exemption under section 54F of the Act, as all conditions laid down in the section were satisfied. The appeal was allowed, and the stay petition became infructuous.Final Order:The order was pronounced in the open court on October 12, 2012.