Tribunal upholds deductions under Sections 54 and 54F for residential properties. Revenue's appeal dismissed.

The Tribunal upheld the CIT(A)'s decisions, granting the assessee deductions under Sections 54 and 54F for investing in residential properties, including one outside India, and ruled that indexation for inherited property should start from the year the previous owner held the asset. The Revenue's appeal was dismissed, affirming the assessee's entitlement to exemptions and indexation treatment. This judgment was issued on June 27, 2018.

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Issues Involved:
1. Deduction under Section 54 for investment of capital gain in a residential house outside India.
2. Exemption under Section 54F without depositing the sale consideration amount in the Capital Gains Bank Account.
3. Indexation year of the cost of acquisition for inherited property.

Issue-wise Detailed Analysis:

1. Deduction under Section 54 for Investment in Residential House Outside India:
The first issue concerns whether the assessee is entitled to a deduction under Section 54 for investing capital gains in a residential house in Australia. The assessee inherited a house property in Chennai, sold it, and purchased a house in Australia. The AO denied the exemption, arguing that Section 54 does not apply to properties purchased outside India. However, the CIT(A) allowed the exemption, and this decision was supported by the Gujarat High Court's ruling in Leena Jugalkishore Shah v. ACIT, which held that prior to the amendment effective from April 1, 2015, Section 54 did not restrict the location of the residential house to India. Consequently, the Tribunal upheld the CIT(A)'s decision, dismissing the first ground of appeal.

2. Exemption under Section 54F Without Depositing in Capital Gains Bank Account:
The second issue revolves around the exemption under Section 54F when the assessee did not deposit the sale consideration in a specified Capital Gains Bank Account. The AO denied the exemption citing the Bombay High Court's decision in Humayun Suleman Merchant v. CCIT, which mandates the deposit of unutilized amounts in a specified account before the filing of the return. The assessee argued, citing several judgments, including CIT v. K. Ramachandra Rao and CIT v. Ms. Jagriti Aggarwal, that the entire sale consideration was invested in purchasing a house within the stipulated period, and thus, the exemption should be granted. The Tribunal, considering the factual scenario and the cited judgments, concluded that the assessee had indeed invested the capital gains within the permissible period and dismissed the second ground of appeal.

3. Indexation Year of Cost of Acquisition for Inherited Property:
The third issue pertains to the appropriate year for indexation of the cost of acquisition of an inherited property. The AO allowed indexation from the year the assessee inherited the property (2001-02), whereas the assessee claimed indexation from 1981-82, the year her mother held the property. The CIT(A) sided with the assessee, relying on the Bombay High Court's decision in CIT v. Manjula J. Shah, which held that the indexation should be from the year the previous owner first held the asset. The Tribunal upheld this view, dismissing the third ground of appeal.

Conclusion:
The Tribunal dismissed the Revenue's appeal, confirming the CIT(A)'s decisions on all three grounds. The assessee was entitled to the exemptions under Sections 54 and 54F, and the indexation should be from the year the previous owner held the property. The judgment was pronounced in open court on June 27, 2018.

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