Exemption under section 54F granted for reinvestment in foreign property despite prior amendments.

The Tribunal allowed the assessee's claim for exemption under section 54F, despite reinvesting capital gains in a residential property outside India. The decision was based on the non-retrospective amendment requiring investment in a residential house in India for exemption under section 54F, effective from April 1, 2015. The Tribunal emphasized legislative changes post-2015, allowing the claim as all conditions under section 54F were satisfied. The judgment was pronounced on July 13, 2022.

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Issues involved:
Whether the assessee is eligible for exemption u/s 54F in case of investment of capital gains through the purchase of residential property outside India or notRs.

Analysis:
The appeal was filed by the assessee against the order of the ld. CIT (International Taxation) regarding the taxation of capital gains from the sale of a property. The Assessing Officer initially treated the proceeds as short-term capital gains but later allowed a deduction claim under section 154, resulting in a refund. The main issue was whether the assessee, a non-resident of India, was eligible for exemption under section 54F for reinvesting the capital gains in a residential property outside India.

The ld. CIT set aside the Assessing Officer's order, citing the Finance Act, 1982, which inserted section 54F to encourage house construction, implying investment in a residential house in India. The CIT emphasized that the words "in India" were crucial in interpreting section 54F, indicating that the new asset should not be situated outside India. The CIT's decision was based on the legislative intent to promote investment in residential houses within India.

The Tribunal reviewed similar cases where investment in residential property outside India was allowed for exemption under section 54F. The Co-ordinate Bench of ITAT Bangalore and the High Court of Gujarat had previously ruled in favor of such investments, emphasizing that section 54F did not specify the location of the residential property for reinvestment. However, an amendment in the Finance Act, 2014, made it mandatory to invest in a residential house in India for claiming exemption under section 54F, effective from April 1, 2015.

Considering the non-retrospective nature of the amendment and the satisfaction of all conditions under section 54F by the assessee, the Tribunal allowed the claim for exemption under section 54F. The decision was based on the legislative changes post-2015, which required investment in a residential house in India to avail of the exemption. Therefore, the appeal of the assessee was allowed, and the judgment was pronounced on July 13, 2022.

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