TaxTMI 
TaxTMI 
2005 (11) TMI 386
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....is dismissed, as not pressed. 4. In respect of ground No. 3, it is submitted by the ld. AR that the ground was taken before CIT(A) but same has not been adjudicated by the CIT(A). After hearing both the sides, we send back this matter of ground No. 3 to the file of CIT(A) to decide the same in accordance with law. 5. The facts of the second ground are as under : The assessee is a non-resident and during the year she sold some plots of land for a consideration of Rs. 44,92,170 against the indexed cost of Rs. 1,11,760 and, thus, she earned capital gain of Rs. 43,80,454. She claimed exemption under section 54B/54D of the Act. But the Assessing Officer found that none of these provisions apply in the case of the assessee. The Assessing Officer has further observed that the appellant has stated that she has made investment in residential house and, therefore, she is entitled to exemption of capital gains. But the Assessing Officer has observed that she has purchased a residential house in USA i.e., outside India and the investment made was out of mortgage loan from BBNT (USA) of dollar 7,68,000 and out of personal savings of dollar 32,601. The sale proceeds of the plot sold in ....
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....able to both the categories of assessee without any discrimination. Any interpretation which militates against this basic principle would not be a just and fair interpretation of the statute and would amount to doing injustice to all non-residents in general and your appellant in particular. Let us take a few examples to clarify the issue. 1. A resident gets, either by inheritance or bequeath, residential house outside India. He sells the house in the foreign country and makes a capital gain. The capital gains so earned will be taxable, although the capital asset is located outside India and the transaction is completed outside India, because a resident is taxed on his global income. Then within the time period prescribed under section 54 if he purchases another residential house outside India at a cost exceeding the capital gain made on the original asset (residential house sold), he will be undoubtedly entitled to the exemption under section 54. 2. A resident gets, either by inheritance or bequeath, a residential house in India sells the same and makes a capital gain. Then, he goes outside India and within the stipulated time purchases a residential house in a foreign co....
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....tives of the parties and perused the record and gone through the decision cited by the ld. AR. The crux of the matter whether benefit of section 54F is available to a residential house purchased out of India. It would be convenient to note statutory provisions, section 54F for its proper appreciation : "54F. Capital gain on transfer of certain capital assets not to be charged in case of investment in residential house - (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,- (a)if the cost of the new asset is not less than the net consideration in respect....
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....s section 54F is also required to read accordingly, the words 'purchase/construction of a residential house' on plain and simple reading means, the purchase/construction of a residential house must be in India and not outside India. This view is supported by the above judgments. At this juncture, we would like to refer some important ruling and observations of the Apex Court in the case of Padmasundara Rao ( supra). "Two principles of construction - one relating to casus omissus and the other in regard to reading the statute as a whole - appear to be well-settled. Under the first principle a casus omissus cannot be supplied by the court except in the case of clear necessity and when reason for it is found in the four comers of the statute itself but at the same time a casus omissus should not be readily inferred and for that purpose all the parts of a statute or section must be construed together and every clause of a section should be construed with reference to the context and other clauses thereof so that the construction to be put on a particular provision makes a consistent enactment of the whole statute. This would be more so if literal construction of a particular clause ....
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....n in section 52, sub-section (2), and take the fair market value of the capital asset transferred by the assessee as on the date of the transfer as representing the full value of the consideration for the transfer of the capital asset and compute the capital gains on that basis. No more is necessary to be proved, contended the revenue. To introduce any further condition such as under-statement of consideration in respect of the transfer would be to read into the statutory provision something which is not there; indeed, it would amount to re-writing the section. This argument was based on a strictly literal relief section 52, sub-section (2), but we do not think such a construction can be accepted. It ignores several vital considerations which must always be borne in mind when we are interpreting a statutory provision. The task of interpretation of statutory enactment is not a mechanical task. It is more than a mere reading of mathematical furmulae because few words possess the precision of mathematical symbols. It is an attempt to discover the intent of the Legislature from the language used by it and it must always be remembered that language is at best an imperfect instrument for....
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....it is quite well known that sometimes the completion of the sale may take place even a couple of years after the date of the agreement - the market price shoots up with the result that the market price prevailing on the date of the sale exceeds the agreed price, at which the property is sold, by more than 15 per cent of such agreed price. This is not at all an uncommon case in an economy of rising prices and in fact we would find in a large number of cases where the sale is completed more than a year or two after the date of the agreement that the market price prevailing on the date of the sale is very much more than the price at which the property is sold under the agreement. Can it be contended with any degree of fairness and justice that in such cases, where there is clearly no understatement of consideration in respect of the transfer and the transaction is perfectly honest and bona fide and, in fact, in fulfilment of a contractual obligation, the assessee, who has sold the property, should be liable to pay tax on capital gains which have not accrued or arisen to him ? It would indeed be most harsh and inequitable to tax the assessee on income which has neither arisen to him no....
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....onable construction of section 52, sub-section (2), would be to read into it a condition that it would apply only where the consideration for the transfer is understated or, in other words, the assessee has actually received a larger consideration for the transfer than what is declared in the instrument of transfer and it would have no application in the case of a bona fide transaction where the full value of the consideration for the transfer is correctly declared by the assessee. There are several important considerations which incline us to accept this construction of section 52, sub-section (2). 7. The first consideration to which we must refer is the object and purpose of the enactment of section 52, sub-section (2). Prior to the introduction of sub-section (2), section 52 consisted only of what is now sub-section (1). This sub-section provides that where an assessee transfers a capital asset and in respect of the transfer two conditions are satisfied, namely, (i) the transferee is person directly or indirectly connected with the assessee; and (ii) the ITO has reason to believe that the transfer was effected with the object of avoidance or reduction of the liability of the ....
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....in sub-section (1). The net effect of this provision is as if a statutory best judgment assessment of the actual consideration received by the assessee is made, in the absence of reliable materials. 8. But the scope of sub-section (1) of section 52 is extremely restricted because it applies only where the transferee is a person directly or indirectly connected with the assessee and the object of the understatement is to avoid or reduce the income-tax liability of the assessee to tax on capital gains. There may be cases where the consideration for the transfer is shown at a lesser figure than that actually received by the assessee but the transferee is not a person directly or indirectly connected with the assessee or the object of understatement of the consideration is unconnected with tax on capital gains. Such cases would not be within the reach of sub-section (1) and the assessee, though dishonest, would escape the rigour of the provision enacted in that sub-section. Parliament, therefore, enacted sub-section (2) with a view to extending the coverage of the provision in sub-section (1) to other cases of understatement of consideration. This becomes clear if we have regard to ....
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....wer figure than what is actually received. The deed of registration mentions a particular amount, the actual money that passes is considerably more. It is to deal with these classes of sales that this amendment has been drafted. . . . It does not aim at perfectly bona fide transactions . . . but essentially related to the day-to-day occurrences that are happening before our eyes in regard to the transfer of property. I think, this is one of the key sections that should help us to defeat the free play of unaccounted money and cheating of the Government." Now, it is true that the speeches made by the Members of the Legislature on the floor of the House when a Bill for enacting a statutory provision is being debated are inadmissible for the purpose of interpreting the statutory provision but the speech made by the mover of the Bill explaining the reason for the introduction of the Bill can certainly be referred to for the purpose of ascertaining the mischief sought to be remedied by the legislation and the object and purpose for which the legislation was enacted. This is in accord with the recent trend in juristic thought not only in Western countries but also in India that interpr....
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....nt of consideration in respect of the transfer and sub-section (2) applies only where the actual consideration received by the assessee is not disclosed and the consideration declared in respect of the transfer is shown at a lesser figure than that actually received. 10. But apart from these considerations, the placement of sub-section (2) in section 52 does indicate in some small measure that Parliament intended that sub-section to apply only to cases where the consideration in respect of the transfer is understated by the assessee. It is not altogether without significance that the provision in sub-section (2) was enacted by Parliament not as a separate section, but as part of section 52 which, as it originally stood, dealt only with cases of understatement of consideration. If Parliament intended sub-section (2) to cover all cases where the condition of 15% difference is satisfied, irrespective of whether there is understatement of consideration or not, it is reasonable to assume that Parliament would have enacted that provision as a separate section and not pitchforked it into section 52 with a total stranger under an inappropriate marginal note. Moreover, there is inherent ....