TaxTMI 
TaxTMI 
TaxTMI 
2016 (12) TMI 351
X X X X Extracts X X X X
X X X X Extracts X X X X
....esident Indian, disposed of the property situated at Vadodara and purchased a residential house in U.S.A. i.e. outside India and investment made was out of mortgage loan from BBNT (USA) of dollar of 7,68,000 and out of personal savings of dollar 32,601. The sale proceeds of the plot sold in India was retained in India which was utilized for giving loan to Smt. Bharti K. Vyas. In view of above, the Assessing Officer observed that the sale proceeds of the plot of land has not been utilized in acquiring the residential house in USA. Moreover, the residential house purchased/constructed in USA is not subject to tax in India within the meaning of section 54 of the Income-tax Act. The Assessing Officer, therefore, did not allow the claim of deduction and brought the amount to tax. Being aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals) observed that acquiring of new asset outside India by the assessee is beyond the purview of the Income-tax Act and as such section 54F will have no application to the assessee's case. He further observed that purchasing of hous....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he date of transfer, purchases or within a period of three years after the date of transfer constructs, a residential house, then, the amount of capital gains to the extent invested in the new residential house is not chargeable to tax under section 45 of the Income-tax Act. 20.2 The provisions contained in sub-section (1) of section 54F of the Income-tax Act, before its amendment by the Act, inter alia, provided that where capital gains arises from transfer of a long term capital asset, not being a residential house, and the assessee within a period of one year before or two years after the date of transfer, purchases or within a period of three years after the date of transfer constructs, a residential house, then, the portion of capital gains in the ratio of cost of new asset to the net consideration received on transfer is not chargeable to tax. 20.3 Certain courts had interpreted that the exemption is also available if investment is made in more than one residential house. The benefit was intended for investment in one residential house within India. Accordingly, sub-section (1) of section 54 of the Income-tax Act has been amended to provide that the rollover relief under ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sset, is chargeable under the head `income from house property) Explanation - For the purposes of this section - `net consideration' in relation to the transfer of a capital asset, means the full value of the consideration received or accruing as a result of the transfer of the capital asset as reduced by any expenditure incurred wholly and exclusively in connection with such transfer. (2) Where the assessee purchases, within the period of two years after the date of the transfer of the original asset, or constructs, within the period of three years after such date, any residential house, the income from which is chargeable under the head "income from house property", other than the new asset, the amount of capital gain arising from the transfer of the original asset not charged under section 45 on the basis of the cost of such new asset as provided in clause (a), or, as the case may be, clause (b), of sub-section (1), shall be deemed to be income chargeable under the head `Capital gains' relating to long-term capital assets of the previous year in which such residential house is purchased or constructed. (3) Where the new asset is transferred within a period of three years f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....asset not charged under section 45 on the basis of the cost of the new asset as provided in clause (a) or, as the case may be, clause (b) of sub-section (1), exceeds (b) the amount that would not have been so charged had the amount actually utilised by the assessee for the purchase or construction of the new asset within the period specified in sub-section (1) been the cost of the new asset, shall be charged under section 45 as income of the previous year in which the period of three years from the date of the transfer of the original asset expires; and (ii) the assessee shall be entitled to withdraw the unutilised amount in accordance with the scheme aforesaid." The learned counsel for the appellant has taken us through Section 11 of the Income-tax Act which is quoted herein below: "Income from property held for charitable or religious purposes. 11. (1) Subject to the provisions of sections 60 to 63, the following income shall not be included in the total income of the previous year of the person in receipt of the income- (a) income derived from property held under trust wholly for charitable or religious purposes, to the extent to which such income is applied ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... (b) in the case referred to in sub-clause (ii), so much of the income applied to such purposes in India during the previous year immediately following the previous year in which the income was derived as does not exceed the said amount, may, at the option of the person in receipt of the income (such option to be exercised before the expiry of the time allowed under sub-section (1) of section 139 for furnishing the return of income, in such form and manner as may be prescribed) be deemed to be income applied to such purposes during the previous year in which the income was derived; and the income so deemed to have been applied shall not be taken into account in calculating the amount of income applied to such purposes, in the case referred to in sub-clause (i), during the previous year in which the income is received or during the previous year immediately following, as the case may be, and, in the case referred to in subclause (ii), during the previous year immediately following the previous year in which the income was derived. (1A) For the purposes of sub-section (1),- (a) where a capital asset, being property held under trust wholly for charitable or religious purposes, i....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... under clause (2) of the Explanation to sub-section (1) is not applied to charitable or religious purposes in India during the period referred to in sub-clause (a) or, as the case may be, sub-clause (b), of the said clause, then, such income shall be deemed to be the income of the person in receipt thereof- (a) in the case referred to in sub-clause (i) of the said clause, of the previous year immediately following the previous year in which the income was received; or (b) in the case referred to in sub-clause (ii) of the said clause, of the previous year immediately following the previous year in which the income was derived. (2) Where eighty-five per cent of the income referred to in clause (a) or clause (b) of sub-section (1) read with the Explanation to that sub-section is not applied, or is not deemed to have been applied, to charitable or religious purposes in India during the previous year but is accumulated or set apart, either in whole or in part, for application to such purposes in India, such income so accumulated or set apart shall not be included in the total income of the previous year of the person in receipt of the income, provided the following conditions are ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f clause (23C) of section 10, shall be deemed to be the income of such person of the previous year in which it is so applied or ceases to be so accumulated or set apart or ceases to remain so invested or deposited or credited or paid or, as the case may be, of the previous year immediately following the expiry of the period aforesaid. (3A) Notwithstanding anything contained in subsection (3), where due to circumstances beyond the control of the person in receipt of the income, any income invested or deposited in accordance with the provisions of clause (b) of sub-section (2) cannot be applied for the purpose for which it was accumulated or set apart, the Assessing Officer may, on an application made to him in this behalf, allow such person to apply such income for such other charitable or religious purpose in India as is specified in the application by such person and as is in conformity with the objects of the trust; and thereupon the provisions of sub-section (3) shall apply as if the purpose specified by such person in the application under this sub-section were a purpose specified in the notice given to the Assessing Officer under clause (a) of sub-section (2): Provided t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ubsidiary bank as defined in the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959), a corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970), or under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980), or any other bank being a bank included in the Second Schedule to the Reserve Bank of India Act, 1934 (2 of 1934); (iv) investment in units of the Unit Trust of India established under the Unit Trust of India Act, 1963 (52 of 1963); (v) investment in any security for money created and issued by the Central Government or a State Government; (vi) investment in debentures issued by, or on behalf of, any company or corporation both the principal whereof and the interest whereon are fully and unconditionally guaranteed by the Central Government or by a State Government; (vii) investment or deposit in any public sector company: Provided that where an investment or deposit in any public sector company has been made and such public sector company ceases to be a public sector company,- (A) such investment made in the shares of suc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....apart for application, then, for such purposes the income shall be determined without any deduction or allowance by way of depreciation or otherwise in respect of any asset, acquisition of which has been claimed as an application of income under this section in the same or any other previous year. (7) Where a trust or an institution has been granted registration under clause (b) of sub-section (1) of section 12AA or has obtained registration at any time under section 12A [as it stood before its amendment by the Finance (No. 2) Act, 1996 (33 of 1996)] and the said registration is in force for any previous year, then, nothing contained in section 10 [other than clause (1) and clause (23C) thereof] shall operate to exclude any income derived from the property held under trust from the total income of the person in receipt thereof for that previous year." 5. The learned advocate for the appellant has further contended that if we look at the provisions of the Income-tax Act, wherever the Legislature intended to restrict the transaction of the assessee, they have specifically used the word s "in India". He further contended that the Legislature was very clear that the restriction was ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....axing provision and it is clear and unambiguous, there is no scope for importing into the statute words which are not there. Even when the language of taxing provision is ambiguous or capable of more meanings, the interpretation which favours the assessee should be adopted. In that view of the matter, he has contended that authorities below have wrongly held that the assessee is not entitled to the benefit under section 54F of the Income-tax Act as she has purchased the house outside India and the orders passed by the authorities below are required to be set aside. 7. Learned counsel Mr. Parikh for the respondent has taken us through the amendment Act of 1982 wherein Section 54 has been brought in which is reproduced below (138 ITR 23): "19.1 Under section 54 of the Income-tax Act, capital gains arising on the transfer of a house property which in the two years immediately preceding the date of its transfer was used by the assessee or a parent of his for self-residence is exempted from income-tax if the assessee, within a period of one year before or after that date, purchases or within a period of two years after the date of such transfer constructs a house property for t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....se - section 54F 20.1 Under the existing provisions of the Incometax Act, any profits and gains arising from the transfer of a long term capital asset are charged to tax on a concessional basis. For this purpose, a capital asset which is held by an assessee for a period of more than 36 months is treated as a "long term" capital asset. 20.2 With a view to encouraging house construction, the Finance Act, 1982, has inserted a new section 54F to provide that where any capital gain arises from the transfer of any long term capital asset, other than a residential house, and the assessee purchases within one year before or after the date on which the transfer took place or constructs within a period of three years after the date of transfer, a residential house the capital gain arising from the transfer will be treated in a concessional manner as under: (i) If the cost of the house that has been purchased or constructed is not less than the net consideration in respect of the capital asset transferred, the entire capital gain arising from the transfer will be exempt from tax. (ii) If the cost of the newly acquired house is less than the net consideration in respect of the capital ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... asset which is not a short-term capital asset. 2(42A) - `Short-term capital asset' means a capital asset held by an assessee for not more than thirty six months immediately preceding the date of its transfer" 8.1 The learned counsel for the respondent has contended that the said provisions are benevolent provisions and for the benefits of the assessee who fulfills the conditions as prescribed in the provisions of the Income-tax Act. In the present case, the assessee has not fulfilled the conditions as laid down in section 54F of the Income-tax Act as she had utilized the sale proceeds in acquiring a residential house in United States of America. As per the terms of the said section, the assessee should have utilized the sale proceeds for purchasing the residential house in India. In that view of the matter, the assessee is not entitled to benefit under section 54F of the Income-tax Act and the Tribunal has, rightly, dismissed the appeal of the assessee. He, therefore, contended that this court should not interfere with the findings recorded by the Tribunal and the appeal of the appellant is required to be dismissed. 9. We have heard learned counsel for the parties. We have per....