AI Drafter 
TaxTMI 
TaxTMI 
2016 (12) TMI 351
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....e facts of the case are that the assessee, a nonresident 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 ....
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....e, 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 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 sec....
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....nsfer of the original asset; (b) the income from such residential house, other than the one residential house owned on the date of transfer of the original asset, 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 ....
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.... for the purchase or construction of the new asset within the period specified in sub-section (1), then,- (i) the amount by which- (a) 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 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....
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....rt of the income has not been received during that year, or (ii) for any other reason, then- (a) in the case referred to in sub-clause (i), so much of the income applied to such purposes in India during the previous year in which the income is received or during the previous year immediately following as does not exceed the said amount, and (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....
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.... transfer and the cost of any improvement thereto within the meaning assigned to that expression in sub-clause (b) of clause (1) of section 55; (iii) "net consideration" 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. (1B) Where any income in respect of which an option is exercised 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 claus....
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....ion (5), or (c) is not utilised for the purpose for which it is so accumulated or set apart during the period referred to in clause (a) of that sub-section or in the year immediately following the expiry thereof, (d) is credited or paid to any trust or institution registered under section 12AA or to any fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of 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 ....
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....ings Certificates Act, 1959 (46 of 1959), and any other securities or certificates issued by the Central Government under the Small Savings Schemes of that Government; (ii) deposit in any account with the Post Office Savings Bank; (iii) deposit in any account with a scheduled bank or a co-operative society engaged in carrying on the business of banking (including a co-operative land mortgage bank or a co-operative land development bank). Explanation.-In this clause, "scheduled bank" means the State Bank of India constituted under the State Bank of India Act, 1955 (23 of 1955), a subsidiary 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 ....
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....ewerage, drainage, solid waste management, roads, bridges and flyovers or urban transport; (x) investment in immovable property. Explanation.-"Immovable property" does not include any machinery or plant (other than machinery or plant installed in a building for the convenient occupation of the building) even though attached to, or permanently fastened to, anything attached to the earth; (xi) deposits with the Industrial Development Bank of India established under the Industrial Development Bank of India Act, 1964 (18 of 1964); (xii) any other form or mode of investment or deposit as may be prescribed.4 (6) In this section where any income is required to be applied or accumulated or set 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 an....
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....issioner of Income-tax, West Bengal (supra), the Apex Court has held as under: "The language of sections 2(6A)(e) and 12(1B) is clear and unambiguous. There is no scope for importing into the statute words which are not there. Such importation would be not to construe, but to amend, the statute. Even if there be a casus omissus the defect can be remedied only by legislation and not by judicial interpretation." 6. The learned counsel for the appellant has contended that after the amendment in sections 54 and 54F of the Act by the Finance (No. 2) Act which is made prospectively, now it has been restricted that the investment should be made in a residential house in India. In that view of the matter, earlier when there is no such restriction in the taxing 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 ....
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....ew property has been raised from two years to three years since assessees sometimes experience difficulty in complying with the existing time limit of two years for the construction of a house property; (iii) It is clarified that this exemption will be allowed only in the case of individual assessees. (iv) It has been provided that this exemption will apply only in relation to long term capital gains, that is gains arising from the transfer of a house property which has been held by the assessee for a period exceeding 36 months. 19.4 This provision will take effect from 1st April, 1983, and will accordingly apply in relation to the assessment year 1983-84 and subsequent years. (xiv) Exemption from tax on capital gains in certain cases on investment of the consideration in residential house - 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....
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....income of the year in which the new asset is transferred and such income shall be charged to tax under the head `Capital gain' relating to long-term capital assets. 20.4 This provision will become effective from 1st April, 1983, and will accordingly apply in relation to the assessment year 1983-84 and subsequent years." 8. The learned counsel for the respondent has further contended that the purpose of introduction of section 54 of the Income-tax Act is to give certain benefits to the assessee from capital gain tax arising from transfer of long-term capital asset provided the assessee invests the net consideration in residential houses in India. He has submitted that long-term capital asset and short-term capital asset have been defined in sections 2(29A) and 2(42A) of the Income-tax Act which read as under: "2(29A) - `Long-term capital asset' means a capital 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 ....