TaxTMI 
TaxTMI 
2018 (1) TMI 947
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....red on 28 September 2002, leaving a Will dated 30 January 1985, in accordance with which his wife Mrs. Mallika Ghosh, mother of the Applicant, was granted life interest in the property, having no disposable interest, and thereafter upon demise of Mrs Mallika Ghosh on 19 February 2009 the property devolved equally upon the Applicant and the wife of his deceased brother. 2.2 The Applicant, on 29.4.2011, relevant to A.Y. 2012-13, sold his 50% undivided share in the aforesaid residential property to Umra Securities Ltd 108, Ansal Bhawan, 16 Kasturba Gandhi Marg, New Delhi - 110001, for a consideration of Rs. 85, 09, 00, 000 and after reducing the proportionate expenses and withholding tax and adding other income, net amount of Rs. 69, 42, 05, 025 was remitted to the applicant in GBP vide RBI approval dated 18July, 2011. 2.3 The Applicant, on the sale of the aforesaid property is stated to have earned Long Term Capital Gain of Rs. 80, 27, 22, 960 liable to Capital Gains Tax and has filed a detailed computationalongwith the Application. 2.4 The Applicant has claimed deduction u/s54 of the Act, amounting to Rs. 24, 77, 86, 100 being the INR equivalent of GBP28, 64, 974(GBP26, 75, 000 +....
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....ose which the legislature had in view while enacting that provision. It highlighted the principles of interpretation as laid down by the Hon'ble Supreme Court in Novopan India Ltd., Appeal (Civil) 3556 of 1984, dated 14.09, 1994, as also in State of Gujarat and Othrs V. Essar Oil, 2012, to state that in cases of exemptions, in case of doubt or ambiguity, the decision should go in favour of the State. 4.2 It was argued that the Legislature did not intend to allow deduction in respect of a house outside India, and the provisions have to be construed strictly. 5. The Applicant, represented by his Counsel, Mr U.N.Marwah FCA, submitted that the applicant has complied with all the conditions stipulated for claiming deduction u/s 54 of the Act. The capital gains on sale of residential house in New Delhi, India has been partly reinvested in acquisition of a residential property in London, UK and the amount reinvested in acquiring the residential property abroad is liable for deduction while computing the taxable capital gains. It was submitted that in the provisions of Section 54 as they existed for the AY 2012-13, there was no restriction imposed in law to the effect that reinvestment i....
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....) Act, 2014, which came into effect with effect from 1.4.2015 that the assessee should invest the sale proceeds arising out of sale of capital asset in a residential house situated in India within the stipulated period. Thus on a plain reading of section 54F of the Income tax Act before its amendment by the Finance (No. 2) Act leaves no room for any doubt that assessee should restrict her investment within India or outside India. The only condition was that the assessee should invest in a residential house............ . When the section 54F of the income tax act was clear and unambiguous, there is no scope for importing into the statute the words which are not there. Such importation would be not to construe but to amend the statute. If there is any defect in the Act, it can be remedied only by the legislation and not by judicial interpretation." 5.3.2 It was also submitted that the above judgement was applicable in the case of deduction u/s 54 also. The case of ITO 3(1) Vs Mr Nishant Lalit Jadhav ITA No.6883/Mum/2014 (AY. 2011-12) has been cited in support: "[Para 5] The said judgement is with reference to Section 54 as in case of Applicant, wherein while relying on decision ....
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....following the orders of the higher appellate authorities; that until a contrary decision is given by another competent High Court, the decision of the High Court becomes binding on all lower appellate authorities; and that in quasi judicial tribunals also decisions of higher authorities are binding. 5.7 The Applicant submitted that on merits, it is entitled in law and on facts, having complied with all conditions stipulated in Section 54, to Deduction in respect of the amount invested being Rs. 24, 77, 86, 100equivalent of GBP28, 64, 974 (GBP26, 75, 000 + Stamp Duty+ Expenses ] at the then rates of Exchange in acquiring the residential house in London. 6. The Applicant thereafter submitted that Question No 2 raised in the Application, has become infructuous due to the fact that at the time of filing the application there was divergence of opinion amongst the ITAT decisions as Ahmedabad ITAT, in the case of Leena J. Shah, had denied the benefit of Deduction u/s54F to the assessee by reading the words "In India" in the Section. However this decision has since been reversed by the Hon'ble High Court of Gujarat in the same case, as discussed above. Further at present there is no deci....
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....Income Tax of Rs. 5, 15, 63, 080. Thus it was submitted that the quantification as filed was correct. He has got a valuation done and has opted for fair market value as on 1.4.1981 and duly indexed it as per the provisions of clause (iii) of explanation to section 48. 8. In response to the contentions of the Applicant, the Revenue represented by Mrs Kavita Pandey, CIT (DR), submitted that Section 54 along with other related sections are part of Chapter IV of the IT Act, and has been mentioned in Section 45 which is the charging Section for Capital Gains tax. 8.1 The Chapter pertaining to Computation of Income is Chapter IV and for the purpose of computation of income, various deductions have been provided under each Head of Income, apart from Chapter VI A. The provisions of Sections 54 to 54H are not included in the section pertaining to deductions and do not fall under the head rebates and reliefs as provided under Chapter VIII of the Act as well. They are also not in the nature of exemption, as in Section 10 of the Act. Section 54 is to be read in conjunction with Section 45 and thus is part of Charging provision. In fact it is a provision for Roll Over of charge. Thisis also e....
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....when the person concerned is a Non-Resident, his or her income can only include Profits and Gains arising 'in India' from transfer of a capital asset, when it is read conjointly with Section 5(2) of the Act. Thus, there is no need to mention the words 'in India' in Section 45 or any such charging Section again. The words 'in India' has the automatic operation therein when dealing with the income of Non- Residents. Thus, the conjoint reading of Section 4, Section 5(2) Section 14, Section 45 and Section 54 in the case of a Non-Resident makes the flow clear that the words 'in India' are to be automatically read into Section 45 and Section 54 in the case of a Non-Resident There is no requirement of separately mentioning the same. 8.4 It is further submitted that if a Non-Resident applies the Capital Gains for Roll Over benefit and the 'New Asset' being an asset in India, it is perfectly in tandem with the provisions of the Act, and the Capital Gains in such case is taxable in India as per the provisions of Section 5(2) of the IT Act, read with Sections 45 and 54, after withdrawal of the Roll Over benefit. This is because both as per the provisions of Section 5 (2) and under Article 14....
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....ruction of Section 54 of the Act from the very beginning of the Income Tax Act with regard to taxation of Non Residents. 8.7 The Revenue has again cited the case of K.P Varghese vs. ITO (77 ITR 719), wherein the Hon'ble Supreme Court observed that we must not adopt a strictly literal interpretation of a statute but we must construe its language having regard to the object and purpose which the legislature had in view in enacting that provision and in the context of the setting in which it occurs. 8.8 The case of Novopan India Ltd. Hyderabad (SC) Appeal (civil) 3556 of 1984, dated 14.9.1994, has been cited to say that in case of ambiguity, a taxing statute should be construed in favour of the assessee, assuming that the said principle is good and sound, does not apply to the construction of an exception or an exempting provision; they have to be construed strictly. This view was reaffirmed in State of Gujarat & Ors v Essar Oil (SC) (2012-TIOL-05-SC-CT) (Civil Appeal No. 599 of 2012), dated 7.1.2012. 8.9 The Revenue submits that in the instant case, when there is a conflict between two or more statutes, or two or more parts of a statute, then the Rule of Harmonious Constructionne....
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.... only one additional house property. 8.11.5 In section 54, the Roll Over of the LTCG is upon acquisition of the New Asset which should be residential house property. In 54F the Roll Over of the LTCG is upon acquisition of the New Asset which should be residential house property. 8.11.6 In section 54, the Roll Over benefit is allowable upon the application into the New Asset of the LTCG arising on transfer of the original asset. In 54F the Roll Over benefit is allowable upon the application into the New Assetof the net consideration arising on transfer of the original asset. 8.11.7 In section 54, Roll Over benefit is withdrawn if the New Assessee transfers the asset within a period of three years of its acquisition. In 54F, Roll Over benefit is withdrawn if the assessee acquires or constructs within a period of two/three years as the case may be, another residential house property. 8.11.8 In section 54, the withdrawal of Roll Over benefit is by way of charging of Capital Gains on the New Asset and for this purpose, while computing the Capital Gains, reduction of the Roll Over benefit so availed from the cost of acquisition of the New Asset is allowed. In section 54F the withdraw....
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.... in the purchase of residential property within the stipulated period. Further, the Applicant, in support of his contention stated that Section 54F is parimateria with Section 54 and relied on excerpts of decisions in the following cases:ITO3(1)Vs Mr Nishant Lalit JadhavITA No.6883/MUM/2014 (AY. 2011-12); Vinay Mishra v. ACIT [2013] 30 taxmann.com 341 (BangaloreITAT); CIT Vs Ravinder Kumar Arora [2012] 342 ITR 38(Delhi); CIT XII v. Kamal Wahal [2013] 30 taxmann.com 34 (Delhi). 9.2 On the issue that the section was unworkable for the reason that Revenue could not be aware of sale of new asset within 3 years, he submitted thatthe law mandates and places an obligation on all assessees, irrespective of residential status, to truthfully file their Return of Income and disclose all facts. The Income Tax Act, 1961 assumes the power to tax the Income of a nonresident, it also allows such a person all the benefits that flow from the provisions of the Act unless, specifically prohibited.Provision of Section 54 is applicable to all assessees whether Resident in India or Non- Resident. Merely because the AO has no control, though he has jurisdiction over the assessee, the benefit of the provi....
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....ising out of sale of capital asset in a residential house situated in India within thestipulated period. Thus on a plain reading of section 54 of the Incometax Act before its amendment bythe Finance (No. 2) Act, 2014 it appears that there was no restriction that the assessee should make his investmentwithin India. The only condition mentioned in the Act was that the assessee should invest in a residential house. 10.2 Even as these proceedings were pending, the Hon'ble Gujarat High Courtdecided a matter in the case of Leena Jugalkishore Shah (Supra), on a similar issue, though this is disputed by Revenue, in favour of the assessee, and the Applicant has sought to take support from that case and to claim that prior to the aforesaid amendment, there was no requirement of making the investment in India to take the benefit u/s 54, and that being so he had fulfilled all the requirements of the Act and was entitled to the deduction. 10.3 Since the main plank of the Applicant's argument is based on the decision of the Hon'ble High Court of Gujarat in the case of Leena Jugalkishore Shah, let us first deal with the Revenue's objection that the facts of that case were different, in that tha....
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....plication deserves to be rejected since this is not a section for granting any deduction or exemption but is rather a charging section. While that is so, we do not agree. The terms benefit, deduction, exemption have been loosely used, in fact in several decisions, to denote the meaning "capital gains not to be charged". Even while bringing about the amendment, through the Finance Act 2014, the words used were : "20. Capital Gains exemption in the case of investment in a residential house property". Hence, due to this usage alone the real issue cannot be kept aside, or the Application rejected. 10.6 The Revenue has vehemently argued that the words "in India" should be read into the relevant sections 4 and 5, as also sections 45 and 54. A detailed analysis has been made by the Ld CIT (DR), of the intent of legislature, and the reasons why the these words, when read into the relevant provisions alone can make the provisions workable, in the manner intended to. It is stated that the words "in India"could not be mentioned so as to keep them aligned to the main charging section, ie. Section 4, where the word'India' does not appear. 10.6.1 We find that this issue that the words "in Ind....
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....re pari material, in that both relate to the eligibility of a benefit on account of investment in house property in or outside India. The above decision is therefore squarely applicable to the facts of the Applicant's case. 10.7 As a corollary to the above is the issue as to whether the amendment made in 2014 would have retrospective effect or prospective. This issue was also considered by the honourable High Court in the above case, and it was held that: "The language of section 54F of the Income tax Act before its amendment was that the assessee should invest capital gain in a residential house. It is only after the amendment to section 54F of the Income tax Act by the Finance (No. 2) Act, 2014, which came into effect with effect from 1.4.2015 that the assessee should invest the sale proceeds arising out of sale of capital asset in a residential house situated in India within the stipulated period. Thus on a plain reading of section 54F of the Income tax Act before its amendment by the Finance (No. 2) Act leaves no room for any doubt that assessee should restrict her investment within India or outside India. The only condition was that the assessee should invest in a residenti....
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....trued strictly, as held in the case of state of Gujarat and others v. Essar Oil. Since we are in agreement with the decision in the case of Leena Jugalkishore Shah, wherein it is held that there was no ambiguity in the provisions contained in section 54/54F, this argument given by the Revenue fails. Even otherwise, the Revenue has argued that sections 45 and 54 of the Act are not sections for granting any exemption or deduction, but are rather charging sections, and hence the Revenue's argument in any case cannot be accepted. 10.10 As regards the Revenue' s plea made with the help of various cases on the construction and harmonious interpretation of the statute, we have to again say that this issue also was adequately considered by the honourable High Court and no adverse view was taken since it did not find any ambiguity in the provisions of the Act under consideration, prior to its amendment. 10.11 The Revenue has mentioned the case of Rameshwarlal Sanwarmal to state that a case can be reviewed and a different conclusion reached, and that an incorrect decision need not be continued to be followed if another correct decision has been given in the intervening period. In the insta....
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....apital gains arisen in India. 11. Coming to question no. 2, we find that with the decision in the case of Leena Jugalkishore Shah as delivered by the Hon'ble Gujarat High Court, this question becomes redundant since the orders of different ITATs stand superseded to the extent of common issues comprised therein. 12. Question no. 3 relates to valuation/computation of the cost of acquisition in the hands of the Applicant, for determining the method for computing Long term capital gains. We donot to get into the details of the valuation done by the Applicant through an accountant firm, or the correctness of the figures therein. This examination will be done by the Assessing Officer. We shall only deal with the provisions in the act that would govern such computation. 12.1 The Applicant states that in the instant case, the capital asset in question was originally acquired by the previous owner (father) on 24.04.1971 and the same was acquired by the assessee under a Will dated 30.01.1985, without incurring any cost. The assessee sold the said capital asset on 29.04.2011. In view of Explanation 1(i)(b) to section 2(42A) which provides that in determining the period for which any asset ....