TaxTMI 
TaxTMI 
2005 (11) TMI 182
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....rema P. Shah. It was purchased for Rs. 14 lakhs on 29-3-1983 and sold on 4-4-1992 for the aforementioned price. Assessee claimed exemption under section 54, showing long-term capital gains as nil Assessee filed a xerox copy of the agreement made in London giving particulars such as date of lease, name of lessor and the lessee. On going through the agreement, the Assessing Officer noted that it was an agreement for leasing of the property by the lessor viz. Higgs & Hill Homes Ltd., which has been made effective from the 1st day of January, 1988. Assessee is described as a lessee. In this agreement lessor is a resident company. Many restrictions are also imposed, including certain restrictions on the payment of lease rent, restrictions on utilisation of the property, which is claimed by the assessee as acquired residential property, against which assessee claims the exemption. 4. Assessing Officer held, section 54 of the Income-tax Act speaks of purchase of residential property or construction thereof within a stipulated period, so that long-term capital gains would be exempted from tax. In the instant case, assessee has purchased only the tenancy rights. Hence assessee's clai....
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....the purchase of the property. (b) The assessee has not purchased the property in India and Income-tax Act extends to the "whole of India" only, (c) The lease deed dated 20-2-1992 but effective from 1-1-1988 for 150 years, it is perpetual. This does not entitle the assessee the right of occupation infinitum and it does amount to purchase itself. It is not purchase of a right only. The provision of lease as obtainable in UK is not the same as in India. Therefore, the benefit of long-term lease obtained in UK cannot be treated as per Indian laws for the purpose of Income-tax law. (d) The assessee is a non-resident Indian and provisions of Chapter XII-A are special provisions relating to certain income of non-residents. Section 115D is a special provision for computation of total income of non-residents. As per section 115D(2)(a), in the case of an assessee, being a non-resident Indian - (a) the gross total income consists only of investment income or income by way of long-term capital gains or both, no deduction shall be allowed to the assessee under subsection (2) of section 48 or under Chapter VI-A. Hence, the CIT(A) held, assessee being a non-resident Indian, is not entitled to any....
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....sel drew our attention to section 11 of the Income-tax Act, 1961. The learned counsel submitted that if the Legislature had such an intention, it would have been definitely and specifically mentioned, as it has been mentioned in section 11. The learned counsel submitted that any income from property held for charitable or religious purposes is exempt from tax net under section 11(1)(a) only to the extent it applied to such purpose in India. If the Legislature wants to invest capital gains in India itself for exception under section 54D, the Legislature would have specifically stated so in the section itself. The lease is for 150 years i.e., in perpetuity. In UK, the King is the owner of the property and the assessee is enjoying all the rights. Assessee is not paying the rent. The rent fixed is "rent of a peppercorn" and that too, if demanded. The learned counsel further submitted that the assessee can transfer the property; in fact no rent is virtually paid. In the light of the above facts, learned counsel further submitted that the revenue authorities were not justified in denying the assessee exemption under section 54(1) of Rs. 15,07,561, being 50 per cent of the capital gain. ....
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....ip property for the purpose of section 22. 12. Learned counsel further submitted; it is similar to a Cooperative Society flat. As it is for a lease of 150 years, it is a house property for the purpose of section 22 and, therefore, for the purpose of section 54, from whichever angle one considers that it is similar to a Co-operative Society flat or it is a long-term lease, in either case, it falls within the scope of section 54 read with sections 22 to 27. Learned counsel invited our attention to the decision of the Hon'ble Supreme Court in the case of CIT v. Podar Cement (P.) Ltd. [1997] 226 ITR 625 wherein it was held that though under the common law "owner" means a person who has got valid title legally conveyed to him after complying with the requirements of law, such as Transfer of Property Act, Registration Act, etc., in the context of the Income-tax Act, 1961, having regard to the ground realities and further having regard to the object of the Income-tax Act, viz. to tax the income from the property in his own right. The Hon'ble Supreme Court held that if one is enjoying all the rights of ownership, he is the owner whether technically he is the owner or not is imma....
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....urchase before the sale, benefit under section 54 is made available. As such, the provisions of purchase before the sale clearly contemplates that it need not be out of the sale consideration, contended the learned counsel. 15. Again, learned counsel reiterated that section 54 provides for appropriation. The section itself provides that the amount of capital gain, which is not appropriated by the assessee towards purchase of a new asset, made within one year before the date on which the transfer takes place or which is not utilised by him for the purchase of a new asset. Therefore, it clearly provides for appropriation of the capital gain in respect of the purchase price paid before the sale has taken place. As such, when appropriation of the capital gain against the property purchased before is provided, it cannot be said that the actual capital gain arising after the sale alone could be used for the purpose of section 54, contended the learned counsel. He further submitted; the section provides that if the amount of capital gain is greater than the cost of residential house etc. It means that one is comparing the cost of new promises and capital gain. The section does not say ....
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....sel again objected the Department's stand that the assessee being non-resident Indian is governed by the provisions of Chapter XII-A and, hence, not entitled to benefit under section 54, is clearly unsustainable. He submitted, provisions of Chapter XII-A are applied in case of specified foreign exchange assets. Immovable property is not one of specified asset. As such, house property not being a specified asset; special provisions of Chapter XII-A are not applicable. Reference was also made to the definition of "specified asset" and "long-term capital gain" under the provisions of section 115C. Learned counsel further submitted, in any case, the assessee has opted out of the application of Chapter XII-A by specifying to that effect in the return filed, as such, for that reason also provisions of Chapter XII-A are not applicable. 19. Learned counsel further submitted, section 115 only provides that in case of such specified gain, provisions of sub-section (2) to section 48 will not be applicable, i.e., one is not entitled to indexation. Section 54 is not part of sub-section (2) to section 48. As such, if provisions of sub-section (2) to section 48 are not applicable, it does ....
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....ransferring, subletting or parting with the occupation of part of the premises. If the assessee is the owner of the property, the learned DR submitted, there cannot be any restriction put on the assessee from transferring, subletting or parting with the property. Hence, the learned DR submitted, the orders of the revenue authorities are to be upheld. 23. We have heard the rival submissions. Coming to the first argument of the revenue that the same amount should have been utilised for the acquisition of new asset, the same cannot be accepted in view of the decision of the Tribunal, Mumbai Bench, in the case of Bombay Housing Corpn. v. Asstt. CIT [2002] 81 ITD 545. In this case the Tribunal held, even if an assessee borrows required funds and satisfies conditions relating to investment in specified assets, he is entitled to exemption. 24. The next argument of the revenue is that in fact the assessee has not acquired any property in the strict sense, assessee had taken the property on lease and for the leased property the benefit of section 54 cannot be extended to. For the above proposition, as already noted hereinabove, the learned DR heavily relied on the Deed Agreement itsel....