Income Tax Officer, Intl. Taxn, Ward-1(1), Bangalore V. Shri Hosagrahar Visvesvaraya Jagadish, USA

ITA 1544/BANG/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 6768 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 9 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-04-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 12-07-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: K SESHADRI
• Section: 143(3); 54F; 142(1); 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH B BEFORE SHRI A.K GARODIA, ACCOUNTANT MEMBER AND SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA NO.1544/BANG/2017 ASSESSMENT YEAR : 2013-14 THE INCOME-TAX OFFICER, INTL. TAXN. WARD 1(1), BENGALURU. VS. SHRI HOSAGRAHAR VISVESVARAYA JAGADISH, 1835, CAMBRIDGE ROAD, ANN ARBOR MI 48104, USA APPELLANT RESPONDENT CO NO.26/BANG/2018 ASSESSMENT YEAR : 2013-14 SHRI HOSAGRAHAR VISVESVARAYA JAGADISH, 1835, CAMBRIDGE ROAD, ANN ARBOR MI 48104, USA VS. THE INCOME-TAX OFFICER, INTL. TAXN. WARD 1(1), BENGALURU. APPELLANT RESPONDENT APPELLANT BY : MS. NEERA MALHOTRA, CIT (DR) RESPONDENT BY : SHRI K SESHADRI, C.A DATE OF HEARING : 01.04.2019 DATE OF PRONOUNCEMENT : 22.04.2019 2 ITA NOS.2804&2805/B/2017 O R D E R PER SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER : THE REVENUE HAS FILED APPEAL AGAINST THE ORDER DATED25.04.2016 OF CIT(A)-12, BENGALURU PASSED U/S 143(3) AND 215 OF THE INCOME-TAX ACT, 1961 (THE ACT) FOR THE A SST. YEAR 2013- 14. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX( APPEALS)-12, BENGALURU IS CONTRARY TO THE LAW AND FACTS OF THE CASE. 2. THE LEARNED COMMISSIONER OF INCOME TAX( APPEALS)-12, BENGALURU OUGHT TO HAVE CONSIDERED THE FACT THAT IN VIEW OF THE STATUTORY PROVISIONS OF SE CTION 54F, THE RESIDENTIAL HOUSE MUST BE IN INDIA. 3. THE LEARNED COMMISSIONER OF INCOME TAX( APPEALS)-12, BENGALURU FAILED TO APPRECIATE THE FAC T THAT IN VIEW OF SETTLED RULING OF INTERPRETATION OF TAX STATUTE, THE RESIDENTIAL HOUSE PURCHASED/ CONSTRUCT ED MUST BE IN INDIA AND NOT OUTSIDE INDIA. 4. THE LEARNED COMMISSIONER OF INCOME TAX( APPEALS)-12, BENGALURU FAILED TO CONSIDER THE MEMORANDUM EXPLAINING PROVISIONS IN THE FINANCE BILL 1982 THAT THE EXEMPTION IN SECTION 54F IS GRANTED WITH A VIEW TO ENCOURAGING HOUSE CONSTRUCTION.THIS WOULD NATURALLY MEAN THAT HOUSE CONSTRUCTION/ PURCHASE WOULD BE ENCOURAGED BY 3 ITA NOS.2804&2805/B/2017 PROVISIONS OF THIS SECTION IN INDIA AND NOT OUTSIDE INDIA. 5. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) - 12, BENGALURU MAY BE CANCELLED AND THAT OF THE AO MAY BE RESTORED. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSE SSEE IS A NONRESIDENT AND DERIVES INCOME FROM CAPITAL GAINS AND FILED THE RETURN OF INCOME ON 13/7/2013 WITH NIL INCOME. SUBSEQUENTLY THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS AND NOTICE U/S 143 (2) AND 142(1) OF THE ACT WERE ISSUED. IN COMPLIANCE, LD AR OF TH E ASSESSEE APPEARED FROM TIME TO TIME AND FILED THE DETAILS. THE AO ON PERUSAL OF THE FINANCIAL FACTS FOUND THAT THE ASSES SEE HAS SOLD IMMOVABLE PROPERTY ALONG WITH HIS SISTER ON 21/2/20 13 FOR A TOTAL SALE CONSIDERATION OF RS.11,00,50,000/- AND THE ASS ESSES SHARE WAS WORKED OUT TO RS.6,90,00,000/- AND AFTER CLAIMING C OST INFLATION INDEX AND IMPROVEMENT OF RS.13,49,752/- LONG TERM CAPITAL GAIN DETERMINED AT RS.6,76,02,248/-. AGAINST LONG TERM CAPITAL GAINS THE ASSESSEE HAS CLAIMED EXEMPTION U/S 54F BY INVESTME NT IN RESIDENTIAL PROPERTY AT NEW YORK . ASSESSEE FILED THE SUBMISSIONS SUPPORTING THE INVESTMENTS MADE OUTSIDE THE COUNTRY REFERRED BY THE AO AT PAGE 2 AND 3. THE AO IS OF THE OPINION T HAT THE ASSESSEE SHALL NOT BE ELIGIBLE FOR CLAIM OF EXEMPTION FOR M AKING INVESTMENT OUTSIDE THE COUNTRY AND DECLAIMED THE EXEMPTION AN D DETERMINED 4 ITA NOS.2804&2805/B/2017 THE TAXABLE CAPITAL GAINS OF RS.6,76,02,248/- AND P ASSED THE ORDER U/S 143(3) OF THE ACT DATED 24/3/2016. 4. AGGRIEVED BY THE ORDER, THE ASSESSEE FILE D AN APPEAL BEFORE THE CIT(A). IN THE APPELLATE PROCEEDINGS, THE LD AR OF THE ASSESSEE ARGUED THE GROUNDS AND REITERATED THE SUBM ISSION MADE BEFORE THE LOWER AUTHORITIES. THE SOLE DISPUTE IS WITH RESPECT TO CLAIM OF EXEMPTION U/S 54 IS NOT ALLOWED TO THE AS SESSEE AS INVESTMENT WAS MADE OUTSIDE THE COUNTRY. THE LD AR SUPPORTED HIS ARGUMENTS WITH THE JUDICIAL DECISIONS AND ALSO THE AMENDMENT TO SEC. 54F EFFECTIVE FROM FINANCE ACT 2014 WHICH IS A PPLICABLE W.E.F 1/4/2015 WHERE THERE IS RESTRICTION IN RESPECT OF I NVESTMENT MADE OUTSIDE INDIA. THE LD CIT(A) CONSIDERED THE FACT S OF THE CASE, PROVISIONS OF LAW AND THE AMENDMENT TO SEC. 54 AND 54F EFFECTIVE FROM ASST. YEAR 2015-16 AND IS PROSPECTIVE AND RELI ED ON THE DECISION OF THE APEX COURT IS OF THE OPINION THAT T HE ASSESSEE IS ENTITLED FOR EXEMPTION U/S 54F AND ALLOWED APPEAL O F THE ASSESSEE. 5. AGGRIEVED BY THE ORDER, THE REVENUE HAS F ILED APPEAL WITH THE TRIBUNAL. BEFORE US, THE LD DR SUBMITTED THAT THE CIT(A) HAS ERRED IN GRANTING THE EXEMPTION U/S 54 AND 54F IN R ESPECT OF THE INVESTMENT MADE BY THE ASSESSEE OUTSIDE THE COUNTRY WHEREAS THE SECTION DOES NOT SPECIFY THAT THE INVESTMENT MADE OUTSIDE THE COUNTRY IS ELIGIBLE FOR EXEMPTION AND SUPPORTED THE ORDERS OF THE AO. CONTRA, THE LD AR SUBMITTED THAT THE AMENDMENT FOR INVESTMENT RESTRICTION OUTSIDE THE COUNTRY IS EFFE CTIVE FROM ASST. 5 ITA NOS.2804&2805/B/2017 YEAR 2015-16 AS PER THE FINANCE BILL AND SUPPORTED THE ORDERS OF THE CIT(A). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND P ERUSED THE MATERIAL ON RECORD. THE SOLE MATRIKS OF THE DISPUT ED ISSUE IS WITH RESPECT OF GRANTING EXEMPTION U/S 54F IN RESPECT O F INVESTMENT IN RESIDENTIAL PROPERTY OUTSIDE THE COUNTRY . 7. THE LD DR CONTENTION THAT THE SECTION DO ES NOT ALLOW THE CLAIM OF INVESTMENT OUTSIDE THE COUNTRY AND SHOULD BE RESTRICTED IN INDIA. WE FIND THAT THE LD CIT(A) HAS DEALT ON T HE PROVISIONS AND THE FINANCE ACT AND THE AMENDMENTS AT PAGE 9 PARA 5 OF THE ORDER WHICH READ AS UNDER:- AS ALL THE ABOVE GROUNDS FROM GROUND NOS. 3 TO 16 ARE INTERRELATED AND IN EFFECT CONTEND ON THE SAME ISSUE OF EXEMPTION UNDER SECTION 54F, THESE ARE TAK EN UP TOGETHER FOR ADJUDICATION. THE ISSUE RELATING TO INVESTMENT IN A HOUSE PRO PERTY IN A FOREIGN COUNTRY FOR CIALMIFIG EXEMPTION UNDER SECTIONS 54 AND 54F IN AN ASSESSMENT YEAR PRIOR TO ASSESSMENT YEAR 2015-16 IS NOT RES INTEGRA. IT HAS BEEN HELD IN VINAY MISHRA V ACIT [2013] 141 LTD 301(BANG. TRIB) THAT THE WORDS 'IN INDIA 'CANNOT BE READ INTO SECTION 54F WHEN PARLIAMENT IN ITS LEGISLATIVE IS.DOM HAD DELIBERATELY NOT USED TH E WORDS 'IN INDIA' IN SECTION 54F IN THE ACT. IN LEENA JUGALKISHOR SHAH V ACIT(TAX APPEAL NO. 483 OF 2006) , HON'BLE GUJARAT HIGH COURT IN ITS ORDER DATED 14.06.2016 HELD THAT THE LANGUAGE OF SECTION 54F OF THE E BEFORE AMENDMENT WAS CLEAR AND 6 ITA NOS.2804&2805/B/2017 UNAMBIGUOUS. THE WORDS 'IN INDIA' COULD NOT BE IMPORTED IN THE STATUTE AND THE BENEFIT OF SECTION 54F BEFORE ITS AMENDMENT COULD BE -X-ENDED TO A RESIDENTIAL HOUSE PURCHASED OUTSIDE INDIA. IN MRS. PREMA P SHAH V ITO [2006] 100ITD 60(MUM.) AND ITO(INTL. TAXN.) V DR. SH M SHAH [IT APPEAL NO. 3582(MUM) OF 2009 DATED 17.2.2010 ,IT HAS BEEN HELD BY IBAI ITAT THAT AN ASSESSEE IS ENTI TLED FOR DEDUCTION UNDER SECTION 54F OF THE ACT IF THE ASSESSEE ACQUIRES PROPERTY OUTSIDE INDIA. SIMILAR FINDING HAS BEEN GIVEN BY ITAT LUCK NOW IN ACIT V IQBAL JAFAR [2014]151 ITD 364(LUCKNOW- TRIB.). IN N. RANGANATHAN VS ITO [2014] 51 TAXMANN.COM 56 CHENNAI-TRIB), IT WAS HELD THAT THE ASSESSEE WAS ENTITLED TO CLAIM EXEMPTION UNDER -E,- TON 54 EVEN IF THE INVESTMENT IN NEW PROPERTY WAS MADE IN SINGAPORE. THE SUBSEQUENT AMENDMENT IN SECTIONS 54 AND 54F DO NOT HAVE ANY IMPLICATION ASSESSMENT YEARS PRIOR TO ASSESSMENT YEAR 2015-16 AS THE STATUTE ITS ELF PROVIDES -'HAT THE AMENDMENTS ARE EFFECTIVE FROM 01.04.2015. THE ASSESSING OFFICER HAD NOT FOLLOWED THE DECISION OF ITAT BENGALURU ON THE D THAT AN APPEAL HAD BEEN FILED BEFORE THE HIGH COURT. IT IS NOT A VALID ARGUMENT. AS HELD BY HON'B LE SUPREME COURT IN UNION OF INDIA AND OTHERS V KAMLAKSHI FINANCE CORPORATION, AIR 1992 SC 71, THE ORDER OF APPELLATE AUTHORITY IS BINDING ON THE SUBORDINATE AUTHORITIES UNLESS STAYED BY A COMPETEN T COURT. THE COURT HELD AS UNDER: THE PRINCIPLES OF JUDICIAL DISCIPLINE REQUIRE THAT THE ORDERS OF THE HIGHER APPELLATE AUTHORITIES SHOU LD 7 ITA NOS.2804&2805/B/2017 BE FOLLOWED UNRESERVEDLY BY THE SUBORDINATE AUTHORITIES. THE MERE FACT THAT THE ORDER OF THE APPELLATE AUTHORITY IS NOT 'ACCEPTABLE' TO THE DEPARTMENT- IN ITSELF AN OBJECTIONABLE PHRASE-AND I S THE SUBJECT MATTER OF AN APPEAL CAN FURNISH NO GROU ND FOR NOT FOLLOWING IT UNLESS ITS OPERATION HAS BEEN SUSPENDED BY A COMPETENT COURT.' THE SAME JUDICIAL PRINCIPLE HAS BEEN REITERAT ED SEVERAL TIMES BY THE DIFFERENT COURTS AND AS MENTIO NED BY THE APPELLANT IN ITS GROUND NO. 16.. THEREFORE, CONSIDERING THE HIERARCHICAL NATURE OF JUDICIAL ADMINISTRATION OF THE DISPUTES IN INCOME TAX MATTER S, THE DECISION OF ITAT BENGALURU HAS A BINDING PRECEDENT VALUE OVER THE SUBORDINATE AUTHORITIES INCLUDING ALL THE ASSESSING OFFICERS IN KARNATAKA. IT IS DIRECTED THAT THE APPELLANT BE ALLOWED EXEMPTION CLAIMED UNDER SECTION 54F OF THE ACT. GROUND NOS. 3 TO 16 ARE ALLOWED. 8. WE FIND THAT THE LD DR COULD NOT CONTROVE RT THE FINDINGS OF THE CIT(A) WITH ANY COGENT OR NEW EVIDENCES FURTHER WE ARE OF THE OPINION THAT THE CIT(A) HAS DEALT ON THE AMENDED PR OVISIONS TO SEC. 54 AND 54F OF THE ACT WHICH ARE EFFECTIVE FROM 1/4/ 2015 RELEVANT TO ASST. YEAR 2015-16. WHEREAS THE PRESENT CASE PERTA INS TO ASST. YEAR 2013-14 AND THE EARLIER PROVISION ARE APPLICABLE FU RTHER THE LD DR HAS ARGUED SUPPORTING THE ORDERS OF THE AO. ACCOR DINGLY WE ARE NOT INCLINED TO INTERFERE WITH THE ORDER OF THE CIT (A) WHO HAS PASSED REASONED ORDER AND UPHELD THE SAME AND DISM ISS GROUNDS OF APPEAL OF THE REVENUE 8 ITA NOS.2804&2805/B/2017 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. 11. THE ASSESSEE HAS FILED CROSS-OBJECTION IN CO NO .26/BANG/2018 SUPPORTING THE ORDER OF THE CIT(A). SINCE WE HAVE DISMISSED THE REVENUE APPEAL, THE ASSESSEES CO BECOMES INFRUCTUO US AND DISMISSED. 20. IN THE RESULT, APPEAL OF THE REVENUE AND CO OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND APRIL, 2019 . SD/- SD/- (A.K GARODIA) (PAVAN KUMAR GADALE) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE DATED : 22/4/2019 VMS COPY TO :1. THE ASSESSEE 2. THE REVENUE 3.THE CIT CONCERNED. 4.THE CIT(A) CONCERNED 5.DR 6.GF BY ORDER ASST. REGISTRAR, I TAT, BANGALORE. 9 ITA NOS.2804&2805/B/2017 1. DATE OF DICTATION 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO SR.P.S .. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER .. 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S. .. 6. DATE OF UPLOADING THE ORDER ON WEBSITE .. 7. IF NOT UPLOADED, FURNISH THE REASON FOR DOING SO .. 8. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 9. DATE ON WHICH ORDER GOES FOR XEROX & ENDORSEMENT 10. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 11. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 12. THE DATE ON WHICH THE FILE GOES TO DISPATCH SEC TION FOR DISPATCH OF THE TRIBUNAL ORDER . 13. DATE OF DESPATCH OF ORDER. ..