Appeal details
Counselvise Citation
[2022] 105 COUNSELVISE.COM (IT) 5937 (ITAT-VISAKHAPATNAM)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
3 year(s) 10 month(s) 18 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
27-03-2022
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
SMC
Assessment Year
2010-2011
Appeal Filed On
09-05-2018
Judgement Text
आयकरअपीलीयअधधकरण, धिशाखापटणमपीठ, धिशाखापटणम IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM श्री लधलत कु मार, न्याधयक सदस्य एिं श्री एस बालाकृ ष्णन, लेखा सदस्य के समक्ष BEFORE SHRI LALIET KUMAR, HON’BLE JUDICIAL MEMBER & SHRI S BALAKRISHNAN, HON’BLE ACCOUNTANT MEMBER आयकर अपील सं./I.T.A.No.178/Viz/2018 (ननधधारण वर्ा/ Assessment Year : 2010-11) Smt.Arabolu Venkata Naga Deepthi Rep. By Power of Attorney Holder Smt. N.Satyaramanujam Flat No.403, Dhanna Apartments Seethammadhara Visakhapatnam [PAN : ATCPA6413A] Vs. Income Tax Officer (International Taxation) Visakhapatnam (अपीलाथी/ Appellant) (प्रत्यथी/ Respondent) अपीलधथी की ओर से/ Appellant by : Shri I.Kama Sastry, AR प्रत्यधथीकीओरसे/ Respondent by : Shri SPG Mudaliar, DR सुनवधई की तधरीख/ Date of Hearing : 28.03.2022 घोर्णध की तधरीख/Date of Pronouncement : 28.03.2022 O R D E R Per Shri Laliet Kumar, Judicial Member This appeal is filed by assessee against the order of the Commissioner of Income Tax (Appeals) [for short CIT(A)]-10, Hyderabad in ITA No.0040/CIT(A)-10/2016-17/CIT(A), Hyd-10/10187/2016-17 dated 19.03.2018 for the Assessment Year (A.Y.)2010-11. 2 ITA No.178/Viz/2018, A.Y.2010-11 Smt.Arabolu Venkata Naga Deepthi, Visakhapatnam 2. The assessee has raised the following grounds of appeal : 1. The Id. AO is not correct in denying the benefit of exemption provided under section 54 of the Income-tax Act, 1961 for the reason that the investment in new residential house property is made outside India i.e., in USA and the Id. CIT (Appeals) is not correct in upholding the same. 2. The Ld. AO is not correct in charging interest under section 234A; 234B and 234C and the Id. CIT (Appeals) is not correct in confirming the levy/charge of interest. 3. The above grounds are mutually exclusive and without prejudice to one another. 4. The appellant craves leave to add to, amend, alter, modify, delete all or any of the above grounds appeal. 3. Brief facts of the case are that the assessee is an NRI, who had sold the immovable property along with her father to Sri T.Janardhana Rao on 19.02.2010 for a consideration of 79,19,500/-. An order u/s 201(1)/(1A) was passed in the case of Sri T.Janardhana Rao on 12.02.2013 for not making TDS u/s 195 of the Income Tax Act, 1961 (in short ‘Act’) on the payments made by him to the assessee. Subsequently, the assessee filed her income tax return for the A.Y.2010-11 on 17.05.2013 admitting sale consideration of Rs.39,69,000/-, towards her share on account of the above transfer of property and claimed exemption u/s 54F for the entire long term capital gains shown at Rs.17,89,099/- for reinvestment made by her in a house situated in United States of America. Notice u/s 148 was issued to the assessee on 30.03.2015 as the assessee is not eligible for such claim 3 ITA No.178/Viz/2018, A.Y.2010-11 Smt.Arabolu Venkata Naga Deepthi, Visakhapatnam as reinvestment is stated to be made in a house property situated in USA, income from which is not chargeable to tax in India u/s 54F of the Act. In response to the notice, the assessee had filed reply and stated that the income tax return filed for the A.Y.2010-11 on 17.05.2013 may be treated as the one filed in response to the said notice u/s 148. Subsequently, notice u/s 143(2) dt.11.03.2016 was also issued to the assessee. In response to the notices, the Ld.AR submitted before the AO that in view of the recent amendment made to section 54F of the Act from 01.-04.2015 onwards, exemption u/s 54F is to be allowed if the re-investment is made in ‘one residential house in India’ and this provision is applicable for the A.Y.2015- 16 onwards only. As the case of the assessee relates to the A.Y.2010-11, it is not necessary for the assessee to reinvest the sale proceeds in a residential house in India, hence, the assessee is eligible for exemption claimed u/s 54F. On examination of the submissions made by the Ld.AR , the AO observed that Long Term Capital Gains has been devised and introduced inter-alia in order to develop and encourage the housing and infrastructure needs in India. Accordingly, such exemption is being granted under various sections viz., Sec.54, 54EC, 54F etc. for the reinvestments made in the assets as specified by the said sections. The AO observed that income arisen in India on account of capital gains cannot be said to go tax free if it 4 ITA No.178/Viz/2018, A.Y.2010-11 Smt.Arabolu Venkata Naga Deepthi, Visakhapatnam is reinvested elsewhere outside India, as in the case on hand, income from such house property in USA cannot be taxed in India as it is taxed in USA. The AO further observed that even as per Article 13 of the Indo-USA DTAA, capital gains are to be taxed in the contracting state in which they arise and as per the law of that contracting state as follows : Article 13- Gains – Except as provided in Article 8 (Shipping and Air Transport) of this Convention, each Contracting State may tax capital gains in accordance with the provisions of its domestic law. In view of the above, the AO has passed assessment order u/s 143(3) r.w.s. 147 by disallowing the exemption claimed by the assessee u/s 54F 4. Aggrieved by the order of the AO, the assessee preferred an appeal before the CIT(A) and the Ld.CIT(A) observed that intention of the legislature in introducing the scheme of exemption of long term capital gains is to develop and encourage the housing and infrastructure needs in India which is of paramount importance. Therefore, invariably, the reinvestment should be in a residential house located in India only and as per provisions of section 1(2) of the Act, the provisions of the Act extend to the whole of India, which means that any exemption or deduction cannot be allowed in respect of the amounts invested / reinvested outside India. The CBDT Circular No.1/2015 dated 21.01.2015 clearly mentioned that the benefit was intended for investment in residential house within India. The 5 ITA No.178/Viz/2018, A.Y.2010-11 Smt.Arabolu Venkata Naga Deepthi, Visakhapatnam Ld.CIT(A) disallowed the exemption claimed u/s 54F by relying on numerous decisions of the Hon’ble Supreme Court. 5. Aggrieved by the order of the Ld.CIT(A), the assessee preferred an appeal before the Tribunal and at the outset, the Ld.AR has submitted that the issue is covered in favour of the assessee by the decision of the coordinate bench and also the following decisions of the Hon’ble High Courts : (a) Hon’ble High Court of Karnataka in the case of CIT Vs. Vinay Mishra in IT.A. No.75/2013 dt.31.08.2020 (b) Hon’ble High Court of Delhi in the case of CIT Vs. Anurag Pandit in ITA No.1169/2018 dt.14.05.2019 and CIT Vs.Dipankar Mohan Ghosh in W.P.(C) 9859/2019 and CM AAppl.40767/2019. (c) Hon’ble High Court of Madras in the case of CIT Vs. Saroja Naidu in Tax Case Appeal No.300 & 301 of 2021 dt.22.06.2021 6. Per contra, the Ld.DR has submitted that the intention of the statute is required to be considered and, if we look into the Explanation to notes of Finance Act, it is abundantly clear that the benefit sought to be granted to the assessee, so as to boost the development of residential houses in India and if the residential house is made outside India, then the benefit of 6 ITA No.178/Viz/2018, A.Y.2010-11 Smt.Arabolu Venkata Naga Deepthi, Visakhapatnam section 54F is not required to be given to the assessee. In rebuttal, the Ld.AR has submitted that by way of amendment to Finance Act 2014, the location has been specifically added and it was provided that the residential house should be situated in India and therefore this amendment in the statue book, being by nature was prospective and applicable w.e.f. 01.04.2015, therefore, the benefit of section 54F cannot be denied to the assessee. The assessee has constructed the house in USA after the selling the property in India 7. We have heard the rival contentions and the material available on record. It is not disputed by the Ld.DR before us that the assessee has sold the immovable property within the definition of capital asset in India. It is also undisputed fact that the assessee has claimed exemption u/s 54F for Rs.17,89,099/- by reinvesting the house situated in USA. It is also not disputed that reason for denying benefit of 54F by the AO as well as the Ld.CIT(A) was solely on the ground that the assessee has reinvested the amount in USA in the residential house property. In our considered opinion, once, the assessee invested the long term capital gain in buying the residential house either in India or outside India prior to 01.04.2015, the assessee is entitled for exemption. The language used inthe statute for the A.Y. 2010-11 under section 54F provides as under : 7 ITA No.178/Viz/2018, A.Y.2010-11 Smt.Arabolu Venkata Naga Deepthi, Visakhapatnam Capital gain on transfer of certain capital assets not to be charged in case of investment in residential house. 64 54F. (1) 65 [Subject to the provisions of sub-section (4), where, in the case of an assessee being an individual or a Hindu undivided family], the capital gain arises from the transfer of any long-term capital asset, not being a residential house (hereafter in this section referred to as the original asset), and the assessee has, within a period of one year before or 66 [two years] after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, a residential house (hereafter in this section referred to as the new asset), the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say,— (a) if the cost of the new asset is not less than the net consideration in respect of the original asset, the whole of such capital gain shall not be charged under section 45 ; (b) if the cost of the new asset is less than the net consideration in respect of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of the new asset bears to the net consideration, shall not be charged under section 45: 67 [Provided that nothing contained in this sub-section shall apply where— (a) the assessee,— (i) owns more than one residential house, other than the new asset, on the date of transfer of the original asset; or (ii) purchases any residential house, other than the new asset, within a period of one year after the date of transfer of the original asset; or (iii) constructs any residential house, other than the new asset, within a period of three years after the date of transfer of the original asset; and (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,— 68 [***] 69 [***] "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 70 [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 8 ITA No.178/Viz/2018, A.Y.2010-11 Smt.Arabolu Venkata Naga Deepthi, Visakhapatnam 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 from the date of its purchase or, as the case may be, its construction, 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 new asset is transferred.] 71 [(4) The amount of the net consideration which is not appropriated by the assessee towards the purchase of the new asset made within one year before the date on which the transfer of the original asset took place, or which is not utilised by him for the purchase or construction of the new asset before the date of furnishing the return of income under section 139, shall be deposited by him before furnishing such return [such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under sub-section (1) of section 139] in an account in any such bank or institution as may be specified in, and utilised in accordance with, any scheme 72 which the Central Government may, by notification in the Official Gazette, frame in this behalf and such return shall be accompanied by proof of such deposit ; and, for the purposes of sub-section (1), the amount, if any, already utilised by the assessee for the purchase or construction of the new asset together with the amount so deposited shall be deemed to be the cost of the new asset : Provided that if the amount deposited under this sub-section is not utilised wholly or partly 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. Explanation.— 73 [Omitted by the Finance Act, 1992, w.e.f. 1-4-1993.]] The plain reading of section 54F make it abundantly clear that the requirement of section 54F is only to construct or acquire a residential 9 ITA No.178/Viz/2018, A.Y.2010-11 Smt.Arabolu Venkata Naga Deepthi, Visakhapatnam house, the place of construction either in India or outside has not been provided by the Act. The literal meaning of construction of ‘a residential house’ used in section 54 cannot be restricted to onlypurchasing or constructing or acquiring “a residential house within India”. In our considered opinion, the golden rule of interpretation as envisaged in law is required to be applied. In our view, when the statue is clear and unambiguous, then the Tribunal or court should refrain from adding any meaning or word which has not been provided by the statute, to the provision , while interpreting the section . Undoubtedly, the word used in section 54 is “a residential house” and not “a residential house in India”, therefore, it will be violation of literal interpretation of statute, if we read a residential house as residential house in India. The Tribunal is bound to interpret the law within four corners of statute and refrain from inserting any word in the statute and it would amount to legislating the Act. The above said views are fortified by the decisions of the three High Courts referred by the Ld.AR and the most recent decision was of the Hon’ble Madras High Court in the case of CIT Vs. Saroja Naidu, wherein, the Hon’ble High Court in para No.21 and 22, after discussing the decision of Hon’ble Karnataka High Court held in favour of the assessee under : 10 ITA No.178/Viz/2018, A.Y.2010-11 Smt.Arabolu Venkata Naga Deepthi, Visakhapatnam “20. We have discussed about the two decisions from the Karnataka High Court, which, in our opinion, dealt with similar controversy as is raised before us herein. The only difference which we find is that the purchase of the residential houses in the present case is at different address in the same city of Madurai. In D.AnandaBasappa case stated (supra), two flats in question were admitedly adjacent to each other and which were joined to become one residential house. In the case of KhoobchandM.Makhija (supra), two door nos are given viz., 623 and 729, but the complete addresses and even the name of the city is not clear in the facts narrated in the said Judgment. But in our considered opinion, the difference of location of the newly purchased residential house(s) will not alter the position for interpretation of the word 'a residential house' to the effect that it may include more than one or plural residential houses, as held by Karnataka High Court, with which we respectfully agree. The location of the newly purchased houses by the same assessee viz., HUF out of sale consideration received on the sale of original capital Asset or a residential house in the given circumstances of availability of such residential houses as per the requirement of the HUF will not alter the position of interpretation. 21.In our understanding, if the word 'a' as employed under section 54 prior to its amendment and substitution by the words 'one' with effect from 1-4-2015 could not include plural units of residential houses, there was no need to amend the said provisions by Finance Act No. 2 of 2014 with effect from 1-4-2015 which the Legislature specifically made it clear to operate only prospectively from A.Y.2015- 2016. Once we can hold that the word 'a' employed can include plural residential houses also in Section 54 prior to its amendment such interpretations will not change merely because the purchase of new assets in the form of residential houses is at different addresses which would depend upon the facts and circumstances of each case. So long as the same Assessee (HUF) purchased one or more residential houses out of the sale consideration for which the capital gain tax liability is in question in its own name, the same Assessee should be held entitled to the benefit of deduction under section 54 of the Act, subject to the purchase or construction being within the stipulated time limit in respect of the plural number of residential houses also. The said provision also envisages an investment in the prescribed securities which to some extent the present Assessee also made and even that was held entitled to deduction from Capital Gains tax liability by the authorities below. If that be so, the Assessee-HUF in the present case, in our opinion, complied with the conditions of Section 54 of the Act in its true letter and spirit and, therefore was entitled to the deduction under section 54 of the Act for the entire investment in the properties and securities. Therefore, in our opinion, Judgment rendered by the Karnataka High Court in CIT v. D.AnandaBasappa ((2009) 309 ITR 329 (Karn)) 11 ITA No.178/Viz/2018, A.Y.2010-11 Smt.Arabolu Venkata Naga Deepthi, Visakhapatnam &KhoobchandM.Makhija(supra) cited at bar by the learned counsel for the Assessee apply on all fours to the facts of the present case. 22. The decision of Punjab and Haryana High Court relied upon by the learned counsel for the Revenue, in which the Division Bench of the said Court finding a distinction with D.AnandaBasapaa's case (supra) on facts, without expressing contrary opinion in detail, held that no Substantial Questions of Law arose, renders little help to the arguments advanced by the learned counsel for the Revenue. 23. Therefore, we are of the considered opinion that the present Appeal filed by the Assessee deserves to be allowed and the same is accordingly allowed and the questions of law framed above are answered in favour of the Assessee and as against the Revenue. No order as to costs.' (ii) CIT v. Vinay Mishra [2020] 121 taxmann.com 243/[2021] 276 Taxman 68, wherein a Division Bench of the High Court of Karnataka held as follows: "... 8. The relevant extract of CBDT Circular No. 1/2015 dated 21-1-2015 reads as under: 20.5 Applicability: These amendments take effect from 1st April, 2015 and will accordingly apply in relation to Assessment year 2015-16 and subsequent Assessment years. Thus, it is axiomatic that residential property, for which investment is made needs to be situated in India for the purpose of claiming exemption under section 54F from Assessment year 2015-16 only and not prior to that period. In the instant case, the investment in a residential house was made in USA prior to 1-4- 2015, whereas, the requirement of making an investment in a residential house, which was incorporated by way of amendment, came into force w.e.f. 1-4-2015. In the light of aforesaid well settled legal principles as well as the memorandum of objects of Finance Act, 2014, which clearly provide that amendments will take effect from 1-4-2015 and will apply to Assessment year 2015-16 onwards as well as the CBDT's Circular dated 21-1-2015, it is evident that amendment incorporated in Section 54F(1) of the Act is prospective in nature. Similar view has been taken in Leena Jugalkishor Shah v. Asstt, CIT , [2016] 72 taxmann.com 185/[2017] 392 ITR 18 (Guj), Dipankar Mohan Ghosh, in re [2018 89 taxmann.com 218/401 ITR 129 (AAR - New Delhi) and CIT v. Anurag Pandit in I.T.A.No.1169/2018 dated 14-5-2019 (New Del). We concur with the view taken by Delhi, Gujarat and Madras High Courts. 12 ITA No.178/Viz/2018, A.Y.2010-11 Smt.Arabolu Venkata Naga Deepthi, Visakhapatnam In view of preceding analysis, the substantial question of law framed by this court is answered in the affirmative and against the revenue. In the result, the appeal fails and the same is hereby dismissed." 7. Mr.Kaushik appearing on behalf of Mr.S.Sridhar, learned counsel for the respondent-assessee submitted that in view of the judgments Manjula J. Shah (supra), Tilokchand& Sons (supra), Vinay Mishra (supra), both the appeals may be dismissed.” 8. No contrary judgement has been cited by the Ld.DR at the time of argument in favour of the revenue. Therefore, respectfully following the decision of Hon’ble High Court of Madras, we allow the appeal of the assessee. 9. In the result, appeal of the assessee is allowed. Order Pronounced in open Court on 28 th March,2022. Sd/- Sd/- (एस बालाकृ ष्णन) (लधलत कु मार) (S.BALAKRISHNAN) (LALIET KUMAR) लेखा सदस्य/ACCOUNTANT MEMBER न्याधयक सदस्य/JUDICIAL MEMBER Dated :28.03.2022 L.Rama, SPS 13 ITA No.178/Viz/2018, A.Y.2010-11 Smt.Arabolu Venkata Naga Deepthi, Visakhapatnam आदेशकीप्रतितितिअग्रेतिि/Copy of the order forwarded to:- 1.ननधधाऩरती/ The Assessee– Smt.Arabolu Venkata Naga Deepthi, Rep. By Power of Attorney Holder Smt. N.Satyaramanujam, Flat No.403, Dhanna Apartments, Seethammadhara, Visakhapatnam 2. रधजस्व/The Revenue – Income Tax Officer, (International Taxation), Visakhapatnam 3.आयकरआयुक्त (अपील)/ The Commissioner of Income Tax (IT&TP), Hyderabad 4.आयकरआयुक्त (अपील)/ The Commissioner of Income Tax (Appeals)-10, Hyderabad 5.नवभधगीय प्रनतनननध, आयकर अपीलीय अनधकरण, नवशधखधपटणम/ DR,ITAT,Visakhapatnam 6.गधर्ाफ़धईल / Guard file आदेशधनुसधर / BY ORDER Sr. Private Secretary ITAT, Visakhapatnam
