INCOME TAX OFFICER (IT)-3(1)(1), MUMBAI V. SARLA TANDON KUMAR, MUMBAI

ITA 507/MUM/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 4376 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-05-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Assessment Year: 2014-2015
• Appeal Filed On: 24-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NISHANT SAMAIYA
• Assessee Lawyers: VINAY DEVI
• Keywords: Cost of acquisition
• Section: 54F; 54

Judgement Text

1 IN THE INCOME-TAX APPELLATE TRIBUNAL I BENCH MUMB AI BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND SHRI N.K. PRADHAN, ACCOUNTANT MEMBER ITA NO. 507/MUM/2018 (ASSESSMENT YEAR 2014-15 ) ITO (IT)- 3 (1)(1), ROOM NO. 1628, AIR INDIA BUILDING, NARIMAN POINT, MUMBAI-400021. VS. SARLA TANDON KUMAR FLAT NO. 2, DALAMAL COURT, WORLI SEAFACT, MUMBAI-400018 . PAN: CISPK4408A APPELLANT RESPONDE NT APPELLANT BY : SHRI NISHANT SAMAIYA (SR. DR) RESPONDENT BY : SHRI VINAY DEVI (AR) DATE OF HEARING : 09.05.2018 DATE OF PRONOUNCEMEN T : 09.05.2019 ORDER UNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER; 1. THIS APPEAL BY REVENUE UNDER SECTION 253 OF THE INC OME-TAX ACT (THE ACT) IS DIRECTED AGAINST THE ORDER OF LD. CIT(A)-57, MUM BAI DATED 08.11.2017 FOR ASSESSMENT YEAR 2014-15. THE ASSESSEE HAS RAISE D THE FOLLOWING GROUNDS OF APPEAL. 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN HOLDING THAT THE INVESTMENT IN THE HOUSE AT SA WOULD BE ENTITLED TO EXEMPTION U/S 54 OF THE I. T. ACT, 1961.' 2. 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN INCLUDING THE PERIOD OF HOLD ING OF THE ASSETS BY THE PREVIOUS OWNER FOR THE PURPOSE OF COMPUTATION OF LO NG TERM CAPITAL GAIN, WHEREAS THE INDEXED COST OF ACQUISITION HAS TO BE C OMPUTED WITH REFERENCE TO THE YEAR IN WHICH THE ASSESSEE HAD BECOME THE OW NER OF THE PROPERTY AFTER THE DEATH OF HIS PREVIOUS OWNER.' ITA NO. 507 MUM 2018-SARLA TANDON KUMAR 2 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A NON-RESIDENT FILED HER RETURN OF INCOME ON 30.06.2014 FOR ASSESSMENT YEAR 2014-15 DECLARING TOTAL INCOME OF RS. 16,19,352/-. THE RETURN OF INCO ME WAS SELECTED FOR SCRUTINY. IN THE RETURN OF INCOME, THE ASSESSEE CLA IMED LONG TERM CAPITAL GAIN (LTCG) EARNED ON SALE OF IMMOVABLE PROPERTY AC QUIRED BY WAY OF INHERITANCE ON THE DEATH OF HER FATHER. THE SAID PR OPERTY WAS ACQUIRED BY HER FATHER PRIOR TO 01.04.1981. THE ASSESSEE CLAIM EXEMPTION UNDER SECTION 54 BY INVESTING IN LTCG IN HOUSE PROPERTY IN USA. T HE ASSESSING OFFICER DISALLOWED THE EXEMPTION OF SECTION 54F HOLDING TH AT NEW ASSET IS LOCATED OUTSIDE INDIA. AND THAT AMENDMENT IN SECTION 54(1) WHEREIN THE WORD IN INDIA WAS INSERTED BY WAY OF FINANCE ACT 2015, W.E .F. 01.04.2015 IS CLARIFICATORY IN NATURE. THE ASSESSEE WAS ALSO DISA LLOWED INDEXATION FROM THE YEAR IN WHICH THE PREVIOUS OWNER FIRST HELD THE ASSET. 3. ON APPEAL BEFORE THE LD. CIT(A), THE ACTION OF ASSE SSING OFFICER WAS REVERSED. THE LD. CIT(A) WHILE GRANTING EXEMPTION F OLLOWED THE DECISION OF TRIBUNAL IN ITO VS. MR. NISHANT LALIT JADHAV IN ITA NO. 6883/MUM/2014 DATED 26.04.2017 AND ON THE SECOND IS SUE REGARDING ALLOWING INDEXATION COST FROM THE DATE ON WHICH THE PREVIOUS OWNER HELD BY FOLLOWING THE DECISION OF JURISDICTIONAL HIGH CO URT IN CIT VS. MANJULA J. SHAH IN ITA NO. 3378 OF 2010 DATED 11.01.2011. THUS , AGGRIEVED BY THE ORDER OF LD. CIT(A), THE REVENUE HAS FILED THE PRES ENT APPEAL BEFORE US. ITA NO. 507 MUM 2018-SARLA TANDON KUMAR 3 4. WE HAVE HEARD THE SUBMISSION OF THE PARTIES AND HAV E GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE HAVE ALSO DELIB ERATED ON VARIOUS CASE LAWS RELIED BY THE LOWER AUTHORITIES. AT THE OUTSET OF HEARING, THE LD. AUTHORIZED REPRESENTATIVE (AR) OF THE ASSESSEE SUBM ITS THAT BOTH THE GROUNDS OF APPEAL RAISED BY REVENUE ARE COVERED AGA INST THE REVENUE AND IN FAVOUR OF ASSESSEE. THE LD. AR OF THE ASSESSEE FURT HER SUBMITS THAT GROUND NO.1 OF THE APPEAL IS COVERED IN FAVOUR OF ASSESSEE BY THE DECISION OF TRIBUNAL IN ITO VS. NISHANT LALIT JADHAV (SUPRA), W HEREIN IT WAS HELD THAT THE AMENDMENT MADE IN FINANCE ACT NO. 2 OF 20114 IS MADE APPLICABLE W.E.F. 01.04.2015 WHICH IS APPLICABLE SUBSEQUENT TO THE AMENDMENT, WHICH CAME INTO EFFECT FROM 01.04.2015. THUS, NOT APPLICA BLE FOR THE YEAR UNDER CONSIDERATION. 5. IN SUPPORT OF GROUND NO.2, THE LD. AR OF THE ASSESS EE RELIED UPON THE DECISION OF HONBLE BOMBAY HIGH COURT IN CIT VS. MA NJULA J. SHAH (SUPRA). 6. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTAT IVE (DR) FOR THE REVENUE AFTER GOING THROUGH THE ORDER OF LOWER AUTH ORITIES AND THE DECISION OF TRIBUNAL IN NISHANT LALIT JADHAV (SUPRA) AND IN CIT VS. MANJULA J. SHAH (SUPRA) SUBMITS THAT HE STRONGLY RELIED UPON THE OR DER OF ASSESSING OFFICER. 7. WE HAVE CONSIDERED THE SUBMISSION OF BOTH THE PARTI ES AND HAVE GONE THROUGH THE ORDER OF AUTHORITIES BELOW. GROUND NO.1 RELATES TO ALLOWING THE EXEMPTION UNDER SECTION 54F OF THE ACT. WE HAVE NOT ED THAT DURING THE ITA NO. 507 MUM 2018-SARLA TANDON KUMAR 4 ASSESSMENT, THE ASSESSING OFFICER NOTED THAT ASSESS EE HAS SOLD IMMOVABLE PROPERTY AND CLAIMED EXEMPTION OF LTCG UNDER SECTIO N 54F BY INVESTING THE SALE PROCEED IN ACQUISITION OF PROPERTY IN FORE IGN COUNTRY. THE ASSESSING OFFICER FURTHER NOTED THAT WHILE COMPUTIN G THE LTCG, THE ASSESSEE HAS TAKEN BENEFIT OF THE ORIGINAL OWNER, W HICH SHE ACQUIRED BY WAY OF INHERITANCE. THE ASSESSING OFFICER DISALLOWE D THE EXEMPTION UNDER SECTION 54F HOLDING THAT EXEMPTION IS NOT AVAILABLE FROM THE PROPERTY PURCHASED OUTSIDE OF INDIA. THE LD. CIT(A) ALLOWED THE EXEMPTION UNDER SECTION 54 HOLDING THAT THE AMENDMENT WAS MADE BY F INANCE ACT NO.2 OF 2014 WHEREIN THE WORD IN INDIA HAS BEEN INSERTED IN SECTION 54(1). THE ASSESSEE WOULD BE ENTITLED TO GET THE BENEFIT OF SE CTION 54 OF THE ACT BY FOLLOWING THE DECISION OF TRIBUNAL IN NISHANT LALIT JADHAVS (SUPRA) CASE ON SIMILAR ISSUE HAS PASSED THE FOLLOWING ORDER: 5. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. UNDOUBTEDLY, PRIOR TO THE AMENDMENT MADE BY FINANCE (NOS.2) ACT, 2014 W.E .F. 01/04/2015, THE LANGUAGE OF SECTION 54 OF THE ACT REQUIRED THE ASSE SSEE TO INVEST THE CAPITAL GAIN IN A RESIDENTIAL PROPERTY. IT IS ONLY SUBSEQUE NT TO THE AMENDMENT, WHICH HAS COME INTO EFFECT FROM 01/04/2015,THAT SUCH INVE STMENT IS REQUIRED TO BE MADE IN A RESIDENTIAL PROPERTY IN INDIA. THE ASSESS MENT YEAR BEFORE US IS PRIOR TO 01/04/2015, AND, THEREFORE, THE AMENDMENT WOULD NOT BE APPLICABLE. A SIMILAR SITUATION, THOUGH IN THE CONTEXT OF SECTION 54F OF THE ACT, HAS BEEN CONSIDERED BY THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF SMT. LEENA J. SHAH (SUPRA); NOTABLY, SO FAR AS THE IMPUGNED ISSUE IS CONCERNED, THE REQUIREMENT OF SECTIONS 54F & 54F OF THE ACT IS PAR I-MATERIA, INTER-ALIA, REQUIRING THE ASSESSEE TO MAKE INVESTMENT IN A NEW RESIDENTIAL HOUSE IN ORDER TO AVAIL THE EXEMPTION ON THE CAPITAL GAINS EARNED. AS PER THE HON'BLE HIGH COURT, PRIOR TO THE AMENDMENT THE ONLY STIPULATION WAS TO INVEST IN A NEW ITA NO. 507 MUM 2018-SARLA TANDON KUMAR 5 RESIDENTIAL PROPERTY AND THAT THERE WAS NO SCOPE FO R IMPORTING THE REQUIREMENT OF MAKING SUCH INVESTMENT IN A RESIDENTIAL PROPERTY LOCATED IN INDIA. ON SIMILAR ANALOGY, IN THE PRESENT CASE TOO, WE DO NOT FIND ANY REASON TO UPHOLD THE STAND OF THE ASSESSING OFFICER THAT THE EXEMPTI ON UNDER SECTION 54 OF THE ACT IS TO BE ALLOWED ONLY IF THE INVESTMENT IS MADE IN RESIDENTIAL PROPERTY IN INDIA. CONSIDERED IN THE AFORESAID LIGHT AND IN THE ABSENCE OF- ANY CONTRARY DECISION, THE PARITY OF REASONING LAID DOWN BY THE HON'BLE GUJARAT HIGH COURT HAS TO PREVAIL AND WE FIND NO REASON TO DISTRACT FR OM THE CONCLUSION ARRIVED AT BY THE CIT(A). ACCORDINGLY, THE ORDER OF THE CIT(A) IS HEREBY AFFIRMED AND REVENUE FAILS IN ITS APPEAL. 8. IN VIEW OF THE FACTUAL AND LEGAL DISCUSSION, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD. CIT(A). HENCE, GROUND NO.1 OF THE APPEAL IS DISMISSED. 9. GROUND NO.2 RELATES TO ALLOWING THE INDEXATION COST OF ACQUISITION OF WHEN FIRST OWNER PURCHASED THE PROPERTY. WE HAVE NOTED T HAT THE ISSUE IS NO MORE RES-INTEGRA AFTER THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN CIT VS. MANJULA J. SHAH (SUPRA), WHEREIN IT WAS HELD TH AT INDEXATION COST OF ACQUISITION HAS TO BE COMPUTED FROM THE YEAR IN WHI CH PREVIOUS OWNER FIRST HELD THE ASSET AND NOT THE YEAR IN WHICH ASSESSEE B ECAME OWNER BY WAY OF INHERITANCE. THUS, THERE IS NO INFIRMITY IN THE ORD ER PASSED BY LD. CIT(A). HENCE, GROUND NO.2 IS DISMISSED. 10. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 09/05/2019. SD/- SD /- N.K. PRADHAN, PAWAN SINGH ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 09 .05.2019 SK ITA NO. 507 MUM 2018-SARLA TANDON KUMAR 6 COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR I BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI