ITO (IT) 3(1), MUMBAI V. NISHANT LALIT JADHAV, MUMBAI

ITA 6883/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0893 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 12-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMAR
• Assessee Lawyers: HARI S RAHEJA
• Keywords: Tax effect
• Section: 143(3); 54F; 260A; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B, MUMBAI BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.6883/MUM/2014 (AY. 2011-12) INCOME-TAX OFFICER 3(1), ROOM NO.114, 1 ST FLOOR, SCINDIA HOUSE, BALLARD PIER, N.M.ROAD, MUMBAI 400 038 ...... APPELLANT VS. MR. NISHANT LALIT JADHAV, FLAT NO.601, 6 TH FLOOR, MADHUBAN CHS, 51, TPS ROAD, BORIVALI (W) MUMBAI 400 092 PAN: AAPPJ 3988L .... RESPONDENT C.O.NO.90/MUM/2016 (ARISING OUT OF 6883/MUM/2014 ,AY. 2011-12) MR. NISHANT LALIT JADHAV, FLAT NO.601, 6 TH FLOOR, MADHUBAN CHS, 51, TPS ROAD, BORIVALI (W) MUMBAI 400 092 PAN: AAPPJ 3988L ... CROSS OBJECTOR VS. INCOME-TAX OFFICER 3(1), ROOM NO.114, 1 ST FLOOR, SCINDIA HOUSE, BALLARD PIER, N.M.ROAD, MUMBAI 400 038 ... APPELLANT IN APPEAL APPELLANT BY : SHRI SUMAN KUMAR RESPONDENT BY : SHRI HARI S. RA HEJA DATE OF HEARING : 10/04/2017 DATE OF PRONOUNCEMENT : 26/04/2017 2 ITA NO.6883/MUM/2014 (AY. 2011-12) ORDER PER G.S.PANNU,A.M: THE CAPTIONED APPEAL FILED BY THE REVENUE AND CRO SS OBJECTION BY THE ASSESSEE PERTAINING TO ASSESSMENT YEAR 2011-12 ARE DIRECTED AGAINST AN ORDER PASSED BY CIT(A)-10, MUMBAI DATED 31/07/2014 , WHICH IN TURN, ARISES OUT OF AN ORDER PASSED BY THE ASSESSING OFFICER UN DER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 2 0/01/2014. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING THE CLAIM OF EXEMPTION U/S 54 OF THE I.T. ACT BY THE ASSESSEE FOR THE INVESTMENT OF RS.1,12,75,000/-, BEING THE SALE CONSIDERATION OF IMMOVABLE PROPERTY IN INDIA, IN BUYING THE RESIDENTIAL APARTM ENT IN NEW YORK, USA OF RS.2,20,00,000/- WITHOUT APPRECIATING THE FACT THAT THE EXEMPTION IS AVAILABLE ONLY WHEN INVESTMENT IS CARRIED OUT IN INDIA. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN RELYING ON THE DECISION OF MUMBAI TRIBUNAL IN TH E CASE OF MRS. PREMA P. SHAH & SANJIV P. SHAH VS. ITO(100 ITR 60(MUM)) WITHOUT APP RECIATING THE FACT THAT REFERENCE APPEAL U/S 260A OF THE IT. ACT, WAS . EAR LIER PREFERRED, BUT LATER ON WITHDRAWN IN THIS, CASE ON THE GROUND OF LOWER TAX EFFECT AND NOT ON MERIT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING THE EXEMPTION U/S 54 OF THE IT. ACT FOR THE CAPITAL GAIN ARISING FROM THE SALE OF RESIDENTIAL PROPERTY IN INDIA IN INVESTING THE SAME IN THE RESIDENTIAL APARTMENT IN NEW YORK, USA(OUTSIDE INDIA) WITHOUT A PPRECIATING THE FACT THAT CLAIM OF EXEMPTION OF SECTION 54F OF THE I T. ACT, HAS NOT BEEN ALLOWED BY THE AHMEDABAD ITAT IN THE CASE OF LEENA J SHAH 6 SOT 72 1 (ITO AHMEDABAD) 3. IN THIS APPEAL, ALTHOUGH REVENUE HAS RAISED MULT IPLE GROUNDS OF APPEAL, BUT THE SOLITARY GRIEVANCE IS AGAINST THE D ECISION OF THE CIT(A) IN ALLOWING ASSESSEES CLAIM FOR EXEMPTION UNDER SECTI ON 54 OF THE ACT. BRIEFLY PUT, THE RELEVANT FACTS ARE THAT THE RESPONDENT ASS ESSEE IS A NON-RESIDENT INDIAN(NRI) AND DURING THE YEAR UNDER CONSIDERATION HE, INTER-ALIA, EARNED A LONG TERM CAPITAL GAIN OF RS.67,06,652/- FROM SALE OF RESIDENTIAL PROPERTY LOCATED AT MUMBAI. IN THE COMPUTATION OF INCOME AS SESSEE CLAIMED 3 ITA NO.6883/MUM/2014 (AY. 2011-12) EXEMPTION UNDER SECTION 54 OF THE ACT ON THE GROUND THAT THE CAPITAL GAIN ARISING ON THE SALE OF PROPERTY WAS UTILIZED IN THE PURCHASE OF A RESIDENTIAL PROPERTY AT NEW YORK, USA. THE ASSESSING OFFICER D ENIED THE CLAIM OF EXEMPTION UNDER SECTION 54 OF THE ACT ON THE GROUN D THAT INVESTMENT IN NEW RESIDENTIAL PROPERTY DID NOT MEET THE REQUIREMENTS OF SECTION 54 OF THE ACT AS THE PROPERTY WAS ACQUIRED OUTSIDE INDIA. IN CO MING TO SUCH CONCLUSION, THE ASSESSING OFFICER RELIED UPON THE DECISION OF T HE AHMEDABAD TRIBUNAL IN THE CASE OF SMT. LEENA J. SHAH , 6 SOT 721(AHD). I N APPEAL BEFORE THE CIT(A), ASSESSEE CONTENDED THAT DURING THE RELEVANT PERIOD , THERE WAS NO REQUIREMENT IN SECTION 54 OF THE ACT THAT THE IN VESTMENT IN THE NEW PROPERTY IS TO BE MADE IN INDIA. THE CIT(A) NOTICE D THAT THE REQUIREMENT OF MAKING THE INVESTMENT IN A PROPERTY IN INDIA INDIA WAS INSERTED BY THE FINANCE (NO.2) ACT, 2014 W.E.F. 01/04/2015 AND, THE REFORE, IN THE INSTANT ASSESSMENT YEAR THE CLAIM OF EXEMPTION UNDER SECTI ON 54 OF THE ACT COULD NOT BE DENIED ON THIS GROUND. IN COMING TO SUCH CO NCLUSION, THE CIT(A) ALSO RELIED UPON THE DECISION OF THE MUMBAI TRIBUNAL IN THE CASE OF MRS. PREMA P. SHAH & SANJIV P. SHAH VS. ITO, 100 ITD 60 (MUM) , I TO VS. GIRISH M. SHAH IN ITA NO.3582/MUM/2009 AND VINAY MISHRA VS. CIT , IN ITA NO.895/(BANG) OF 2012.AGAINST SUCH A DECISION OF THE CIT(A), REVEN UE IS IN APPEAL BEFORE US. 3. BEFORE US, THE LD. REPRESENTATIVE FOR THE ASSESS EE POINTED OUT THAT DECISION OF THE AHMEDABAD TRIBUNAL IN THE CASE OF S MT. LEENA J. SHAH(SURPA), WHICH HAS BEEN RELIED UPON BY THE ASSESSING OFFICER HAS SINCE BEEN REVERSED BY THE HON'BLE GUJARAT HIGH COURT IN ITS JUDGMENT I N ITA NO. 483 OF 2006 DATED 14/06/2016, A COPY OF WHICH HAS BEEN PLACED O N RECORD. APART THEREFROM, THE LD. REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE FOLLOWING DECISIONS OF THE TRIBUNAL SUPPORT THE STA ND OF THE ASSESSEE, WHICH HAS RIGHTLY BEEN UPHELD BY THE CIT(A) :- 4 ITA NO.6883/MUM/2014 (AY. 2011-12) (1) MRS. PREMA P. SHAH VS. ITO, (2006) 100 ITD 60( MUM) (2) ITO VS. DR. GIRISH M. SHAH, ITA NO.3582/MUM/20 09 DATED 17/2/2010. (3) ITO VS. SHRI ANIL P. MUKHI, ITA 6803/MUM/2010 DATED 16/02/2012. (4) VINAY MISHRA VS. CIT , IN ITA NO.895/(BANG) OF 2012 DATED 12/10/2012. 4. THE LD. DEPARTMENTAL REPRESENTATIVE HAS MERELY R EITERATED THE STAND OF THE ASSESSING OFFICER THAT EVEN PRIOR TO AMENDME NT BY FINANCE (NO.2) ACT, 2014,IT WAS TO BE IMPLICITLY UNDERSTOOD THAT THE RE QUIREMENT OF SECTION 54 OF THE ACT WAS TO MAKE INVESTMENTS IN A NEW RESIDENTIA L HOUSE WITHIN INDIA ONLY. 5. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. 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 R EQUIRED THE ASSESSEE TO INVEST THE CAPITAL GAIN IN A RESIDENTIAL PROPERTY. IT IS ONLY SUBSEQUENT TO THE AMENDMENT, WHICH HAS COME INTO EFFECT FROM 01/04/20 15, THAT SUCH INVESTMENT IS REQUIRED TO BE MADE IN A RESIDENTIAL PROPERTY IN INDIA. THE ASSESSMENT YEAR BEFORE US IS PRIOR TO 01/04/2015, AND, THEREFORE, THE AMENDMENT WOULD NOT BE APPLICABLE. A SIMILAR SITUA TION, THOUGH IN THE CONTEXT OF SECTION 54F OF THE ACT, HAS BEEN CONSIDE RED 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 SEC TIONS 54F & 54F OF THE ACT IS PARI-MATERIA, INTER-ALIA, REQUIRING THE ASSE SSEE TO MAKE INVESTMENT IN A NEW RESIDENTIAL HOUSE IN ORDER TO AVAIL THE EXEMPT ION 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 RESIDENTIAL P ROPERTY AND THAT THERE WAS NO SCOPE FOR IMPORTING THE REQUIREMENT OF MAKING S UCH INVESTMENT IN A RESIDENTIAL PROPERTY LOCATED IN INDIA. ON SIMILAR ANALOGY, IN THE PRESENT CASE