DHUN JEHAN CONTRACTOR, MUMBAI V. ITO (IT) 1(1), MUMBAI

ITA 7058/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92634 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2008-2009
• Appeal Filed On: 03-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LOVE KUMAR
• Assessee Lawyers: K K LALKAKA
• Keywords: Capital asset; Reassessment proceedings
• Section: 54F; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH D , MUMBAI BEFORE SHRI R.C. SHARMA , ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NO. 7058/M/2013 ASSESSMENT YEAR: 200 8 - 09 M S. DHUN JEHAN CONTRACTOR, C/O. K.K. LALKAKA & CO., 507, CHU RCHGATE CHAMBERS, 5, NEW MARINE LINES, MUMBAI 400 020 PAN: AHIP C 1702 E VS. INCOME TAX OFFICER (INTERNATIONAL TAXATION) - 1(1), SCHINDIA HOUSE, BALLARD ESTATE, MUMBAI (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : S HRI K. K. LALKAKA, A.R. REVENUE BY : SHRI LOVE KUMAR , D.R. DATE OF HEARING : 30 .04. 201 5 DATE OF PRONOUNCEMENT : 13.05.2015 O R D E R PER VIJAY PAL RAO , JUDICIAL MEMBER: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 1 8 .0 5 .201 1 OF CIT(A) FOR THE ASSESSMENT YEAR 2008 - 0 9 . THE ASSESSEE HAS RAISED THE F OLLOWING GROUNDS IN THIS APPEAL. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (APPEALS) HAS ERRED IN SUSTAINING THE ORDE R OF THE ASSESSING OFFICER DESPITE THE FACT THAT THE REASSESSMENT PROCEEDINGS WERE INITIATED CONTRARY TO THE PROVISIONS OF LAW, AND THEREFORE, THE SAID PROCEEDINGS ARE ILLEGAL, IN EXCESS OF AND/OR WANT OF JURISDICTION AND/OR OTHERWISE VOID. 2. ON THE FACT S AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (APPEALS) HAS ERRED IN SUSTAINING THE ORDER OF THE ASSESSING OFFICER BY NOT GRANTING EXEMPTION IN RESPECT OF CAPITAL GAINS OF RS. 1,33,56,630/ - EARNED ON SALE OF RESIDENTIAL PROPERTY ALTHOU GH ALL THE REQUISITE CONDITIONS LAID DOWN IN SECTION 54 OF THE ACT WERE DULY FULFILLED. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT ITA NO.7058/M/2013 MS. DHUN JEHAN CONTRACTOR 2 (APPEALS) HAS ERRED IN NOT DEALING WITH THE ADDITIONAL GROUNDS OF APPEAL RELATING TO P ROVISIONS OF ARTICLE 24 BEING NON - DISCRIMINATION CLAUSE CONTAINING DOUBLE TAXATION AVOIDANCE AGREEMENT WITH AUSTRALIA WHICH CATEGORICALLY STATES THAT NATIONALS OF A CONTRACTING STATE SHALL NOT BE SUBJECTED IN OTHER CONTRACTING STATE TO ANY TAXATION OR ANY REQUIREMENT CONNECTED THEREWITH WHICH INCLUDES RELIEFS AND REDUCTIONS FOR TAX PURPOSES, WHICH IS MORE BURDENSOME THAN THE TAXATION AND CONNECTED REQUIREMENTS WHICH NATIONALS OF THAT OTHER STATE IN THE SAME CIRCUMSTANCES MAY BE SUBJECTED TO. 2. THOUGH THE ASSESSEE HAS CHALLENGED THE VALIDITY OF REOPENING VIDE GROUND NO.1 OF THE GROUNDS OF APPEAL, HOWEVER, WE FIRST TAKE UP THE GROUND NO.2 WHICH DEALS WITH THE MERITS OF THE CASE REGARDING DISALLOWANCE OF DEDUCTION UNDER SECTION 54 IN RESPECT OF THE CAPITAL G AIN INVESTED FOR PURCHASE OF RESIDENTIAL HOUSE OUTSIDE INDIA. THE ASSESSEE SOLD A FLAT NO.2.1, SPENTA CO - OP HOUSING SOCIETY, B.G. KHER MARG, MUMBAI AND EARNED CAPITAL GAIN OF RS.1,45,41,080/ - . THE ASSESSEE HAS PURCHASED A RESIDENTIAL PROPERTY OUTSIDE IND IA IN AUSTRALIA BEING FLAT NO.UNIT G01, 1 DANKS STREET WEST, PORT MELBOURN, AND CLAIMED EXEMPTION UNDER SECTION 54 OF THE INCOME TAX ACT. THE ASSESSING OFFICER (AO) HAS DISALLOWED THE CLAIM OF DEDUCTION UNDER SECTION 54 ON THE GROUND THAT THE INVESTMENT W AS MADE IN A NEW PROPERTY OUTSIDE INDIA. 3. ON APPEAL, THE ASSESSEE HAS RELIED UPON THE DECISION OF THIS TRIBUNAL IN THE CASE OF MRS. PREMA T. SHAH 282 ITR (AT) 2 11 MUMBAI. THE LD. CIT(A) HAS NOT ACCEPTED THE CONTENTION OF THE ASSESSEE AS WELL AS THE D ECISION OF THE TRIBUNAL IN THE CASE OF MRS. PREMA T. SHAH RATHER THE LD. CIT(A) HAS CONSIDERED THE AMENDED PROVISIONS OF SECTION 54 AS WELL AS A DECISION OF AHMEDABAD BENCH OF THIS TRIBUNAL IN THE CASE OF LEENA J. SHAH. ACCORDINGLY, THE LD. CIT(A) HAS CON FIRMED THE ACTION OF THE AO IN DISALLOWING THE DEDUCTION UNDER SECTION 54. ITA NO.7058/M/2013 MS. DHUN JEHAN CONTRACTOR 3 4. WE HAVE HEARD THE LD. A.R. AS WELL AS THE LD. D .R. AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. SINCE THE FACTS RELEVANT TO THIS ISSUE ARE NOT IN DISPUTE AND THEREFORE THE ONLY ISSUE ARISES FOR OUR CONSIDERATION AND ADJUDICATION IS WHETHER THE DEDUCTION UNDER SECTION 54 IS ALLOWABLE IN RESPECT OF THE INVESTMENT MADE IN THE RESIDENTIAL PROPERTY OUTSIDE INDIA FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. THE ASSESSEE HAS RELI ED UPON THE FOLLOWING JUDGMENTS: (I) MRS. PREMA P. SHAH V ITO 282 ITR (AT) 211 (MUM) (II) VINAY MISHRA V ACIT 20 ITR (TRIB.) 129 (BANG.) (III) AMERICAN HOTEL AND LODGING ASSOCIATION EDUCATIONAL INSTITUTE V. CBDT 301 ITR 86 (SC) (IV) OXFORD UNIVERSITY PRESS V. CIT 247 ITR 658 (SC) (V) ITO V. DR. GIRISH M. SHAH ITAT MUMBAI ITA NO.3582/MUM/2009 5. ON THE OTHER HAND, THE LD. D.R. HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE DECISION OF AHMEDABAD BENCHES OF THIS TRIBUNAL IN THE CASE OF LEENA J. SHAH. 6. H AVING CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD, WE FIND THAT A S IMILAR ISSUE HAS ALREADY BEEN DECIDED BY THE CO - ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF MR. GIRDHAR MOHANANI & MRS. VARSHA GIRDHAR IN ITA NO S .4591 & 45 92 /MUM/2013 DECIDED ON 06.05. 15 AND THE RELEVANT FINDING IN PARA S 4 TO 9 IS AS UNDER: 4. WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT DURING THE YEAR ASSESSEE HAS CLAIMED EXEMPTION U/S.54. OUT OF THE SALE CONSIDERATION OF RS.87,37,291/ - , ASSESSEE HAS DEPOSITED RS.50 LAKHS IN CAPITAL GAINS IN SCHEME ACCOUNT. SUBSEQUENTLY DEPOSIT WAS WITHDRAWN DURING THE ASSESSMENT YEAR 2010 - 2011 UNDER CONSIDERATION AND WAS INVESTED IN A FLAT IN DUBAI. AS PER AO ASSESSEE WAS NOT ENTITLED FOR CLAIM OF EXEMPTION U/S.54 IN RESPECT OF INVESTMENT MADE IN HOUSE PROPERTY OUTSIDE INDIA. 5. IT WAS CONTENDED BY LD. DR THAT CIT(A) HAS ALREADY CONSIDERED THE DECISION IN THE CASE OF DR. GIRISH M. SHAH, MRS.PREMA P. SHAH, LEENA P. SHAH, WHEREIN IT WAS ITA NO.7058/M/2013 MS. DHUN JEHAN CONTRACTOR 4 HELD THAT EXEMPTION IS PERMI SSIBLE, EVEN IF INVESTMENT IN NEW RESIDENTIAL HOUSE IS MADE OUTSIDE INDIA. 6. ON THE OTHER HAND, LD. AR RELIED ON THE DECISION OF BANGALORE BENCH OF THE TRIBUNAL IN THE CASE OF VINAY MISHRA, 141 ITD 301, WHEREIN IT WAS HELD THAT PROVISIONS OF SECTION 54F DOES NOT SUGGEST THAT NEW RESIDENTIAL HOUSE ACQUIRED SHOULD BE SITUATED ONLY IN INDIA. ACCORDINGLY EXEMPTION WAS GRANTED IN RESPECT OF RESIDENTIAL HOUSE ACQUIRED OUTSIDE INDIA. IT WAS OBSERVED THAT ON A PLAIN READING OF PROVISIONS OF SECTION 54F ONE DOES NOT FIND ANYTHING THEREIN TO SUGGEST THAT THE NEW RESIDENTIAL HOUSE ACQUIRED SHOULD BE SITUATED IN INDIA. THE WORDS IN INDIA CANNOT BE READ INTO SECTION 54F, WHEN PARLIAMENT IN ITS LEGISLATIVE WISDOM HAS DELIBERATELY NOT USED THE WORDS IN INDIA IN SECT ION 54F, THERE WAS NO REASON TO SHOW THAT EXEMPTION WILL NOT BE APPLICABLE IN RESPECT OF HOUSE ACQUIRED OUTSIDE INDIA. SIMILARLY, THE CHENNAI BENCH OF THE TRIBUNAL IN CASE OF N.RANGANATHAN, 33 ITR(AT) 444 HELD THAT THE PROFIT ON SALE OF PROPERTY USED FOR R ESIDENTIAL HOUSE (FOREIGN HOUSE PROPERTY) ACQUIRED OUTSIDE INDIA IS ELIGIBLE FOR EXEMPTION U/S.54. HOWEVER, NO CONTRARY DECISION OF TRIBUNAL OR HONBLE HIGH COURT WAS BROUGHT TO OUR NOTICE SUGGESTING THAT EXEMPTION WILL NOT BE AVAILABLE IN CASE RESIDENTIAL HOUSE IS ACQUIRED OUTSIDE INDIA. 7. THE FINANCE (NO.2) BILL, 2014 BROUGHT AN AMENDMENT IN SECTION 54, WHEREIN SUB - SECTION (1), FOR THE WORDS CONSTRUCTED, A RESIDENTIAL HOUSE, THE WORDS CONSTRUCTED, ONE RESIDENTIAL HOUSE IN INDIA HAS TO BE SUBSTITUTE D W.E.F. 1 ST DAY OF APRIL, 2015. THUS, IT IS CLEAR FROM THE AMENDMENT SO BROUGHT FOR CLAIMING EXEMPTION U/S.54, THAT NEW RESIDENTIAL HOUSE SHOULD TO BE CONSTRUCTED IN INDIA ONLY W.E.F. ASSESSMENT YEAR 2015 - 2016.. HOWEVER, THE ASSESSMENT YEAR UNDER CONSIDER ATION IS 2010 - 2011 I.E. MUCH PRIOR TO THE AMENDMENT SO BROUGHT IN FINANCE (NO.2) BILL, 2014. THERE IS NO REASON TO DECLINE EXEMPTION U/S.54 DURING THE A.Y.2010 - 11 UNDER CONSIDERATION. 8. THE PROVISIONS CONTAINED IN SUB - SECTION (1) OF SECTION 54 OF THE INC OME - TAX ACT, BEFORE ITS AMENDMENT BY THE ACT, INTER ALIA, PROVIDED THAT WHERE CAPITAL GAIN ARISES FROM THE TRANSFER OF A LONG - TERM CAPITAL ASSET, BEING BUILDINGS OR LANDS APPURTENANT THERETO, AND BEING A RESIDENTIAL HOUSE, AND THE ASSESSEE WITHIN A PERIOD OF ONE YEAR BEFORE OR TWO YEARS AFTER THE DATE OF TRANSFER, PURCHASES, OR WITHIN A PERIOD OF THREE YEARS AFTER THE DATE OF TRANSFER CONSTRUCTS, A RESIDENTIAL HOUSE, THEN, THE AMOUNT OF CAPITAL GAINS TO THE EXTENT INVESTED IN THE NEW RESIDENTIAL HOUSE IS NO T CHARGEABLE TO TAX UNDER SECTION 45 OF THE INCOME - TAX ACT. 9. IN VIEW OF THE ABOVE, WE HOLD THAT DURING THE YEAR UNDER CONSIDERATION, ASSESSEE WAS ENTITLED FOR EXEMPTION U/S.54 EVEN IF INVESTMENT WAS MADE IN RESIDENTIAL HOUSE SITUATED OUTSIDE INDIA, PROV IDED THAT ASSESSEE HAS TO COMPLY WITH OTHER CONDITIONS OF SECTION 54. SINCE THE AO HAS OUT - RIGHTLY DECLINED EXEMPTION ON THIS PLEA WITHOUT EXAMINING THE OTHER CONDITIONS OF SEC.54 SO AS TO MAKE ASSESSEE ELIGIBLE, WE ACCORDINGLY RESTORE THE APPEAL TO THE F ILE OF THE AO FOR VERIFYING OTHER CONDITIONS TO BE FULFILLED FOR GRANT OF EXEMPTION U/S.54 IN BOTH THE APPEALS OF THE ITA NO.7058/M/2013 MS. DHUN JEHAN CONTRACTOR 5 ASSESSEES. THE AO IS ALSO AT A LIBERTY TO VERIFY ACTUAL ACQUISITION OF HOUSE PROPERTY OUTSIDE INDIA, IN TERMS OF TRANSFER DEEDS SO EXECUTE D IN FAVOUR OF ASSESSEE. WE DIRECT ACCORDINGLY. 7 . ACCORDINGLY, F OLLOWING THE ORDER OF THE CO - ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF MR. GIRDHAR MOHANANI & MRS. VARSHA GIRDHAR (SUPRA), WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE AND AGAI NST THE REVENUE. AO IS ALSO AT A LIBERTY TO VERIFY FULFILLMENT OF OTHER CONDITIONS OF SECTION 54 OF ACT. 8 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 13. 05 . 201 5 . SD/ - SD/ - ( R.C. SHARMA ) ( VIJAY PAL RAO ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 13. 05 .2015 . * KISHORE , SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT ( A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.