2017 (4) TMI 1440 - AT - Income Tax

Exemption u/s 54 - residential house is purchased or constructed by the assessee outside India - scope of amendment to act - HELD THAT - A similar situation though in the context of section 54F of the Act has been considered in the case of Smt.Leena J. Shah 2016 (12) TMI 351 - GUJARAT HIGH COURT ; notably so far as the impugned issue is concerned the requirement of sections 54F 54F of the Act is pari-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 residential property and that there was no scope for 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 have any reason to uphold the stand of the Assessing Officer that the exemption under Section 54 of the Act is to be allowed only if the investment is made in residential property in India. - Decided against revenue.

Summary

Issues:
- Claim of exemption under section 54 of the Income Tax Act for investment made outside India.
- Interpretation of the requirement of making investment in a residential property in India under section 54 of the Act.
- Comparison of decisions by different Tribunals and High Courts regarding the location of investment for claiming exemption under section 54 of the Act.

Analysis:
1. The appeal involved a dispute between the Revenue and the assessee regarding the allowance of exemption under section 54 of the Income Tax Act for an investment made outside India. The Revenue contended that the exemption is available only when the investment is carried out in India, while the assessee claimed that there was no such requirement during the relevant period. The Assessing Officer denied the claim based on a decision by the Ahmedabad Tribunal. However, the CIT(A) allowed the exemption, noting that the requirement of investing in India was inserted in 2014 and not applicable for the assessment year in question.

2. The key issue revolved around the interpretation of the requirement of making the investment in a residential property in India under section 54 of the Act. The CIT(A) relied on decisions by the Mumbai Tribunal and other cases to support the assessee's claim that there was no explicit mandate to invest only in India for claiming the exemption. The Revenue challenged this interpretation, arguing that the requirement was implicit even before the 2014 amendment.

3. The Tribunal considered various decisions by different Tribunals and the Gujarat High Court to analyze the location requirement for claiming exemption under section 54 of the Act. It was highlighted that prior to the 2014 amendment, the law only mandated investment in a residential property without specifying the location. Drawing parallels with a similar provision under section 54F, the Tribunal affirmed the CIT(A)'s decision, emphasizing that the investment location requirement in India was not applicable for the assessment year in question. The Tribunal dismissed the Revenue's appeal and the assessee's cross objection, which was not pressed during the hearing.