2018 (3) TMI 1942 - AT - Income Tax

Deduction u/s 54F for investments - benefit of deduction under section 54F for investments made outside India - Scope of amendment - HELD THAT - We find that in the peculiar facts of the present case the claim of the assessee has to be allowed. It is seen that the amendment by the Finance Act of 2014 in section 54F comes into effect only from 01/04/2015. Thus from the said date the benefit of deduction under section 54F for investments made outside India undisputedly can be denied as it can be said to be limited to the investment in residential house property made only within India. Prior to the said date when the amendment kicks in there is no statutory bar for the taxpayer to make investments outside India in residential house property in order to get the benefit of deductions 54F provided other conditions were fulfilled. Thus since the assessment year under consideration is prior to the amendment of section 54F by the Finance Act 2014 the law as on date stands that the claim of the assessee has to be allowed. - Decided in favour of assessee.

Summary

Issues:
- Correctness of order under Income Tax Act, 1961
- Exemption claimed under section 54 of the Act
- Investment in residential property in a foreign country
- Additions made under the head of Capital Gain
- Validity of order passed by CIT (A)

Analysis:

1. The appeal challenged the order dated 22/09/2015 of CIT(A)-43 New Delhi for the 2008-09 assessment year. The primary argument focused on the order passed under section 143(3) r/w Sec 148 of the Income Tax Act, 1961, questioning the denial of exemption claimed under section 54 of the Act due to the purchase of a residential property in a foreign country. The appellant contended that there were no restrictions on the location of the new residential property for claiming exemption under section 54 for the A.Y. 2008-09. However, an amendment in 2014 limited the exemption to residential properties purchased in India only.

2. The appellant relied on the decision of the Hon'ble Gujarat High Court, which clarified that investments in residential properties outside India before the 2014 amendment to section 54F were entitled to deductions. The AO's rejection of the claim was based on a previous ITAT decision, which was later overturned by the Gujarat High Court. The CIT(A) did not have the benefit of this decision during the appeal.

3. Upon reviewing the submissions and record, it was found that the appellant had sold a property in Chandigarh and reinvested the proceeds in a house in the UK. The AO allowed the claim for the purchase of a house in Chandigarh but rejected the claim for the UK property, citing the investment location as the reason. The ITAT decision relied upon by the AO was found to be no longer applicable due to the Gujarat High Court's clarification on the matter.

4. The Gujarat High Court's decision emphasized that the pre-amendment section 54F of the Income-tax Act did not specify that the residential property had to be in India. The court held that the investment in a residential house, whether in India or outside, fulfilled the conditions of section 54F. Therefore, the appeal was allowed, and the order was set aside, granting relief to the assessee for the assessment year 2008-09.

5. Considering the legal position before the 2014 amendment to section 54F, the assessing officer was directed to grant necessary relief to the assessee in accordance with the law. The appeal was allowed, and the issue was restored back to the assessing officer for further action as per the legal provisions applicable at the time of assessment.

This detailed analysis of the judgment highlights the key arguments, legal interpretations, and decisions made by the tribunal, providing a comprehensive understanding of the case.