2023 (9) TMI 950 - HC - Income Tax

Revision u/s 264 in favor of assessee - Deduction u/s 54F - Petitioner has sold his house property in India and invested the sale proceeds in a residential house in USA, out of the capital gain on the sale of the property in India, within the specified period - Scope of amendment - HELD THAT - The language of Section 54(F) of the Act before its Amendment was that the assessee should invest capital gain in a residential house. It did not mention any boundary. It is only after the amendment to Section 54(F) of the Act, which amendment came into effect from 1st April 2015, that the condition that the assessee should invest the sale proceeds arising out of a sale of capital asset in a residential situated in India within the stipulated period was imposed. Thus, a plain reading of the pre-amended Section 54(F) of the Act, leaves no room for doubt that the assessee need not restrict his investment only in India. The only condition was that sale proceeds should be invested in a residential property within the stipulated period of time. We find that the language of Section 54(F) of the Act prior to the amendment is neither ambiguous nor vague. The intention of the legislature to insert the words in India with effect from 1st April 2015 is not uncertain or confusing and hence the applicability of the amendment cannot but be prospective. It is also clear that Petitioner has not filed the revised returns under Section 139(5) of the Act but he has admitted to an inadvertent error in declaring total income as Nil vide a rectification application. Admittedly, he is entitled to a refund of Rs. 72,370/- for excess amount of tax deduction at source. The sale deed placed on record also discloses the exact amount of consideration. It is undisputed that Petitioner has deposited Rs. 75,00,000/- in the CGAS. In the circumstances, it is clear that rejection of the revision petition on the grounds mentioned therein cannot be sustained. Petition deserves to be allowed.

Summary

Issues involved:
The issue in this case is whether the benefits of Section 54(F) of the Income Tax Act are available to the Petitioner who transferred his residential house in India and purchased another house property in the United States of America, considering the amendment in Sections 54 and 54(F) by the Finance Act of 2014.

Comprehensive Details:

Issue 1: Eligibility for deduction under Section 54 of the Act
The Petitioner, a Non-Resident Indian working in the USA, filed a return of income for AY 2014-15 assuming his income was not taxable in India. He sold a residential flat in India and purchased another in the USA within the time limit prescribed by Section 54. The Respondent rejected his claim based on the amendment in Section 54(1) of the Act, which inserted the words 'in India'. The Petitioner argued that the amendment was prospective and should not apply to transactions before 1st April 2015. The Court agreed, stating that the pre-amended Section 54(F) did not restrict investment to India, and the amendment was not clarificatory but substantive, thus ruling in favor of the Petitioner.

Issue 2: Revision of return under Section 139(5) of the Act
The Respondent contended that the Petitioner's revised return was non-est as it was filed beyond the due date. Additionally, doubts were raised about the cost of the new asset declared by the Petitioner. The Court found that the Petitioner admitted to an inadvertent error in declaring total income as Nil and was entitled to a refund. The rejection of the revision petition on these grounds was deemed unsustainable, and the Respondent was directed to accept the rectified return of income filed by the Petitioner.

Separate Judgment Delivered:
No separate judgment was delivered by the judges in this case.