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2015 (8) TMI 316 - AT - Income TaxDisallowance of exemption in respect of capital gains u/s 54 as earned on sale of residential property - 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? - Held that - Following the order of the co-ordinate bench of the Tribunal in the case of Mr. Girdhar Mohanani & Mrs. Varsha Girdhar 2015 (8) TMI 212 - ITAT MUMBAI wherein held as during the year under consideration, assessee was entitled for exemption u/s.54 even if investment was made in residential house situated outside India, provided 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 file of the AO for verifying other conditions to be fulfilled for grant of exemption u/s.54 , we decide this issue in favour of the assessee.
Issues:
1. Validity of reopening of assessment proceedings. 2. Disallowance of deduction under section 54 for capital gain invested in a residential property outside India. 3. Non-discrimination clause under Article 24 of Double Taxation Avoidance Agreement with Australia. Issue 1: Validity of Reopening of Assessment Proceedings The appeal challenged the validity of reopening the assessment proceedings for the assessment year 2008-09. The assessee contended that the reassessment proceedings were initiated contrary to the provisions of the law, rendering them illegal, in excess of jurisdiction, or void. However, the Tribunal decided to first address the merits of the case regarding the disallowance of deduction under section 54 before considering the validity of the reopening. Issue 2: Disallowance of Deduction under Section 54 The primary issue revolved around the disallowance of the deduction under section 54 for the capital gain invested in a residential property outside India. The assessee sold a property in Mumbai and invested in a residential property in Australia, claiming exemption under section 54. The Assessing Officer disallowed the claim, stating that the investment was made in a property outside India. The Tribunal considered various judgments and provisions of section 54, ultimately relying on a similar case precedent where exemption was granted for investments made in a residential property outside India. The Tribunal emphasized that the conditions of section 54 needed to be fulfilled for the exemption to be granted, directing the Assessing Officer to verify the compliance with other conditions and the actual acquisition of the property outside India. Issue 3: Non-Discrimination Clause under Article 24 The appeal also raised a ground related to the provisions of Article 24, which is a non-discrimination clause in the Double Taxation Avoidance Agreement with Australia. The clause prohibits subjecting nationals of one contracting State to more burdensome taxation or requirements compared to nationals of the other State in the same circumstances. However, the Tribunal did not delve into this issue as it first addressed the disallowance of deduction under section 54. In conclusion, the Tribunal allowed the appeal in favor of the assessee for statistical purposes, based on the decision regarding the disallowance of deduction under section 54. The Tribunal highlighted the importance of fulfilling the conditions of section 54 for claiming exemption, especially in cases where investments are made in residential properties outside India.
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