2019 (2) TMI 1206 - AT - Income Tax

Deduction u/s 54 for investment of capital gain in purchase of new residential house in Panama - allowing the shifting of tax base of India to foreign country, whereas provisions of Income Tax act extends to India only and not extra territorial - assessee is a NRI and resides in Taiwan - HELD THAT - We find that the specific provision of section 54 as it is stood prior to the amendment was examined by the tribunal. It was held that the investment abroad satisfies the requirement of provisions of section 54. No contrary decision has been produced before us. We also note that the Hon ble Delhi High Court in the case of Honda Siel Power Products Ltd. vs. Deputy Commissioner of Income-tax 2011 (2) TMI 1184 - DELHI HIGH COURT has expounded that non consideration of a coordinate bench order of the Tribunal will result in the tribunal order suffering from mistake apparent from the record. Accordingly in the background of the aforesaid discussion and precedent, we do not find any infirmity in the order of the ld. CIT(A). - Decided against revenue

Summary

Issues:
- Whether investment in a foreign country qualifies for exemption under section 54 of the Income Tax Act?
- Whether the decision of the Hon'ble Supreme Court in a specific case applies to the claim of exemptions under section 54?

Analysis:
1. The case involved an appeal by the Revenue against the order of the Commissioner of Income Tax (Appeals) pertaining to the assessment year 2012-13. The dispute centered around the interpretation of section 54 of the Income Tax Act concerning the exemption for investment in a new residential house in India.

2. The assessee, a Non-Resident Indian residing in Taiwan, sold a property in Mumbai and reinvested the sale proceeds in a new residential house in Panama. The assessee claimed exemption under section 54, declaring Nil income under the head Long Term Capital Gain for the assessment year in question.

3. The Assessing Officer denied the exemption, arguing that the investment for claiming the benefit of section 54 should be in India and not abroad. The AO contended that the Income Tax Act's scope is limited to the country's territory and does not extend to foreign countries like Panama.

4. The ld. CIT(A) ruled in favor of the assessee, citing precedents from the Tribunal that upheld the validity of investments made abroad for claiming exemptions under section 54. The CIT(A) noted that the law had been amended in 2014-15 to restrict exemptions for investments in India, but the amendment was not retrospective.

5. The Tribunal, comprising Shri Shamim Yahya, AM, and Shri Sandeep Gosain, JM, examined the provisions of section 54 and the relevant case laws. The Tribunal found that prior to the 2014-15 amendment, the exemption was not restricted to investments in India, and investments made abroad met the requirements of section 54.

6. The Revenue contended that the CIT(A) erred by not following a decision of the Hon'ble Supreme Court in a different case. However, the Tribunal held that the Supreme Court's decision was rendered in a different context and did not apply to the specific provisions of section 54.

7. Ultimately, the Tribunal dismissed the Revenue's appeal, finding no infirmity in the CIT(A)'s order. The Tribunal's decision was based on the interpretation of section 54 and the precedents that supported investments made abroad for claiming exemptions under the Income Tax Act.

This comprehensive analysis of the judgment highlights the key issues, arguments presented by both parties, relevant legal provisions, and the final decision rendered by the Tribunal.