2019 (9) TMI 1181 - HC - Income Tax

Eligibility of benefit u/s 54 - re-investment in residential property outside India, i.e. in London in this particular case - assessee is a Non-Resident Indian - HELD THAT - The authority arrived at its conclusion with regard to the respondent being entitled to exemption under Section 54 of the Act by placing reliance on the decision of Leena JugalKishor Shah Vs. Assistant Commissioner of Income- Tax, 2016 (12) TMI 351 - GUJARAT HIGH COURT . The authority has noted that the Revenue has not assailed the said decision before the Supreme Court. Reference has also been made to the Circular No. 01/2015 containing explanatory notes to the provisions of the Finance (No. 2) Act, 2014 whereby Section 54 of the Act was amended to specifically include the word in India in respect of the residential house acquired out of the long term capital gain earned by the assessee. The said explanatory note in terms provides that the said amendment would take effect from 01.04.2015 and would, accordingly, apply for the assessment year 2015-16 and subsequent assessment years. Thus, the said amendment is prospective and would not apply in the facts of the present case since the respondent sold the residential property in India and earned long term capital gain in the assessment year 2012-13 and invested the said gain in the same year for purchase of the property, as aforesaid, in London. - Decided against revenue

Summary

Issues:
1. Challenge to the order of the Authority for Advance Rulings regarding eligibility for benefit under Section 54 of the Income-Tax Act.
2. Interpretation of Section 54 in relation to reinvestment in residential property outside India.
3. Prospective application of the amendment to Section 54 introduced by the Finance (No. 2) Act, 2014.
4. Previous judgments related to the interpretation of Section 54.

Analysis:

1. The High Court dealt with a writ petition challenging the order of the Authority for Advance Rulings, which held that the respondent, a Non-Resident Indian, was eligible for the benefit under Section 54 of the Income-Tax Act. The respondent had reinvested in a residential property in London after selling a property in New Delhi, resulting in long term capital gains.

2. The respondent's reinvestment in a property outside India raised the question of eligibility for exemption under Section 54. The Authority relied on a decision of the Gujarat High Court and noted that the Revenue had not challenged this decision in the Supreme Court. The Court considered the specific circumstances of the case and the interpretation of Section 54 in light of the reinvestment made by the respondent.

3. The Court also discussed the prospective application of an amendment to Section 54 introduced by the Finance (No. 2) Act, 2014. The circular issued in this regard clarified that the amendment, which included the term "in India" in relation to the residential house acquired from long term capital gains, would be effective from 01.04.2015 onwards. As the respondent had reinvested before this amendment came into effect, the Court found that it did not apply to the case.

4. Referring to a previous judgment in a related matter, the Court highlighted its consistency in dealing with issues concerning Section 54. The Court's decision not to interfere with the impugned order was based on the specific facts of the case and the application of relevant legal provisions and precedents. The writ petition was ultimately dismissed by the Court.