2024 (7) TMI 839 - AT - Income Tax

LTCG - Exemption u/s 54F - investment made in purchase of residential house in Ontario in Canada - assessee is a non-resident Indian during the relevant financial year - AO sought to disallow the claim of exemption on the ground that the property had not been purchased/constructed in India and that the amendment in section 54F introducing the words constructed one house in India w.e.f. AY 2015-16 was clarificatory in nature and hence applicable retrospectively. HELD THAT - There are several decisions including that of the Jurisdictional High Court wherein it has been held that the exemption u/s 54F would be available on property purchased outside India in the period prior to 01.04.2015 as the amendment is prospective in nature and cannot be applied to the transactions prior to 01.04.2015. As relying on Hemant Dinkar Kandlur 2023 (9) TMI 950 - BOMBAY HIGH COURT we hold that for the year under consideration the words in India cannot be read into the provisions of section 54F and hence, the assessee is entitled to claim exemption u/s 54F in respect of the investment made in the residential property in Ontario, Canada. Appeal filed by the assessee is allowed.

Summary

Issues:
1. Assessment order being time-barred
2. Disallowance of deduction u/s. 54 of the I.T. Act

Analysis:
1. Assessment Order Being Time-Barred:
The appeal was filed against the order of the Ld. ITO under Section 147 read with Section 144C(13) of the Income-tax Act, 1961 for Assessment Year 2013-14. The primary contention raised by the assessee was that the assessment order was beyond the prescribed time limit specified under the Act. The Ld. A.O. was required to pass the assessment order within one month from the end of the month in which the statutory period of filing objections expired. The assessee argued that the addition made by the A.O. was erroneous as the objections were dismissed by the Hon'ble DRP without proper direction. The Tribunal considered various judicial pronouncements and held that the exemption u/s 54F would be available on property purchased outside India before 01.04.2015, as the amendment was prospective in nature and could not be applied retrospectively. The decision of the Hon'ble Bombay High Court in a similar case supported this interpretation. Consequently, the Tribunal held that the assessment order was time-barred, and the appeal was allowed on this ground.

2. Disallowance of Deduction u/s. 54 of the I.T. Act:
The assessee had sold an immovable property and invested a significant amount in purchasing a new residential property in Ontario, Canada. The A.O. sought to disallow the claim of exemption under section 54F on the grounds that the property was not purchased/constructed in India. The A.O. contended that the amendment in section 54F, which introduced the requirement of constructing a house in India, was clarificatory and applicable retrospectively. However, the assessee argued that the amendment was prospective from AY 2015-16 only. The Tribunal analyzed the nature of the amendment, considering whether it was clarificatory or substantive. It noted that the amendment expressly stated it would come into force from 01.04.2015, indicating prospective application. The Tribunal relied on legal principles to determine that the amendment was not clarificatory and could not be applied retrospectively. Citing precedents and the language of the relevant sections, the Tribunal held that the assessee was entitled to claim exemption u/s 54F for the investment made in the residential property in Ontario, Canada. Consequently, the disallowance of deduction u/s. 54 was overturned, and the appeal was allowed on this ground as well.

In conclusion, the Tribunal allowed the appeal filed by the assessee, holding that the assessment order was time-barred and that the assessee was entitled to claim the deduction under section 54F for the investment made in the residential property in Ontario, Canada. The technical grounds were deemed academic and not decided. The order was pronounced on 12.07.2024.