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TMI Blog2016 (12) TMI 546X X X X Extracts X X X X X X X X Extracts X X X X ..... Decided in favour of assessee Disallowance being investment claimed as deduction under section 54 - Held that:- The assessee had made the payment to the builder and it was beyond her control to compel the builder to comply with the terms and conditions of the initial agreement she entered with the builder for constructing her residential flat. Therefore, following case Smt. Shasi Varma Vs. CIT reported in [1996 (3) TMI 65 - MADHYA PRADESH High Court ] we are of the considered view that the assessee is entitled for the deduction under section 54 of the Act. - Decided in favour of assessee Disallowance of the claim of exemption under section 54 of the Act in respect of investment in house property outside India - Held that:- On perusing the provisions of section 54 of the Act we find that the benefit of section 54 of the Act was specifically denied for any residential house property acquired outside India by the Finance Act, 2014 w.e.f. 01.04.2015. Before that no such restriction existed in the Act. The relevant case before us is for the assessment year 2010-11. In this period, the assessee had the benefit of few Tribunal decisions in her favour on the issue which she relied wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the claim of exemption under section 54 of the Act in respect of investment in house property outside India for ₹ 2,05,92,000/-. 4. Brief facts of the case are that the assessee is a nonresident individual filed her return of income for the assessment year 2010-11 on 26.07.2010 admitting total income of `7,568/-. The case was selected for scrutiny and notice under section 143(2) was issued to the assessee on 29.08.2011. Subsequently, the assessment was completed by the learned Assessing Officer under section 143(3) of the Act on 28.03.2013 wherein he computed the long term capital gain of the assessee by:- i) Treating the cost of acquisition of the asset for the purpose of indexation from the date the assessee owned the property through family partition and not from the date the property was first acquired. ii) Rejecting the claim of deduction under section 54 of the Act for ₹ 1,50,00,000/- because the new asset was constructed beyond the period of three years from the sale of the original asset. iii) Rejecting the claim of deduction under section 54 of the Act for ₹ 2,05,92,000/- since the residential house was purchased outside India (USA) on 22. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has only followed the decision of the Hon ble High Court of Bombay in arriving at his decision, we do not find it necessary to interfere with the order of the learned Commissioner of Income Tax (Appeals) on this issue. ITA No.281/Mds/2015 - (Assessee s Appeal): Ground No.1 : Disallowance of ` 1,50,00,000/- being investment claimed as deduction under section 54 of the Act: 7.1 The assessee had initially invested ₹ 1,50,00,000/- in capital gain scheme account with State Bank of India and subsequently utilized the amount by entering into an agreement with the builder M/s. Landmark Constructions for booking a residential flat in the project Tirvoli on 27.08.2010, the total cost of which was ₹ 3,55,61,935/-, and the construction was likely to be completed by September, 2014. But since the project was delayed due to hitches in approval, the assessee switched over to another property of the same builder and entered into an agreement dated 27.01.2011 for purchase of a flat in project Vertila . As the project Vertila was a mega project, it could not be completed in time which extended beyond the period of three years as prescribed under the Act. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court had held the issue as follows:- Held that the CBDT had issued circular No.471 dated 15.10.1986 stating that cases of allotment of flats under the self-financial scheme of the Delhi Development Authority shall be treated as cases of construction for the purpose of capital gains. Section 54 of the Act says that within two years of sale the assessee should have constructed the house but it does not mean that the construction should necessarily be complete within two years. If substantial investment was made in the construction of the house, it amounted to sufficient steps being taken thus satisfying the requirements of section 54. The tribunal was not justified in denying exemption under section 54 to the assessee. 7.6 In the case of the assessee also the facts are more or less identical because the assessee had made the payment to the builder and it was beyond her control to compel the builder to comply with the terms and conditions of the initial agreement she entered with the builder for constructing her residential flat. Therefore, following the above mentioned decision of the Hon ble Madhya Pradesh High Court, we are of the considered view that the assessee is e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perusing the provisions of section 54 of the Act we find that the benefit of section 54 of the Act was specifically denied for any residential house property acquired outside India by the Finance Act, 2014 w.e.f. 01.04.2015. Before that no such restriction existed in the Act. The relevant case before us is for the assessment year 2010-11. In this period, the assessee had the benefit of few Tribunal decisions in her favour on the issue which she relied while claiming the benefit of section 54 of the Act. Further, as pointed out by the learned Authorized Representative the decision of the Hon ble Gujarat High Court supra dated 14.06.2016 is also in favour of the assessee on the identical circumstances. The gist of the decision of the Hon ble Gujarat High Court is placed below for reference:- 9. We have heard learned counsel for the parties. We have perused the order of the Tribunal. There is no finding recorded by the authorities below that the appellant-assessee has not invested the sale proceeds in a residential house. It is also not in dispute that the appellant has not purchased the residential house in United States of America. In fact, she has purchased a residential hous ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uous. Therefore, we cannot import into the statute the words 'in India' as interpreted by the authorities.- Thus, taking into consideration the above facts, we are of the opinion that benefit of section 54F before its amendment can be extended to a residential house purchased outside India. In that view of the matter, the appeal is allowed. The order of the Tribunal is set aside. We answer the question in favour of the assessee and against the revenue. 8.5 Following the decision of the Hon ble Gujarat High Court, we do not find any hesitation to hold the issue in favour of the assessee who had invested the sale proceeds of her asset in a residential house property in California(USA). Therefore, we hereby direct the learned Assessing Officer to grant the benefit of section 54 of the Act to the assessee with respect to purchase of her flat for ₹ 2,05,92,000/- on 22.07.2010 which is well within the period of two years from the date of sale of her original asset. 9. In the result, the appeal of the Revenue is dismissed and the appeal of the assessee is allowed. Order pronounced in the open court on the 2nd November, 2016 - - TaxTMI - TMITax - Income Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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