Vildirect: IncomeTax-caselaws-2018-VIL-1681-ITAT-MUM

2018-VIL-1681-ITAT-MUM

Income Tax Appellate Tribunal MUMBAI

I.T.A . No.3429/Mum /2016

Date: 15.02.2018

ASHOK KESHAVLAL TEJUJA

ACIT, CIR 18 (1) , MUMBAI

BENCH

Shri C. N Prasad, Judicial Member And Shri Ramit Kochar, Accountant Member

JUDGMENT

Per Ramit Kochar, Accountant Member

This appeal, filed by the assessee being ITA No. 3429/M um/20 16 for assessment year 2011-12 is directed against the appellate order dated 14.03.2016 passed by learned Commissioner of Income-tax (Appeals)-33, Mumbai (hereinafter called “the CIT(A)”) for assessment year 2011-12, appellate proceedings had arisen before learned CIT(A) from the assessment order dated 04.03.2014 passed by learned Assessing Officer (hereinafter called “the AO”) u/s 143(3) of the Income-tax Act, 1961 (hereinafter called “the Act”).

2. The grounds of appeal raised by the assessee in the memo of appeal filed with the Income-Tax Appellate Tribunal, Mumbai (hereinafter called “the tribunal”) read as under:-

“1. On the facts and circumstances of the case whether the Commissioner of Income Tax (Appeals) was justified in disallowing the exemption claim u/s 54F of Rs. 76,66,657, although all the requisite conditions laid down in section 54F of the Act as they stood during the relevant assessment year were duly fulfilled?

2. On the facts and circumstances of the case whether the Commissioner of Income Tax (Appeals) was justified in taking the sale price of Terrace in Arcadia Building as per Stamp Duty Valuation Authority u/s 50C of Rs. 86,32,000 inspite of the same being disputed by the appellant in his revised computation?

3. On the facts and circumstances of the case whether the Commissioner of Income Tax (Appeals) was justified in rejecting the valuation report as on 01-04-1981 valuing the terrace sold at Rs. 9,90,000?

4. On the facts and circumstances of the case whether the Commissioner of Income Tax (Appeals) was justified in disregarding the revised Computation of Income filed by the assessee during the assessment, wherein sale of shares of private limited company was claimed under Long Term Capital Gains, instead of Short Term Capital Gains as claimed in the original return of income?

The Appellant craves leave to add, alter, amend and or modify all or any grounds of appeal mentioned above at or before the time of final hearing.”

3. The Brief facts of the case are that the assessee is an individual having income from house property , capital gains and income from other sources. The controversy in this case revolves around computation of capital gains on sale of 50% share in Terrace at Arcadia Premises Co-Op Society Ltd., Nariman Point, NCPA Marg, Mumbai. It is the say of learned counsel for the assessee that if the assessee is found entitled for deduction u/s 54F on investment made by him in a residential flat in Dubai, UAE , the whole controversy will be set at rest as the capital gains as computed by the AO as per methodology used and valuations adopted by the AO will become eligible for deduction u/s 54F and consequently all other related issues will become adademic. The assessee had invested in residential property in Dubai, UAE for which the assessee claimed deduction u/s 54F from the capital gain arising from sale of 50% share in Terrace at Arcadia Premises. The claim of the assessee for deduction of u/s. 54F was denied by the AO to the assessee as said residential house bearing flat no. 1906, Laguna Towers, Dubai, UAE was situated outside India and hence both the authorities below i.e. Ld. AO as well Ld. CIT-A concurrently came to the same conclusion and denied the claim to the assessee for deduction u/s 54F on the ground that said new residential house property is situated outside India in Dubai, UAE. The AO while rejecting the claim of the assessee on the grounds that new residential flat is situated outside India and hence deduction u/s 54F is not available relied upon decision of ITAT, Mumbai dated 31-08-2012 in the case of Farhad J Bottlewalla v. ACIT , Mumbai. The assessee filed first appeal before learned CIT(A) who upheld the view of the AO and dismissed the appeal of the assessee, vide appellate orders dated 14-03-2016.

4. Aggrieved by the appellate orders dated 14-03-2016 passed by learned CIT(A), the assessee has come in appeal before the tribunal. Both the parties have submitted their arguments before the tribunal. The assessee has brought to our notices decision of the Hon’ble Gujarat High Court in the case of Leena Jugal Kishore Shah vs. ACIT in ITA no. 483/2006 vide judgment dated 14-06-2016 wherein Hon’ble Gujarat High Court has held that investments in residential house property outside India will be entitled for deduction u/s. 54F before the amendment to Section 54F made by Finance Act 2014, which has come into effect from 01.04.2015 . We are concerned with previous year relevant to AY 2011-12 which is prior to coming into force Finance Act, 2014. The aforesaid decision of the Hon’ble Gujarat High Court is reproduced here under:-

“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 house in U.S.A. out of the capital gain on sale of the plot in India and thus she has fulfilled the conditions stipulated in section 54F of the Income-tax Act. She has invested the capital gains in a residential house within the stipulated time. There was no condition in section 54F of the Income-tax Act at the relevant time that the capital gain arising out of transfer of capital asset should be invested in a residential house situated in India. The language of section 54F of the Income-tax Act before its amendment was that the assessee should invest capital gain in a residential house. It is only after the amendment to section 54F of the Income-tax Act by the Finance (No. 2) Act, 2014, which came into effect with effect from 1.4.2015 that the assessee should invest the sale proceeds arising out of sale of capital asset in a residential house situated in India within the stipulated period. Thus on a plain reading of section 54F of the Income-tax Act before its amendment by the Finance (No. 2) Act leaves no room for any doubt that the assessee should restrict her investment within India or outside India. The only condition was that the assessee should invest in a residential house. The Tribunal has wrongly interpreted section 54F of the Income-tax Act by holding that the assessee should purchase the residential house situated in India. Prior to amendment to section 54F of the Act, the only condition stipulated was investment in a residential house. When the section 54F of the Income-tax Act was clear and unambiguous, there is no scope for importing into the statute the words which are not there. Such importation would be not to construe but to amend the statute. If there is any defect in the Act, it can be remedied only by the legislation and not by judicial interpretation.

10. In the present case the assessee has purchased the residential house in U.S.A. out of the sale proceeds of the plot in India and thus she has fulfilled the conditions of section 54F of the Income-tax Act before its amendment by the Finance (No. 2) Act. Moreover, when the language of a taxing provision is ambiguous or capable of more meanings than one, then the court has to adopt the interpretation which favours the assessee. Section 54F of the Act before its amendment was clear that the assessee should investment in a residential house. The language of section is clear and unambiguous. 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.”

The learned counsel for the assessee also brought to our notice decision of ITAT, Mumbai Bench in the case of ITO v. Nishant Lalit Jadhav in ITA no. 6883/Mum/2014 for AY 2011-12, vide orders dated 26-04-2017 wherein tribunal has also taken similar view , wherein the claim of the assessee of re- investments made outside India in a residential house property were allowed vide deduction u/s 54F , by holding as under:-

“5. We have carefully considered the rival submissions. Undoubtedly, prior to the amendment made by Finance (Nos.2) Act, 2014 w.e.f. 01/04/2015, the language of section 54 of the Act required the assessee to invest the capital gain in a residential property. It is only subsequent to the amendment, which has come into effect from 01/04/2015, that such investment is required to be made in a residential property in India. The assessment year before us is prior to 01/04/2015, and, therefore, the amendment would not be applicable. A similar situation, though in the context of section 54F of the Act, has been considered by the Hon'ble Gujarat High Court in the case of Smt.Leena J. Shah (supra); notably, so far as the impugned issue is concerned, the requirement of sections 54F & 54F of the Act is pari-materia, inter- alia, requiring the assessee to make investment in a new residential house in order to avail the exemption on the capital gains earned. As per the Hon'ble High Court, prior to the amendment the only stipulation was to invest in a new residential property and that there was no scope for importing the requirement of making such investment in a residential property located in India. On similar analogy, in the present case too, we do not find any reason to uphold the stand of the Assessing' Officer that the exemption under section 54 of the Act is to be allowed only if the investment Is made in residential property in India. Considered in the aforesaid light and in the absence of any contrary decision, the parity of reasoning laid down by the Hon'ble Gujarat High Court has to prevail and we find no reason to distract from the conclusion arrived at by the CIT(A). Accordingly, the order of the CIT(A) is hereby affirmed and Revenue fails in its appeal.”

The Mumbai-tribunal in the above case of Mr Nishant Lalit Jadhav(supra) has followed the decision of Hon’ble Gujarat High Court in the case of Smt. Leena Jugalkishore Shah(Supra). Thus it was prayed by learned counsel for the assessee that the deduction u/s. 54F be allowed to the assessee also.

The Ld. DR objected to the allowability of deduction u/s. 54F of the 1961 Act on the grounds that objective of giving the deduction u/s. 54F is to encourage housing in India which should be seen while adjudicating this appeal that investments outside India are not eligible for deduction u/s 54F. However, the learned DR could not produce any contrary decision of Hon’ble High courts and Hon’ble Supreme Court.

5. We have considered rival contentions and perused the material on record including cited case laws before us . After hearing both the parties, we are of the view that there is an amendment by Finance Act 2014 in Section 54F, with effect from 01.04.2015 wherein the benefit of deduction u/s 54F will be allowed only when reinvestment in residential house property is made within India. Prior to the aforesaid amendment , there was no bar for the taxpayer making investments outside India in residential house property to get the benefit of deduction u/s. 54F provided other conditions are fulfilled. We are presently concerned with appeal for AY 2011-12 which is prior to amendment of Section 54F by Finance Act, 2014 w.e.f. 01-04-2015. There is no dispute between rival parties so far as compliance of the other conditions by the assessee as stipulated u/s 54F of the 1961 Act to get the benefit of deduction u/s 54F are concerned . The Hon’ble Gujarat High Court in the case of Leena Jugalkishore Shah(supra) has allowed the deduction u/s. 54F to the taxpayer making investments outside India in residential house properties . The relevant portion of the decision of Hon’ble Gujarat High Court in the case of Leena Jugalkishore Shah(supra) is reproduced here under:-

The Mumbai tribunal has followed the decision of Hon’ble Gujarat High Court in the case of Leena Jugalkishore Shah(supra) while deciding appeal in the case of the Nishant Lalit Jadhav(supra). No contrary decision of Hon’ble High Courts and/or Hon’ble Supreme Court is brought to our notice by Revenue. Respectfully following the decision of Hon’ble Gujarat High Court in the case of Leena Jugalkishore Shah(supra) and also decision of the coordinate benches of ITAT,Mumbai in the case of Nishant Lalit Jadhav(supra), we allow the claim of the assessee for deduction u/s. 54F for investment made outside India in the residential flat in Dubai, UAE . As we have allowed the claim of deduction u/s 54F to the assessee for making investment in residential flat in Dubai, UAE . It is the say of the learned counsel for the assessee that the other grounds raised by the assessee in its memo of appeal filed with the tribunal related to the methodology adopted and valuation of the property used for computation of capital gains by the AO have become academic and did not require adjudication and hence we refrain from adjudicating the same. We order accordingly.

6. The assessee has also raised ground no. 4 in memo of appeal filed with the tribunal with respect to the claim of being charged to tax as long term capital gain on sale of shares of private limited company , instead of it being short term capital gain as claimed in the return of income filed by the assessee with Revenue . The assessee had claimed to have filed revised computation of income with respect to the chargeability of long-term capital gain on sale of shares of Private Limited company before the AO as well learned CIT(A) by filing letter instead of making the said additional claim by way of filing revised return of income . The said claim was not allowed by the lower authorities as the same was not filed by the assessee by filing revised return of income but instead the said claim was raised for the first time by the assessee before the AO by filing revised computation of income. The decision of Hon’ble Supreme Court in the case Goetze (India) Ltd., (2006) 157 Taxman 1 and also decision of the Hon’ble Bombay High Court in the case CIT v. M/s. Pruthvi Brokers & Shareholders., ITA no. 3908 of 2010 was brought to our notice by learned counsel for the assessee. It is also brought to our notice by the learned counsel for the assessee during the course of hearing that the assessee can always raised additional claim before appellate authorities even if the same was not filed through filing return of income including revised return of income. the Ld. DR submitted the additional claim raised by the assessee be not allowed as the assessee has not filed revised return of income for raising this additional claim and it is only through a letter claim for treating capital gains on sale of shares of private limited company to be long term capital gains instead of short term capital gains had been made.

7. We have considered rival contentions and have perused the material on record including orders of authorities below and case laws cited before us. We are of the considered view that the assessee has filed return of income in which sale of share of Private Limited company were declared as short-term capital gain while the same was later claimed to be long-term capital gains for which necessary claim has been filed through a letter during the course of assessment proceedings and also the said claim was raised during the course of appellate proceedings before learned CIT(A) . The assessee did not filed revised return of income for lodging this additional claim. The said additional claim raised by the assessee otherwise through filing revised return of income was denied to the assessee . Hon’ble Supreme Court in the case of Goetze India Ltd.(supra) and Hon’ble Bombay High Court in the case of Pruthvi Brokers & Shareholders (supra) has clearly held that the additional claim can be filed before the appellant authorities even if the same is not filed by way of revised return of income . Since the assessee filed the claim before the AO as well before learned CIT(A) to bring to tax capital gains as long term capital gain on sale of shares of Private Limited Company instead of short term capital gain as declared in the return of income , we admit the said claim filed by the assessee , however , we are remitting the matter back to the file of the A.O for considering the aforesaid additional claim raised by the assessee on merits after hearing the contention of the assessee and evaluating evidences filed/to be filed by the assessee on merits in accordance with law. Thus, the A.O will consider the claim of the assessee on merits in accordance with law. The assessee is directed to appear before the A.O. and file necessary contentions, explanation and evidences before the A.O. w.r.t. aforesaid additional claim which shall be evaluated by the AO on merits in accordance with law. The AO shall provide proper and reasonable opportunity of being heard to the assessee in accordance with principles of natural justice in accordance with law on merits. We order accordingly.

8. In the result appeal of the assessee is allowed as indicated above.

Order pronounced in the open court on 15.02.2018.

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