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TMI Blog2021 (9) TMI 1221X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration of Rs. 80 Crores. This property had been received by the assessee by way of gift from her mother and long term capital gain was computed at Rs. 24,85,07,748/- after reducing the indexed value of Rs. 1,51,31,401/-. In respect of the capital gain so earned, the assessee had claimed exemption of Rs. 50,00,000/- U/s 54EC of the Income Tax Act, 1961 (hereinafter called the 'Act') and a further exemption of Rs. 3,75,95,937/- U/s 54 of the Act being a residential house purchased in UK. The Assessing Officer (AO) disallowed the claim of exemption u/s 54 on the ground that the purchase of a residential house outside India does not qualify for exemption U/s 54 of the Act. The Assessing Officer (AO) also made a disallowance of Rs. 50,000/- being amount paid to an Advocate for conversion of property from leasehold to freehold and also an amount of Rs. 5,60,000/- and Rs. 2,00,000/- being stamp duty and Professional Charges respectively paid at the time of transfer of property in the name of the assessee. The long term capital gain was computed by the AO at Rs. 24,47,59,930/- as against the returned capital gain of Rs. 21,97,26,078/-. 2.1 Aggrieved by the assessment order, the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ption of Rs. 3,75,95,937/- U/s 54 of the Act. It was submitted by the Ld. Sr. DR that the benefit of exemption u/s 54 is available only in respect of investment made in India and not outside India. It was argued that the intention of the legislature behind section 54 of the Act was to encourage investment in India as was evident from the amendment brought by Finance Act, 2014 wherein the word 'in India' was added to section 54. It was argued by the Ld. Sr. DR that the Ld. CIT(A) had, therefore, erred in allowing the benefit of exemption in respect of residential property purchased in UK. 4.0 The Ld. Authorized Representative (AR), on the other hand, while placing reliance on the order of the Ld. CIT(A) submitted that the issue of exemption U/s 54 of the Act with respect to investment in purchase of residential house outside India prior to the amendment to section 54 of the Act vide Finance Act, 2014 was no longer res integra and that the issue was settled by various judgments of the Hon'ble High Courts as well as the Coordinate Benches of this Tribunal. In this regard, he placed reliance on the judgment of the Hon'ble Delhi High Court in the case of Dipankar Mohan Ghosh reported i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Ahmedabad Bench of ITAT that for claiming exemption undersection 54F of the Act, a residential house purchase / constructed must be in India and not outside India. The assessee in this context has pointed out that the Hon'ble High Court of Gujarat has set aside the order of ITAT in the saidcase on 14-06-2016. The operative part of the Judgement is as under: "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 1.4.2015thatthe 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 sti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h a view to encouraging house construction, the Finance Act, 1982, has inserted a new section 54F to provide that where any capital gain arises from the transfer of any long term capital asset, other than a residential house, and the assessee purchases within one year before or after the date on which the transfer took place or constructs within a period of three years after the date of transfer, a residential house the capital gain arising from the transfer will be treated in a concessional manner as under: i. If the cost of the house that has been purchased or constructed is not less than the net consideration in respect of the capital asset transferred, the entire capital gain arising from the transfer will be exempt from tax. ii. If the cost of the newly acquired house is less than the net consideration in respect of the capital asset transferred, the exemption from long term capital gain will be granted proportionately on the basis of investment of net consideration either for purchase or construction of the residential house." 4.5.2 The stated provision was to be effective from AY 83-84 and subsequent orders. It is also relevant to quote the speech of the hon. Financ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been decided by the Hon'ble Delhi High Court in the case of Dipankar Mohan Ghosh reported in 401 ITR 129 (Delhi High Court) in Writ Petition (Civil) 9859/2019 and by the Hon'ble Kerala High Court in the case of CIT vs. Vinay Mishra reported [2021] 276 Taxmann.com.68 (Karnataka) and very recently Hon'ble Madras High Court in its judgment dated 22.07.2021 in the case of CIT vs. Saroja Naidu reported in [2021] 281 Taxamann.com 305 (Madras). The observations of the Hon'ble Delhi High Court in the case of Dipankar Mohan Ghosh (supra) are being reproduced herein under for a ready reference:- "1. The challenge in the present writ petition preferred by the Revenue is to the order dated 22.12.2017 passed by the Authority for Advance Rulings in AAR No. 1356/2012. The said authority has held that the respondent/ applicant would be eligible for the benefit available under the provisions of Section 54 of the Income-Tax Act and to the extent of re-investment in residential property outside India, i.e. in London in this particular case. 2. The respondent assessee is a Non-Resident Indian. He sold his residential property bearing No. 1/26, Shanti Niketan, New Delhi and earned long term capi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d it will not affect the eligibility of claim in respect of investment made outside India prior to such amendment. In the present appeal, the investment in purchase of residential house in UK was made in July, 2013 and as such the claim of exemption u/s 54 of the Act in respect of such investment is allowable. Accordingly, we find no reason to take a view different from the view taken by the Ld. CIT(A) on the issue and we uphold the same. The grounds raised by the Department are dismissed. 8.0 As far as the Cross Objection of the assessee is concerned, it challenges the action of the Ld. CIT(A) in upholding the disallowance of expenses claimed by the assessee towards cost of improvement. We note that in the assessment order, the Assessing Officer has not disputed the genuineness and the nature of expenditure so incurred. We also note that the expenses such as registration expenses, conversion charges, stamp duty and professional fee are inextricably linked with the property in question and, therefore, the same had been incurred for the purpose of the sale transaction. It is very much apparent that the costs incurred towards stamp duty and registration of the gift in the name of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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