TMI Blog2005 (11) TMI 182X X X X Extracts X X X X X X X X Extracts X X X X ..... to in, convertible foreign exchange . Again the specified asset is defined u/s 115C(f). The property sold by the assessee does not fill within any of the definition given in section 115C(f). In short, we are of the considered view, for the reasons stated hereinabove, the assessee is entitled to the benefit u/s 54 of the Act. It does not exclude the right of the assessee to claim property purchased in a foreign country, if all other conditions laid down in the section are satisfied, merely because the property acquired is in a foreign country. Coming to the direction of the CIT(A), regarding applicability of provisions of section 115D pertaining to special provisions relating to certain incomes of non-residents, we are of the view, it is not applicable. The long-term capital gains is defined as a capital gain relating to a capital asset, being a foreign exchange asset. In the case of the assessee, there is no doubt that this is not a foreign exchange asset. As such, the provision of section 115D is not applicable. Thus, the appeal by the assessee with regard to remaining 50 per cent of the share is to be accepted. In the result, appeals of the assessee stand allowed. - HON'BLE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as submitted on the basis of the legal opinion that the property though termed as lease, has extended period of 150 years and as such, the assessee was entitled for the benefit of section 54. Assessee further objected that the Assessing Officer was not justified in holding that to claim exemption the investment again should be made in India itself. It was further submitted that the Assessing Officer was not justified in holding that the sale proceeds were not invested in the residential property purchased in London, for the reason that the assessee has invested Rs. 50 lakhs in shares and deposits with private parties. It was further the case of the assessee that the Assessing Officer was not justified in denying the benefit also on the ground that it was for the purpose of purchasing the property and not the consideration received out of the sale of Juhu property. 6. It was contended, as long as there was a sale of house property and purchase and consideration of a house property within the time specified under section 54, the conditions laid down under section 54 are satisfied. It was contended that not necessarily the same sale consideration is to be invested in the new residenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 115E. In the light of the above discussion, the CIT(A) held that the assessee was not entitled to claim relief under section 54 and the Assessing Officer was directed to recomputed the capital gain as per the provisions of section 115D of Chapter XII-A. Aggrieved by the above order, assessee is in appeal before the Tribunal. 8. The preliminary fact that the assessee has not purchased the property after selling the Juhu property is disputed by the learned counsel for the assessee on the ground that in UK, the property belongs to the Sovereign and the subjects have only the right to enjoy it in perpetuity. The learned counsel for the assessee first submitted that Chapter XII-A does not apply to the assessee at all, by virtue of definition of section 115C(d), which reads as under:- 115C. In this Chapter, unless the context otherwise requires- (b) ............. (c) ............. (d) long-term capital gains means income chargeable under the head Capital gains relating to a capital asset, being a foreign exchange asset which is not a short-term capital asset. 9. Secondly, the learned counsel for the assessee submitted, the reasoning of the Assessing Officer and the CIT(A) that the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39; means negligible, and of no value, that too, is payable on demand. It is only to keep the facade of lease. The property under the agreement is freely transferable without any restrictions. The property is for the enjoyment of the person to whom it is given. Learned counsel further submitted, for all purposes, it is similar to the Co-operative Society flats in India. To such flat benefit of section 54 is made available by the decisions of the Court as well as by Circular of the Department No. 471 dated 15th October, 1986 in Chaturvedi Pithisaria Income-tax Law, Fifth Edition of Volume 2, Page 2886, wherein the Board considered the flat allotment under the Self-financing Scheme of the Delhi Development Authority is similar to a Co-operative Society in Mumbai and it was held that it was entitled to benefit under section 54. Learned counsel further submitted, similarly, vide Circular No. 672 dated 16th December, 1993, in Chaturvedi Pithisaria Income-tax Law, Page 2887, it was held that in case of a Co-operative Society flat, benefit of section 54 is available. 11. Learned counsel further submitted that it has been held that the expression House Property for the purpose of section 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the concept of house property is similar under sections 22 and 54, it is clear that in respect of the property acquired by the assessee, it is house property purchased within the meaning of section 54. 13. Relying upon the decision of the Hon'ble jurisdictional High Court in the case of Mrs. Amy P. Cama, Trustee of the Estate of Late M.R. Adenwalla v. CIT [1999] 237 ITR 82, learned counsel also submitted that the benefits of section 54 are made available to a beneficiary of a trust in respect of the property owned by the trust. Learned counsel further added, similarly, the Hon'ble Madras High Court in the case of CIT v. M.K. Chandrakanth [2002] 258 ITR 142, held that the benefit of investment under section 54 is available in case of partner of a partnership firm. Learned counsel further submitted, all these issues consider the purchase and ownership in substance and if one applies the test laid down by the Hon'ble Supreme Court, of effective enjoyment of property, the assessee enjoys all the benefits of the premises in question and, therefore, the objection that it is only a lessee and not purchase is not sustainable. 14. Coming to the plea that part of the sale proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate but acquisition by way of exchange also. If the test is that house property should be acquired out of the actual capital gain arising, it is not possible in case of exchange. As such, he submitted, it cannot be said that the actual capital gain must be utilised for the purpose of acquiring the house property under section 54. 16. Learned counsel brought our attention to the following observation of the Hon'ble Supreme Court in the case of CIT v. T.N. Aravinda Reddy [1979] 120 ITR 461:- We find no reason to divorce the ordinary meaning of the word purchase as buying for a price or equivalent of price by payment in kind or adjustment towards an old debt or for other monetary consideration from the legal meaning of that word in section 54(1). If you sell your house and make a profit, pay Caesar what is due to him. But if you buy or build another subject to the conditions of section 54(1) you are exempt. The purpose is plain; the symmetry is simple, the language is plain. Why mutilate the meaning by lexical legalism. We see no stress in the section on cash and carry . The point pressed must, therefore, be negatived. We have declined to hear Sri S.T. Desai's artillery fire a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roperty for Rs. 60 lakhs on 4-4-1992. Out of the total sale proceeds, Rs. 50 lakhs was invested in purchase of shares. In other words, the assessee had no used the proceeds from the sale of property for purchase of property abroad. There is no correlation between the assets purchased and the sale of the old Juhu property. The source is in India. The learned DR further submitted that section 54E is very clear. The change brought in the section by the Finance Act, 1979, with effect from 1-4-1979, which reads as whole or any part of the net consideration clearly indicates that it should be the whole or part of the consideration received out of the sale proceeds. He submitted, if the intention was otherwise, nothing prevented the Legislature in saying the amount as equal to or any part of the net consideration. Hence he submitted, the order of the Assessing Officer is to be restored. He further submitted, so far as provisions of section 54 concerned, section 54(1) is subject to provisions of sub-section (2) and sub-section (2) stipulates that the amount of the capital gain which is not appropriated by the assessee towards the purchase of new asset made within one year before the date o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the assessee that in the United Kingdom the property belongs to the Sovereign. The subjects enjoy it. Of course absolutely. In the instant case of the assessee the lease is valid for 150 years, which is in perpetuity and as such, the assessee is as good as absolute owner of the property. 25. Secondly, coming to the plea that the assessee is to pay rent as per the deed, as such in any case the assessee cannot be treated as the owner of the property, is also to be rejected. In the Black's Law Dictionary, peppercorn is mentioned a small or insignificant thing or amount . In the agreement, where the rent is fixed as peppercorn , it is also mentioned, if demanded on the first day of January every year. It also means, the assessee as a matter of duty, not bound to pay but it is only on demand insignificant rent is to be paid. 26. Coming to section 54, the learned DR particularly brought our attention to sub-section (2) of section 54, which reads:- the amount of the capital gain which is not appropriated by the assessee towards the purchase of the new asset.... . He particularly stressed the word appropriated , which indicates that the amount of the capital gain should be appropr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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