In ITO v. Nishant Lalit Jadhav, the Mumbai Income Tax Appellate Tribunal (ITAT) held that the provisions of Section 54/54F of Income Tax Act prior to its amendment in 2014, w.e.f. 01/04/015, does not mandate that investment in the new residential house should be situated in India. Consequently, the Tribunal allowed the benefit of the said section to the assessee in respect of purchase of residential property in USA.
Assessee, a Non-Resident Indian, claimed exemption under section 54 in respect of buying a new residential property in USA. AO disallowed the claim by relying upon the 2014 amendment according which, the relief is available if the investment is made in one residential house situated in India. On appeal, assessee contended that during the relevant period, there was no requirement in section 54 of the Act that the investment in the new property is to be made in India. The first appellate authority accepted the plea based on the decision in Mrs. Prema P. Shah & Sanjiv P. Shah Vs. ITO.
The bench observed that, prior to the amendment made by Finance (Nos.2) Act, 2014 w.e.f. 01/04/2015, the language of section 54 of the Income Tax 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.” The division bench placed reliance on the Gujarat High Court decision in the case of Smt.Leena J. Shah wherein it was held 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.”
Read the full text of the Order below.
