Assessee is eligible for exemption under Section 54F for investment made in the house property in USA: Karnataka HC [Read Judgment]

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The Karnataka High Court held that the assessee is eligible for exemption under Section 54F of the Income Tax Act for the investment made in the house property in the USA.

The assessee is a Director of M/s Markets Technologies (India) Pvt. Ltd Bangalore. The assessee filed the return of income for the Assessment year 2009-10 declaring total income of Rs.1,53,44,940 under the head income from salary, business, capital gains, and other sources.

The return of income was processed under Section 143(1) and the case of the assessee was selected for scrutiny and notice was issued. The Assessing Officer vide order denied the exemption of Rs.11,30,20,000 with regard to investment made in residential property holding that exemption is not available for investment in property made outside India and created a demand for Rs.6,53,96,362.

The assessee filed an appeal before the Commissioner of Income Tax (Appeals), who by an order held that investment should be made in India for claiming the benefit of exemption under Section 54(1) of the Act. In the result, the appeal was dismissed.

The assessee thereupon filed an appeal before Income Tax Appellate Tribunal, wherein it was held that the assessee entitled to exemption under Section 54F of the Act and allowed the appeal preferred by the assessee.

The dispute arose, in this case, was whether on the facts and in the circumstances of the case, the Tribunal justified in law in holding that the assessee is entitled to claim exemption under Section 54F of the Income Tax Act in respect of investment made in the house property in the USA.

The division judge bench of Justice Alok Aradhe and Justice H.T. Nagendra Prasad noted that the investment in a residential house was made in the USA prior to April 1, 2015, whereas, the requirement of making an investment in a residential house, which was incorporated by way of amendment, came into force from April 1, 2015.

“In the light of aforesaid well-settled legal principles as well as the memorandum of objects of Finance Act, 2014, which clearly provide that amendments will take effect from April 01, 2015 and will apply to Assessment year 2015-16 onwards as well as the CBDT’s Circular dated January 21, 2015, it is evident that amendment incorporated in Section 54F(1) of the Act is prospective in nature,” the bench while answering against the revenue said.

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