The Income Tax Appellate Tribunal (ITAT) Mumbai bench held that capital gain exemption under Section 54F should be available if the assessee purchased property outside India prior to the amendment in Finance Act, 2014.
Assessee Khalid Sayed jointly and equally with his wife Smt. Aditi Khalid Sayed, owned a property which was purchased on 29.10.2003 for a consideration amount of Rs.25,30,020/-
Assessee lateron along with his wife migrated to Canada and on dated 19-07/2013 sold the said flat on a consideration of Rs.1,55,00,000/-. The Assessee also deducted the tax at source amounting to Rs.10,68,000/- on its behalf.
Thereafter, the Assessee on 31st July 2013, purchased a residential property at Canada, on a consideration of Canadian Dollar 775,000/- from Ronald Maizis and Barcelisa Maizis and remitted the entire long term capital gain of Rs. 1,03,68,923/- excluding TDS to the account of the seller in Canada and paid the rest amount of consideration by getting financed from Canada Street Capital Finance corporation.
The assessee thereafter claimed long term capital gain of Rs.1,03,68,923/- was invested in residential property and in the return filed by submitting a detailed note claimed the TDS, which was refunded to the Assessee.
Further the AO passed an order under section 154 of income tax act and disallowed the claim.
Aggrieved by the order, the assessee filed an appeal before the Commissioner of Income Tax-Appeals [CIT(A)], who dismissed the appeal. Thereafter the assesee filed another appeal before the tribunal.
Before the bench, Akash Kumar, counsel for the assessee submitted that prior to AY 2015-16, there was no restriction on purchase of property in foreign/outside India, for claiming exemption under Section 54 of the Income Tax Act as the provision of one residential house in India” was introduced vide Finance Act, 2014 w.e.f 01.04.2015.
Thus the Assessee sold the original property on 19-07-2013 and subsequently purchased the property on 31-07-2013 in foreign, and therefore could not be subjected to such restriction, which was introduced w.e.f. 01.04.2015.
S.N. Kabra, Cousin el for the revenue, supported the decision of lower authorities.
The tribunal during the proceedings observed that for the period prior to AY 2015-16 or to the introduction of the words “India” in section 54 of the Act vide Finance Act No. 2 of 2014, which came into effect from 01.04.2015.
Thus the Assessee would get benefit of deduction u/s 54F of the Act even for the property purchased or constructed in abroad/outside India as well, but not from A.Y. 2015- 16 onwards.
The present case Assessee purchased the property in foreign country on 31st July 2013 and claimed the benefit of the provisions of Section 54F of the Income Tax Act in AY 2014-15, hence the Assessee would get benefit of Section 54F of the Income Tax Act.
After considering the facts submitted by both parties, the two member bench of Prashant Maharishi (Accountant Member) and N. K. Choudhry (Judicial Member) held that capital gain exemption under Section 54F should be available even if the assessee purchased property outside India prior to the amendment in Finance Act 2014.
Therefore the bench allowed the appeal filed by the assessee.
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