The Income Tax Appellate Tribunal (ITAT) of Bangalore has allowed a claim of deduction under section 54/54F of the Income Tax Act on a house purchased by the assessee outside India.
The Assessee Shri Rajasugumar Subramani is an individual who sold a site in Bangalore for a consideration of 2 crores. The assessee claimed deduction u/s. 54/54F of the Act on the capital gain on sale of the property as he invested the capital gain in the residential house purchased in Texas. The Assessing Officer (AO) firstly expressed the opinion that the site sold was a vacant site and therefore deduction cannot be claimed u/s. 54 of the Act which is applicable only when the capital asset sold is a residential asset. Concerning the deduction u/s. 54F of the Act, he was of the view that the said deduction is not available to an investment of capital gain in the purchase of property outside India.
On appeal by the assessee, the Commissioner of Income Tax (Appeals) confirmed the action of the Assessing Officer (AO) in not allowing deduction u/s. 54/54F of the Act. Regarding the quantum of capital gain computed by the Assessing Officer (AO), CIT(A) gave some relief to the assessee.
Vice President Shri N.V. Vasudevan, and Accountant Member Shri B.B. Baskaran, while allowing the appeal held, “We have given careful consideration to the rival submissions. We find that in the decision rendered in the case of Jai Kumar Gupta HUF (supra) on identical facts the assessee had claimed deduction u/s. 54 of the Act instead of 54F of the Act. The Tribunal held that the assessee’s claim for deduction u/s. 54F should be examined. In the case of Arshia Basith (supra), the Bangalore Bench of the Tribunal held that assessee would be entitled to deduction u/s. 54F of the Act even in respect of property purchased which is located outside India.”
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