Income Tax Exemption available for New House purchased in Foreign Countries: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Mumbai bench has held that the income tax exemption under Section 54 of the Income Tax Act, 1961 is available to properties purchased in foreign countries as there is no condition in the provision that the property must be purchased in India prior to amendment in the provision in 2015.

While concluding the assessment proceedings against the assessee, the Assessing Officer noticed that the sale consideration received on sale of the immovable property in India was utilized by the assessee to purchase the new residential house at Dubai, UAE. The Officer, therefore, denied the exemption under section 54 of the Act by holding that the exemption envisaged under Sec.54 of the IT Act was available only where the assessee had invested towards purchase or construction of a new residential property in India.

The Tribunal noted that as per the pre-amended Sec. 54 of the IT Act (i.e prior to its amendment by the Finance (No. 2) Act, 2014 w.e.f 01.04.2015), there was nothing available in the said statutory enactment which would suggest that the new residential house acquired should be situated in India.

On first appeal, the CIT(A) granted relief to the assessee.

“In our considered view, the aforesaid amendment as per which the term “constructed a residential house‟ has been substituted by „constructed, one residential house in India”, vide the Finance (No.2) Act, 2014 w.e.f 01.04.2015, in itself reveals the legislative intent of restricting the exemption available under the aforesaid statutory provision only in respect of a residential house which was either constructed or purchased by the assessee in India with effect from assessment year 2015-16,” the Tribunal observed.

The Tribunal further observed that “as the entitlement of an assessee to claim exemption under Sec.54 was not qualified by any such condition that the investment towards the construction or purchase of the new residential house was to be made in India during the year under consideration, hence the claim of exemption so raised by him under Sec. 54 in respect of the new residential house that was purchased by him at Dubai, UAE was well in order.”