The Income Tax Appellate Tribunal (ITAT), New Delhi, has allowed a capital gain deduction under Section 54 of the Income Tax to the retiree of the Overseas Bank, who has purchased a new residential property in Australia by utilising the proceeds from the sale of a residential flat in India.
The Tribunal clarified that where the property was purchased outside of India, before the amendment with effect from the AY 2015-16, the taxpayer can claim the benefit of Section 54 of the Income Tax Act. Reference was made to the decision of the High Court of Karnataka in the case of Commissioner of Income Tax vs. Vinay Mishra [(2020) 121 taxmann.com 243 (Karnataka)].
The Division Bench comprising Anubhav Sharma (Judicial Member) and S. Rifaur Rahman (Accountant Member) negated the application of the amendment made in section 54, which mandated that the new property must be purchased in India.
The Bench pointed out that an amendment can be considered to be declaratory and clarificatory only if the statute itself expressly and unequivocally states that it is a declaratory and clarificatory provision. If there is no such clear statement, the amendment is not merely a clarification, but a substantive amendment, which shall apply prospectively.
Briefly, the appellant, a 70-year-old individual, retired from Indian Overseas Bank, sold a residential flat in Delhi for a sale consideration of Rs. 70 lacs, which was originally purchased in August 2004. The sale proceeds after indexation resulted in a capital gain of Rs. 54.35 lacs. Later, in March 2014, the appellant purchased a new residential property in Australia for a consideration of his retirement.
The AO, however, disallowed Rs. 54.35 lacs under section 54, stating that he did not have any details of the purchase of the new property. On appeal, the CIT(A) applied amended Section 54 and held that the deduction would not be allowable as the property was purchased outside India.
Appearances:
CA Anshul Kumar, for the Appellant/ Taxpayer
DR Ajay Kumar Arora, for the Respondent/ Revenue
