Capital Gain Exemption Not Available For A Residential House Purchased Abroad After April 1, 2015: ITAT

The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) has held that capital gain exemption is not available for a residential house purchased abroad after April 1, 2015.

The bench of N. K. Choudhry (Judicial Member) and Prashant Maharishi (Accountant Member) has observed that for the period prior to AY 2015-16 or to the introduction of the words “in India” in Section 54 of the Act vide Finance Act No. 2 of 2014, which came into effect on April 1, 2015, the assessee would get the benefit of deduction under Section 54F for the property purchased or constructed abroad or outside India as well, but not from A.Y. 2015-16 onwards.

The assessee, jointly and equally with his wife, owned a property in Mumbai, which was purchased on October 29, 2003, for a consideration amount of Rs. 25,30,020. The assessee later, along with his wife, migrated to Canada and sold the flat. The assessee deducted the tax at source, amounting to Rs. 10,68,000.

The assessee purchased a residential property in Canada on a consideration of $775,000 and remitted the entire long-term capital gain, excluding TDS, to the account of the seller in Canada. The assessee paid the rest of the consideration by getting financing from Canada Street Capital Finance Corporation.

The assessee claimed that the entire long-term capital gain was invested in residential property, and the return filed by submitting a detailed note claimed the TDS, which was refunded to the assessee.

However, the AO disallowed the amount. The assessee, being aggrieved by the disallowance made, preferred a first appeal before the Commissioner. The assessee claimed that prior to AY 2015-16, there was no restriction on the purchase of property in or outside India for claiming exemption under Section 54, as the provision of “one residential house in India” was introduced via the Finance Act, 2014, w.e.f. 01.04.2015. The assessee sold the original property on July 19, 2013, and purchased the property on July 31, 2013, in foreign currency, and therefore cannot be subjected to the restriction that was introduced w.e.f. April 1, 2015. The CIT (A) held that the CPC and AO are justified in disallowing the TDS claim of the appellant.

The tribunal held that the assessee purchased the property in a foreign country on July 31, 2013, and claimed the benefit of the provisions of Section 54F of the Act in AY 2014–15; hence, the assessee would get the benefit of Section 54F of the Income Tax Act.

Case Title: Khalid Sayed Versus Centralized Processing Centre

Case No.: I.T.A. No. 706/Mum/2023

Date: 18.08.2023

Counsel For Appellant: Akash Kumar

Counsel For Respondent: S.N. Kabra

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