Sec. 54F relief available if second house occupied by him is in foreign country: ITAT

Case Details: Smt. Maries Joseph v. DCIT - [2023] 148 taxmann.com 97 (Cochin-Trib.)

Judiciary and Counsel Details

• • N.V. Vasudevan, Vice President & Ms Padmavathy S., Accountant Member
  • Arun Raj S., Advocate for the Appellant.
  • Smt J.M. Jamuna Devi, Sr. AR for the Respondent.

Facts of the Case

Assessee, a non-resident, filed its return of income for the relevant assessment year. During the relevant assessment year, the assessee sold land she jointly held with her husband. He made an investment in a residential property for claiming exemption under section 54F. During the scrutiny proceedings, the Assessing Officer (AO) disallowed claim for deduction under section 54F based on the fact that assessee owned two residential houses in USA.

On appeal, the CIT(A) affirmed the deletions by AO. Aggrieved by the order, assessee preferred an instant appeal to the Cochin Tribunal.

ITAT Held

The Tribunal held that the exemption under section 54F is available with respect to a residential house property provided the assessee does not own more than one residential house other than the new asset but does not explicitly say whether in India or abroad. The Finance (No. 2) Act, 2014 amended the section 54F to bring in clarity that the deduction is allowable only if the investment in the new residential house is made in India and not abroad.

Section 54F to the assessee is a benefit which is granted towards making an investment, whereas what is contained in the proviso is a condition/restriction towards existing ownership of the asset and, therefore, it cannot be categorically said that the same interpretation should be applied to both.

It is important that a proviso must be construed harmoniously with the main statute to give effect to the legislative objective, and the section should be read as a whole inclusive of the proviso in such a manner that they mutually throw light on each other and result in a harmonious construction. The legislative intent behind granting relief to the assessee through section 54F is investments in a residential house in India. Therefore, the proviso imposing the conditions cannot be read in isolation and should be construed harmoniously with the main section.

Accordingly, the condition that the deduction is not available if the assessee owns more than one residential house other than the new asset should be interpreted to mean ownership of residential houses in India. Therefore, the ground on which the deduction under section 54F was denied that the assessee owns two residential houses in the USA was not tenable.

List of Cases Referred to

• • DIT (International Taxation) v. Mrs Jennifer Bhide [2011] 15 taxmann.com 82/203 Taxman 208/[2012] 349 ITR 80 (Kar.) (para 14).