Section 54

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Querist : Anonymous

Querist : Anonymous (Querist)

17 November 2013 My friend sold two flats in India and invested all sale proceeds in a residential house in foreign country with in one year. He is a NRI. is he entitled to exemption u/s 54? Pl give case law or reference book if available.

CA Pallav Singhania

CA Pallav Singhania (Expert)

17 November 2013 Exemption will be available even if the Property purchased outside India...

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Nikhil Kaushik

Nikhil Kaushik (Expert)

17 November 2013 as such yes you can. there is no restriction prescribed in the Act. Rather there is a Mumbai tribunal judgment in the case of Mrs. Prema P Shah vs ITO 282 ITR 211 that specifically ruled in its favor. Mumbai tribunal again ruled in favor of the assessee in the case of ITO v. Dr. Girish M. Shah, ITA No. 3582/M/ 2009

You may refer to the same for your case. However, kindly note -

1. its a tribunal ruling. Thus it is not binding on any other jurisdictional court.

2. Before Prema Shah judgment the earlier courts disallowed exemption in similar cases (refer Smt. Leena J. Shah v. ACIT, 6 SOT 721 (Ahd.). (however this judgment was itself was not too strong)

My personal belief is that allowing for exemption in such cases would lead to absurd result defeating the whole intent of promoting investment in residential assets in the country. So don't be surprised if they amend the act to nullify such judgments.

3. You also need to check how this fits in DTAA. Often it happens in case of Capital gains that both the countries are allowed to tax as per domestic rules. In such a scenario you still end up paying taxes in the country of residence.

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Querist : Anonymous

Querist : Anonymous (Querist)

21 November 2013 If he invested sale proceeds of two flats in one residential house with in one year in INDIA instead Foreign country then will he be entitled for exemption u/s 54 ?

Nikhil Kaushik

Nikhil Kaushik (Expert)

21 November 2013 yes he will be entitled.

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Querist : Anonymous

Querist : Anonymous (Querist)

21 November 2013 is he entitled on both flats sold?

Nikhil Kaushik

Nikhil Kaushik (Expert)

21 November 2013 yes he shall be able to.

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