Order K.P.T. THANGAL V.P. - These appeals are by assessees for asst. yr. 1993-94. 2. ITA No. 2707/Mum/1997 : interesting question before us is whether exemption contemplated under s. 54(1) could be extended to property purchased in foreign country after selling property situated in India. 3. brief facts narrated by AO are as under : Assessee filed return showing taxable income of Rs. 33.570 on 31st Dec., 1993. During previous year relevant to asst. yr. 1993-94, assessee sold residential property for Rs. 60 lakhs. It was jointly owned by assessee and Mrs. Prema P. Shah. It was purchased for Rs. 14 lakhs on 29th March, 1983 and sold on 4th April, 1992 for aforementioned price. Assessee claimed exemption under s. 54, showing long-term capital gains as nil. Assessee filed xerox copy of agreement made in London giving particulars such as date of lease, name of lessor and lessee. On going through agreement, AO noted that it was agreement for leasing of property by lessor, viz., Higgs & Hill Homes Ltd., which has been made effective from 1st day of January, 1988. Assessee is described as lessee. In this agreement lessor is resident company. Many restrictions are also imposed, including certain restrictions on payment of lease rent, restrictions on utilisation of property, which is claimed by assessee as acquired residential property, against which assessee claims exemption. 4. AO held, s. 54 of IT Act speaks of purchase of residential property or construction thereof within stipulated period, so that long-term capital gains would be exempted from tax. In instant case, assessee has purchased only tenancy rights. Hence assessee s claim for exemption under s. 54 was rejected. Aggrieved by above order, assessee approached first appellate authority. 5. It was submitted before CIT(A) that selling Juhu property for Rs. 60 lakhs on 4th April, 1992 and also explained amount of Rs. 1,59,855 and further Rs. 1,38,000. Assessee invested balance sum of US $ 1,20,000 in residential property at London on 20th Feb., 1992. It was submitted on basis of legal opinion that property though termed as lease, has extended period of 150 years and as such, assessee was entitled for benefit of s. 54. Assessee further objected that AO was not justified in holding that to claim exemption investment again should be made in India itself. It was further submitted that AO was not justified in holding that sale proceeds were not invested in residential property purchased in London, for reason that assessee has invested Rs. 50 lakhs in shares and deposits with private parties. It was further case of assessee that AO was not justified in denying benefit also on ground that it was for purpose of purchasing property and not consideration received out of sale of Juhu property. 6. It was contended, as long as there was sale of house property and purchase and consideration of house property within time specified under s. 54, conditions laid down under s. 54 are satisfied. It was contended that not necessarily same sale consideration is to be invested in new residential premises. It was further submitted that there is no stipulation in s. 54 that residential premises must be purchased in India itself. If it is purchased outside India, but for residential purposes, it would satisfy condition of s. 54 and claim of assessee cannot be rejected. It was further submitted that where assessee borrowed for purpose of acquiring new property, conditions are satisfied. 7. learned CIT(A) did not approve view canvassed by assessee. While disallowing assessee s claim, CIT(A) observed : (a) assessee had taken loan from Barclays Bank and used assessee s foreign earning to purchase/lease property. In other words, receipts, which gave rise to capital gains, were not utilised for purchase of property. (b) assessee has not purchased property in India and IT Act extends to "whole of India" only. (c) lease deed dt. 20th Feb., 1992 but effective from 1st Jan., 1998 for 150 years, it is perpetual. This does not entitle assessee right of occupation infinitum and it does amount to purchase itself. It is not purchase of right only. provision of lease as obtainable in UK is not same as in India. Therefore benefit of long-term lease obtained in UK cannot be treated as per Indian laws for purpose of IT law. (d) assessee is non-resident Indian and provisions of Chapter XII-A are special provisions relating to certain income of non-residents. Sec. 115D is special provision for computation of total income of non-residents. As per s. 115D(2)(a), in case of assessee, being non-resident Indian (a) gross total income consists only of investment income or income by way of long-term capital gains or both, no deduction shall be allowed to assessee under sub-s. (2) of s. 48 or under Chapter VI-A. Hence CIT(A) held, assessee being non-resident Indian, is not entitled to any deduction in respect of expenditure or allowance under provisions of IT Act and if income of non-resident consists only of investment income or income by way of long-term capital gain or both, tax payable by him on his total income shall be amount of income-tax calculated on such total income @ 20 per cent of such income in view of provisions of sub-s. (1) of s. 115E. In light of above discussion, CIT(A) held that assessee was not entitled to claim relief under s. 54 and AO was directed to recompute capital gain as per provisions of s. 115D of Chapter XII-A. Aggrieved by above order, assessee is in appeal before Tribunal. 8. preliminary fact that assessee has not purchased property after selling Juhu property is disputed by learned counsel for assessee on ground that in UK, property belongs to sovereign and subjects have only right to enjoy it in perpetuity. learned counsel for assessee first submitted that Chapter XII-A does not apply to assessee at all, by virtue of definition of s. 115C(d), which reads as under : "115C. In this Chapter, unless context otherwise requires (a) ............. (b) ............. (c) ............. (d) long-term capital gains means income chargeable under head Capital gains relating to capital asset, being foreign exchange asset which is not short-term capital asset," Secondly, learned counsel for assessee submitted, reasoning of AO and CIT(A) that assessee is not entitled for benefit of s. 54E because assessee had utilised borrowed funds for investment in property is also not tenable. For this proposition, he relied upon decisions of Bombay Housing Corporation vs. Asstt. CIT (2002) 76 TTJ (Mumbai) 25 : (2002) 81 ITD 545 (Mumbai), ITO vs. K.C. Gopalan (2000) 162 CTR (Ker) 566 : (1999) 107 Taxman 591 (Ker) and Ajit Vaswanit vs. Dy. CIT (2001) 117 Taxman 123 (Del). Thirdly, learned counsel submitted that there is nothing in statute to show that property purchased should also exist in India, so as to claim benefit contemplated under s. 54. Only stipulation is that income should arise in India and not necessarily it should also be invested in India. For above proposition, learned counsel drew our attention to s. 11 of IT Act, 1961. learned counsel submitted that if legislature had such intention, it would have been definitely and specifically mentioned, as it has been mentioned in s. 11. learned counsel submitted that any income from property held for charitable or religious purposes is exempt from tax net under s. 11(1)(a) only to extent it applied to such purpose in India. If legislature wants to invest capital gains in India itself for exception under s. 54, legislature would have specifically stated so in section itself. lease is for 150 years, i.e., in perpetuity. In UK, King is owner of property and assessee is enjoying all rights. Assessee is not paying rent. rent fixed is "rent of peppercorn" and that too, if demanded. learned counsel further submitted that assessee can transfer property; in fact no rent is virtually paid. In light of above facts, learned counsel further submitted that Revenue authorities were not justified in denying assessee, exemption under s. 54(1) of Rs. 15,07,561, being 50 per cent of capital gain. 9. It was further submitted, in assessee s case lease is for longer period of 150 years, which cannot be terminated, except under very limited circumstances provided under deed. Secondly, no rent is payable and only premium is paid. Learned counsel contended, thereby it is clear that premium is nothing but purchase price and as far as rent is concerned, it shall be peppercorn, if demanded. Learned counsel further contended, peppercorn means negligible, and of no value, that too, is payable on demand. It is only to keep facade of lease. property under agreement is freely transferable without any restrictions. property is for enjoyment of person to whom it is given. Learned counsel further submitted, for all purposes, it is similar to co-operative society flats in India. To such flat benefit of s. 54 is made available by decisions of Court as well as by Circular of Department, No. 471, dt. 15th Oct., 1986 in Chaturvedi & Pithisaria Income-tax Law, Fifth Edn. of Vol. 2, p. 2886, wherein Board considered flat allotment under self-financing scheme of Delhi Development Authority is similar to co-operative society in Mumbai and it was held that it was entitled to benefit under s. 54. Learned counsel further submitted, similarly, vide Circular No. 672, dt. 16th Dec., 1993 [(1993) 115 CTR (St) 73], in Chaturvedi & Pithisaria Income-tax Law (supra), Page 2887, it was held that in case of co-operative society flat, benefit of s. 54 is available. 10. Learned counsel further submitted that it has been held that expression "House property" for purpose of s. 54(1) has same meaning as concept of house property under ss. 22 to 27. It takes into account all residential units, particularly in these days multi-storyed flats have become order of day. For above proposition, learned counsel relied upon decision of Hon ble Delhi High Court in case of Addl. CIT vs. Vidya Prakash Talwar (1981) 25 CTR (Del) 220 : (1981) 132 ITR 661 (Del) and decision of Hon ble Gujarat High Court in case of CIT vs. Kodandas Chanchlomal (1985) 48 CTR (Guj) 346 : (1985) 155 ITR 273 (Guj). Learned counsel submitted, under s. 27, it is clearly provided that co-operative society flats would be covered for purpose of s. 22 and also property taken on lease for more than twelve years is ownership property for purpose of s. 22. 11. Learned counsel further submitted; it is similar to co-operative society flat. As it is for lease of 150 years, it is house property for purpose of s. 22 and, therefore, for purpose of s. 54, from whichever angle one considers that it is similar to co-operative society flat or it is long-term lease, in either case, it falls within scope of s. 54 r/w ss. 22 to 27. Learned counsel invited our attention to decision of Hon ble Supreme Court in case of CIT vs. Podar Cement (P) Ltd. (1997) 141 CTR (SC) 67 : (1997) 226 ITR 625 (SC), wherein it was held that though under common law "owner" means person who has got valid title legally conveyed to him after complying with requirements of law, such as Transfer of Property Act, Registration Act, etc., in context of IT Act, 1961, having regard to ground realities and further having regard to object of IT Act, viz., to tax income from property in his own right. Hon ble Supreme Court held that if one is enjoying all rights of ownership, he is owner; whether technically he is owner or not is immaterial consideration. In this case Hon ble Supreme Court also referred to ss. 22 to 27 and held that s. 27 includes certain kinds of transactions of ownership and held that this provision is only explanatory and that amendments introduced by Finance Bill, 1987 was declaratory/clarificatory in nature insofar as it relates to s. 27(iii), (iiia) and (iiib). Consequently, these provisions have retrospective operation. Hence, learned counsel submitted, as concept of house property is similar under ss. 22 and 54, it is clear that in respect of property acquired by assessee, it is house property purchased within meaning of s. 54. 12. Relying upon decision of Hon ble jurisdictional High Court in case of Mrs. Amy P. Cama, Trustee of Estate of Late M.R. Adenwalla vs. CIT (1999) 152 CTR (Bom) 53 : (1999) 237 ITR 82 (Bom), learned counsel also submitted that benefits of s. 54 are made available to beneficiary of trust in respect of property owned by trust. Learned counsel further added, similarly, Hon ble Madras High Court in case of CIT vs. M.K. Chandrakant & Ors. (2002) 178 CTR (Mad) 477 : (2002) 258 ITR 14 (Mad), held that benefit of investment under s. 54 is available in case of partner of partnership firm. Learned counsel further submitted, all these issues consider purchase and ownership in substance and if one applies test laid down by Hon ble Supreme Court, of effective enjoyment of property, assessee enjoys all benefits of premises in question and, therefore, objection that it is only lease and not purchase is not sustainable. 13. Coming to plea that part of sale proceeds being not invested, learned counsel submitted, capital gain, which is part of sale proceeds is not used for purpose of purchasing property. assessee borrowed funds for purpose of investment, as such, according to Department, it is not investment of capital gain arising out of sale consideration and, therefore, benefit of s. 54 is not available. Learned counsel further submitted, on face of it, said objections are not sustainable. section itself provides that purchase of new asset may be one year before sale. In nature of things, if property is purchased before sale, same cannot be out of sale consideration receivable. To such purchase before sale, benefit under s. 54 is made available. As such, provisions of purchase before sale clearly contemplates that it need not be out of sale consideration, contended learned counsel. 14. Again, learned counsel reiterated that s. 54 provides for appropriation. section itself provides that amount of capital gain, which is not appropriated by assessee towards purchase of new asset, made within one year before date on which transfer takes place or which is not utilised by him for purchase of new asset. Therefore, it clearly provides for appropriation of capital gain in respect of purchase price paid before sale has taken place. As such, when appropriation of capital gain against property purchased before is provided, it cannot be said that actual capital gain arising after sale alone could be used for purpose of s. 54, contended learned counsel. He further submitted section provides that if amount of capital gain is greater than cost of residential house, etc. it means that one is comparing cost of new premises and capital gain. section does not say that to extent that capital gain is not utilised for purchasing property. Hence, learned counsel submitted, it only provides comparison of two amounts capital gain and amount invested in purchase of house property, which clearly means that such investment need not be out of actual capital gain arising out of sale. Learned counsel further submitted, it is also clear that provisions of s. 54 would be equally applicable not only by way of purchase date but acquisition by way of exchange also. If test is that house property should be acquired out of actual capital gain arising, it is not possible in case of exchange. As such, he submitted, it cannot be said that actual capital gain must be utilised for purpose of acquiring house property under s. 54. 15. Learned counsel brought our attention to following observation of Hon ble Supreme Court in case of CIT vs. T.N. Aravinda Reddy (1979) 12 CTR (SC) 423 : (1979) 120 ITR 46 (SC) : "We find no reason to divorce ordinary meaning of word purchase as buying for price or equivalent of price by payment in kind or adjustment towards old debt or for other monetary consideration from legal meaning of that word in s. 54(1). If you sell your house and make profit, pay Caesar what is due to him. But if you buy or build another subject to conditions of s. 54(1) you are exempt. purpose is plain; symmetry is simple, language is plain. Why mutilate meaning by lexical legalism. We see no stress in section on cash and carry . point pressed must, therefore, be negatived. We have declined to hear Sri S.T. Desai s artillery fire although he was armed cap pie with Mitakshara lore and law. point of suffocating scholarship sometimes arrives in Court when one nostalgically remembers escapist verse : Where ignore is bliss, Tis folly to be wise ." 16. Learned counsel further submitted that following decisions clearly establish that investment may not be out of actual sale consideration or out of actual capital gain arising on such sales : (1) K.C. Gopalan (supra) (2) Bombay Housing Corporation vs. CIT (supra) (3) Ajit Vaswanit vs. Dy. CIT (supra) 17. Learned counsel again objected to Department s stand that assessee being non-resident Indian is governed by provisions of Chapter XII-A and hence, not entitled to benefit under s. 54, is clearly unsustainable. He submitted, provisions of Chapter XII-A are applied in case of specified foreign exchange assets. Immovable property is not one of specified assets. As such, house property not being specified asset, special provisions of Chapter XII-A are not applicable. Reference was also made to definition of "specified asset" and "long-term capital gain" under provisions of s. 115C. Learned counsel further submitted, in any case, assessee has opted out of application of Chapter XII-A by specifying to that effect in return filed, as such, for that reason also provisions of Chapter XII-A are not applicable. 18. Learned counsel further submitted, s. 115 only provides that in case of such specified gain, provisions of sub-s. (2) to s. 48 will not be applicable, i.e., one is not entitled to indexation. Sec. 54 is not part of sub-s. (2) to s. 48. As such, if provisions of sub-s. (2) to s. 48 are not applicable, it does not follow that provision of s. 54 will not be applicable. Sub-s. (2) deals only with indexation and nothing else contended learned counsel. 19. For all these reasons, learned counsel concluded, AO and CIT(A) are clearly wrong in denying benefit of investment under s. 54 of Act. 20. Replying to above, learned Departmental Representative submitted, assessee has not utilised gains he got out of transaction. cases relied on by assessee are distinguishable on facts. assessee sold Juhu property for Rs. 60 lakhs on 4th April, 1992. Out of total sale proceeds, Rs. 50 lakhs was invested in purchase of shares. In other words, assessee had not used proceeds from sale of property for purchase of property abroad. There is no correlation between assets purchased and sale of old Juhu property. source is in India. learned Departmental Representative further submitted that s. 54 is very clear. change brought in section by Finance Act, 1979, w.e.f. 1st April, 1979, which reads as "whole or any part of net consideration" clearly indicates that it should be whole or part of consideration received out of sale proceeds. He submitted, if intention was otherwise, nothing prevented legislature in saying amount as equal to or any part of net consideration. Hence he submitted, order of AO is to be restored. He further submitted, so far as provisions of s. 54 is concerned, s. 54(1) is subject to provisions of sub-s. (2) and sub-s. (2) stipulates that "the amount of capital gain which is not appropriated by assessee towards purchase of new asset made within one year before date on which transfer of original asset took place, or which is not utilised by him for purchase or construction of new asset, before date of furnishing return of income under s. 139", if not deposited, then assessee will not have benefit contemplated under s. 54. 21. learned Departmental Representative further submitted that in agreement, evidence at paper book pp. 1 to 32, assessee is described as "lessee". There is no purchase of land/building and as such section itself does not apply to assessee. He further submitted that assessee is prevented by cl. (4) from assigning, transferring, subletting or parting with occupation of part of premises. If assessee is owner of property, learned Departmental Representative submitted, there cannot be any restriction put on assessee from transferring, subletting or parting with property. Hence, learned Departmental Representative submitted, orders of Revenue authorities are to be upheld. 22. We have heard rival submissions. Coming to first argument of Revenue that same amount should have been utilised for acquisition of new asset, same cannot be accepted in view of decision of Tribunal, Mumbai Bench, in case of Bombay Housing Corporation vs. Asstt. CIT (supra). In this case Tribunal held, even if assessee borrows required funds and satisfies conditions relating to investment in specified assets, he is entitled to exemption. 23. next argument of Revenue is that in fact assessee has not acquired any property in strict sense, assessee had taken property on lease and for leased property benefit of s. 54 cannot be extended to. For above proposition, as already noted hereinabove, learned Departmental Representative heavily relied on Deed Agreement itself. In this it is mentioned date of lease is 20th Feb., 1992, lessor is Higgs & Hill Homes Ltd., whose registered office is at Crown House, Kingston Road, New Maiden Surrey, and lessee s name is that of assessee. It is case of Revenue that Juhu property was sold for Rs. 60 lakhs on 4th April, 1992, whereas lease deed is effective from 1st Jan., 1988, i.e., four years prior to sale of very property. rent is also fixed, according to Revenue and it is "peppercorn". However, we do not find much credence in this argument as well. It is case of assessee that in United Kingdom property belongs to Sovereign. subjects enjoy it. Of course absolutely. In instant case of assessee, lease is valid for 150 years, which is in perpetuity and as such, assessee is as good as absolute owner of property. 24. Secondly, coming to plea that assessee is to pay rent as per deed, as such in any case assessee cannot be treated as owner of property, is also to be rejected. In Black s Law Dictionary, "peppercorn" is mentioned "a small or insignificant thing or amount". In agreement, where rent is fixed as "peppercorn", it is also mentioned, "if demanded" on first day of January every year. It also means, assessee as matter of duty, (is) not bound to pay but it is only on demand insignificant rent is to be paid. 25. Coming to s. 54, learned Departmental Representative particularly brought our attention to sub-s. (2) of s. 54, which reads : "the amount of capital gain which is not appropriated by assessee towards purchase of new asset ......". He particularly stressed word "appropriated", which indicates that amount of capital gain should be appropriated or should not be appropriated for purchase of new asset, to come into play this section. If amount of capital gain not appropriated, assessee is not entitled for any benefit. If appropriated, then assessee is entitled for benefit. learned Departmental Representative stressed that appropriation can be only amount assessee gained from alienation of capital asset. However, we are not inclined to accept way canvassed by learned Departmental Representative because issue has already been concluded by decision of Tribunal, Mumbai Bench, in case cited (supra), reported in (2002) 76 TTJ (Mumbai) 25 : (2002) 81 ITD 545 (Mumbai). 26. It is not disputed that assessee is non-resident Indian. For non-resident Indian, Chapter XII-A applies, being special provisions relating to certain incomes of non-resident Indians. long-term capital gains, as far as non-resident Indian (is-concerned), is defined in Chapter XII-A, s. 115C(d). which has been reproduced hereinabove in para 8. It is defined as income chargeable under head "Capital gains" relating to capital asset being foreign exchange asset which is not short-term capital asset. "foreign exchange asset" is again defined under s. 115C(b), which reads : foreign exchange asset means any specified asset which assessee has acquired or purchased with, or subscribed to in, convertible foreign exchange". Again "specified asset" is defined under s. 115C(f). property sold by assessee does not fall within any of definitions given in s. 115C(f). 27. In short, we are of considered view, for reasons stated hereinabove, assessee is entitled to benefit under s. 54 of Act. It does not exclude right of assessee to claim property purchased in foreign country, if all other conditions laid down in section are satisfied, merely because property acquired is in foreign country. 28. Coming to direction of CIT(A), regarding applicability of provisions of s. 115D pertaining to special provisions relating to certain incomes of non-residents, we are of view, it is not applicable. "long-term capital gains" is defined as capital gain relating to capital asset, being foreign exchange asset. In case of assessee, there is no doubt that this is not foreign exchange asset. As such, provision of s. 115D is not applicable. 29. For same reasons, appeal by assessee with regard to remaining 50 per cent of share is to be accepted. 30. ITA No. 2706/Mum/1997 : Facts being identical, for same reasons mentioned hereinabove in case of Mr. Sanjiv P. Shah, in ITA No. 2707/Mum/1997, we allow appeal of assessee. 31. In result, appeals of assessee stand allowed. *** Prema P. Shah v. Income-tax Officer, Ward 2(4)