1 IN HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS 31ST DAY OF AUGUST 2020 PRESENT HON BLE MR. JUSTICE ALOK ARADHE AND HON BLE MR. JUSTICE H.T.NARENDRA PRASAD I.T.A. NO.75 OF 2013 BETWEEN: 1. COMMISSIONER OF INCOME TAX BANGALORE-III, BANGALORE. 2. ASST. COMMISSIONER OF INCOME TAX CIRCLE 12(1), BANGALORE. ... APPELLANTS (BY SRI. E.I. SANMATHI, ADV.,) AND: MR. VINAY MISHRA C/O MAKESH, NO.17, GROUND FLOOR 2ND MAIN, SHAMANNA GOWDA LAYOUT BANGALORE-560008. ... RESPONDENT (BY SRI. A. SHANKAR, SR. COUNSEL A/W SRI. M. LAVA, ADV.) --- THIS ITA IS FILED UNDER SECTION 260-A OF I.T. ACT, 1961, ARISING OUT OF ORDER DATED 12.10.2012 PASSED IN ITA NO.895/BANG/2012 FOR ASSESSMENT YEAR 2009-10, PRAYING THAT THIS HON BLE COURT MAY BE PLEASED TO: (I) FORMULATE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN. (I) ALLOW APPEAL AND SET ASIDE ORDER OF ITAT, BANGALORE BEARING IN ITA NO.895/BANG/2012, DATED 2 12-10-2012 AND UPHOLD ORDER OF COMMISSIONER OF INCOME TAX, (APPEALS)-III, BANGALORE DATED 26-06-2012 IN APPEAL NO.440/C-12(1)/CIT(A)-III/BNG/11-12, IN INTEREST OF JUSTICE AND EQUITY. THIS ITA COMING ON FOR FINAL HEARING, THIS DAY, ALOK ARADHE J., DELIVERED FOLLOWING: JUDGMENT This appeal under Section 260A of Income Tax Act, 1961 (hereinafter referred to as Act for short) has been preferred by revenue. subject matter of appeal pertains to Assessment year 2009-10. appeal was admitted by bench of this Court vide order dated 28.02.2013 on following substantial question of law: (i) Whether on facts and in circumstances of case, Tribunal justified in law in holding that assessee is entitled to claim exemption under Section 54F of Income Tax Act in respect of investment made in house property in USA? 3 2. Facts leading to filing of this appeal briefly stated are that assessee is Director of M/s Marketics Technologies (India) Pvt. Ltd Bangalore. assessee filed return of income on 20.07.2009 for Assessment year 2009-10 declaring total income of Rs.1,53,44,940/- under head income from salary, business, capital gains and other sources. return of income was processed under Section 143(1) and case of assessee was selected for scrutiny and notice was issued on 20.08.2010. Assessing officer vide order dated 29.12.2011 denied exemption of Rs.11,30,20,000/- with regard to investment made in residential property holding that exemption is not available for investment in property made outside India and created demand of Rs.6,53,96,362/- 3. Being aggrieved, assessee filed appeal before Commissioner of Income Tax (Appeals), who by order dated 16.06.2012 inter alia held that decision of Mumbai Bench of Tribunal is 4 applicable only to non residents and is not applicable to facts of case as assessee is resident of India. It was further held that investment should be made in India for claiming benefit of exemption under Section 54(1) of Act. In result, appeal was dismissed. assessee thereupon filed appeal before Income Tax Appellate Tribunal (hereinafter referred to as Tribunal , for short). Tribunal vide order dated 12.10.2012 held assessee entitled to exemption under Section 54F of Act and allowed appeal preferred by assessee. In aforesaid factual background, this appeal has been filed by revenue. 4. Learned counsel for revenue at outset submitted that subject matter of appeal is prior to amendment of Act by Finance Act, 2014 w.e.f. 01.04.2015. It was submitted that assessee was not entitled to exemption as assessee had not fulfilled condition prescribed under Section 54 of 5 Act, as he had not purchased house in India. It is also urged that if there is ambiguity in exemption provision, like Section 54 of Act, benefit should go in favor of revenue and not in favor of assessee. Alternatively, it is submitted that amendment incorporated by Finance Act, 2014 w.e.f. 01.04.2015 is clarificatory in nature. In support of aforesaid submissions, reference has been made to Circular No.346 dated 30.06.1982 containing explanatory notes on provisions of Finance Act, relevant extract of Finance (No.2) Bill, 2014, extract of relevant provisions of Finance (No.2) Bill, 2014, notes on clauses and decision of Supreme Court in COMMISSIONER OF CUSTOMS (IMPORTS) MUMBAI VS. DILIP KUMAR & COMPANY , 2018 69 GST 239 (SC). 5. On other hand, learned counsel for assessee submitted that Supreme Court in case of DILIP KUMAR supra was not dealing with statutory 6 provision but exemption notification. While inviting attention of this court to paragraph 12 of aforesaid decision, it is submitted that in matter of interpretation of charging section of taxation statute, strict rule of interpretation is mandatory and if there are two views possible in matter of interpretation of charging section, one favorable to assessee needs to be applied. It is further submitted that amendment to Section 54F of Act made by Finance Act, 2014 w.e.f. 01.04.2015 is prospective in nature and aforesaid issue is no longer res integra and has been answered in favour of assessee in cases of LEENA JUGALKISHOR SHAH VS. ACIT , 392 ITR 18 (GUJ), DIPANKAR MOHAN GHOSH IN RE , 401 ITR 129 (AAR-NEW DEL) AND CIT VS. ANURAG PANDIT IN I.T.A.NO.1169/2018 DATED 14.05.2019 (NEW DEL). Reliance has also been placed on decision of Supreme Court in COMMISSIONER OF INCOME 7 TAX VS. VATIKA TOWNSHIP P.LTD. , (2014) 367 ITR 466 (SC). 6. We have considered submissions made by learned counsel on both sides and have perused record. Admittedly, dispute in appeal pertains to Assessment year 2009-10 i.e., prior to amendment of Section 54F of Act by Finance Act, 2014 w.e.f. 01.04.2015. seminal issue, which arises for consideration in this appeal is whether assessee was required to purchase residential house within India for purposes of claiming exemption under Section 54F of Act. Before proceeding further, we deem it appropriate to take note of relevant extract of Section 54F(1) of Act as it existed prior to and post amendment w.e.f. 01.04.2015: Prior to 01.04.2015: 54F (1) [Subject to provisions of sub-Section (4), where, in case of assessee being individual or Hindu 8 Undivided Family], capital gain arises from transfer of any long-term capital asset, not being residential house (hereafter in this section referred to as original asset), and assessee has, within period of one year before or [two years] after date on which transfer took place purchased, or has within period of three years after that date constructed, residential house (hereafter in this section referred to as new asset), capital gain shall be dealt with in accordance with following provisions of this section, that is to say,- . Post 01.04.2015 54F(1) Subject to provisions of sub- Section (4) where, in case of assessee being individual or Hindu undivided family, capital gain arises from transfer of any long-term capital asset, not being residential house (hereafter in this section referred to as original asset), and assessee has within period of one year 9 before or two years after date on which transfer took place purchased, or has within period of three years after that date constructed, one residential house in India (hereafter in this section referred to as new asset), capital gain shall be dealt within in accordance with following provisions of this section, that is to say.- .. Thus, it is evident, that requirement of construction of residential house in India in order to claim exemption under Section 54F(1) of Act has been incorporated w.e.f. 01.04.2015. 7. Before proceeding further, we may advert to certain well settled legal principles. Supreme Court in GOVIND DAS vs. I.T.O , (1976) 1 SCC 906 held that unless terms of statute expressly so provide or necessarily require it, retrospective operation should not be given to statute so as to take away or impair existing right or create new obligation or impose new 10 liability otherwise than as regards matters of procedure. general rule as stated by Halsbury in Vol. 36 of Laws of England (3rd Edn.) and reiterated in several decisions of this Court as well as English courts is that all statutes other than those which are merely declaratory or which relate only to matters of procedure or of evidence are prima facie prospective and retrospective operation should not be given to statute so as to affect, alter or destroy existing right or create new liability or obligation unless that effect cannot be avoided without doing violence to language of enactment. If enactment is expressed in language which is fairly capable of either interpretation, it ought to be construed as prospective only. aforesaid principle was quoted with approval by Supreme Court in Vatika Township P. Ltd. , supra. It is cardinal principal of law that law to be applied is that in force in Assessment year, unless otherwise provided expressly or by necessary 11 implication. [See: Reliance Jute & Industries Ltd. vs. Commissioner of Income Tax , AIR 1980 SC 251]. aforesaid view was quoted with approval in Commissioner of Income Tax vs. Sarkar Builders , (2015) 7 SCC 579. 8. relevant extract of CBDT Circular No.1/2015 dated 21.01.2015 reads as under: 20.5 Applicability: These amendments take effect from 1st April, 2015 and will accordingly apply in relation to Assessment year 2015-16 and subsequent Assessment years. Thus, it is axiomatic that residential property, for which investment is made needs to be situated in India for purpose of claiming exemption under Section 54F from Assessment year 2015-16 only and not prior to that period. In instant case, investment in residential house was made in USA prior to 01.04.2015, whereas, requirement of making investment in 12 residential house, which was incorporated by way of amendment, came into force w.e.f. 01.04.2015. In light of aforesaid well settled legal principles as well as memorandum of objects of Finance Act, 2014, which clearly provide that amendments will take effect from 01.04.2015 and will apply to Assessment year 2015-16 onwards as well as CBDT s Circular dated 21.01.2015, it is evident that amendment incorporated in Section 54F(1) of Act is prospective in nature. Similar view has been taken in LEENA JUGALKISHOR SHAH VS. ACIT , 392 ITR 18 (GUJ), DIPANKAR MOHAN GHOSH IN RE , 401 ITR 129 (AAR-NEW DEL) AND CIT VS. ANURAG PANDIT IN I.T.A.NO.1169/2018 DATED 14.05.2019 (NEW DEL). We concur with view taken by Delhi, Gujarat and Madras High Courts. In view of preceding analysis, substantial question of law framed by this court is answered in affirmative and against revenue. 13 In result, appeal fails and same is hereby dismissed. Sd/- JUDGE Sd/- JUDGE ss Commissioner of Income-tax Bangalore-III, Bangalore / Asst. Commissioner of Income-tax Circle 12(1), Bangalore v. Vinay Mishra