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CASE STUDY 1:
The Tribunal held that, in a case where an individual sells
two flats owned by him separately and acquires two different
flats within the time schedule prescribed in section 54(1) of
the
Income Tax Act ,1961, exemption under that provision should
not be restricted to one of the flats only but must be allowed
to
both the flats, since that provision had not placed any
restriction
on the number of times that an assessee could avail the
exemption.
What is important is that sale of each residential house
should
link with investment in one residential house only ( and not
more
than one house) and each such set of sale and investment
should
satisfy the basic condition in section 54 of the Act. Once
these
condition are satisfied , exemption on capital gains should
be
allowed separately in respect of each such set of house instead
of
adopting any process of aggregation.
IN THE ITAT MUMBAI BENCH D
Rajesh Keshav Pillai*
v.
Income-tax Officer, Ward 19(3)(2), Mumbai
D. MANMOHAN, VICE-PRESIDENT
AND RAJENDRA SINGH, ACCOUNTANT MEMBER
IT APPEAL NO. 6661 (MUM.) OF 2009[ASSESSMENT YEAR 2006-07]
AUGUST 13, 2010
Section 54 of the Income-tax Act, 1961 - Capital gains - Profit
on sale of
property used for residential house - Assessment year 2006-07 -
Whether in
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view of provisions of section 54(1), exemption will be available
in respect of
transfer of any number of long-term capital assets being
residential houses if
other conditions are fulfilled - Held, yes - Whether, however,
in case there are
sales of more than one residential houses, exemption has to be
computed
considering each set of sale of residential house and
corresponding investment
in one residential house and not by taking into account
aggregate of capital
gains and aggregate of investment in residential houses - Held,
yes
FACTS
The assessee owned two flats being the flat Nos. 41 and 51. Both
the flats had
been purchased on 5-1-2001. The flat No. 41 was sold by the
assessee on 16-6-
2005 for a sum of Rs. 1.01 crores and the flat No. 51 had been
sold on 29-4-
2005 for a sum of Rs. 97,79,500. Theassessee had thus, earned
income on
account of long-term capital gain from sale of two flats in
assessment year
2006-07. The indexed gain in respect of flat No. 41 was Rs.
88,55,558 whereas
the indexed gain in respect of the flat No. 51 was Rs.
85,55,508.
The assessee invested the gain on sale of flats in two different
flats, i.e., flatin Sai Dham for Rs. 81,57,624 and flat at Girnar
for a sum of Rs. 95,71,364.
The total investment in two flats was Rs. 1,77,28,988 which was
more than the
total index gain on sale of two flats of Rs. 1,74,17,617. The
assessee, therefore,
claimed the entire capital gain as exempt under the provisions
of section 54.
The Assessing Officer held that the assessee was entitled to
claim exemption
under section 54 only in respect of sale of one flat and the
correspondinginvestment in one flat. Exemption was thus, allowed
only in respect of indexed
gain of Rs. 88,55,558 in respect of flat No. 41 with respect to
the investment
of Rs. 95,71,364 in Girnar flat. The investment being more than
capital gain in
respect of sale of flat No. 41, the capital gain was exempted
whereas the
indexed gain of Rs. 85,55,058 in respect of flat No. 51 was held
taxable. In
appeal, the Commissioner (Appeals) upheld the view taken by the
Assessing
Officer.
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CASE STUDY 2:
Mr. Nayak (NRI and resident of U.K.) has earned in India
following
income during the previous year (2006-07).
Income from Dividend (from Indian Companies and
Mutualfunds).
Interest on Loan given to his Brother (resident in India).
Interest on Fixed Deposits with banks and Listed Companies.
Short Term and Long Term Capital Gains on Sale of
listedsecurities.
Long Term Capital gains on Sale of Flat in India. Rental Income
in respect of House Property and Car hire
charges
Discuss the Taxability of above income in India. Whether he
is
liable to file his return of Income in India.
Will the answer be different if he is a resident of either
Hong
Kong or Mauritius.
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Case study 3:
Mr. Purohit (NRI and resident of U.S.A.) has earned in
Indiafollowing income during the previous year (2006-07).
Partners Remuneration from a Partnership firm in India He
participated in Marathon in India and won the Cash prize of
Rs. 5 Lakhs.
He has developed an Accounting software and has given thelicense
to the Indian Company to copy and distribute the same.
He will be paid a lump sum consideration of USD 1 Million.
Directors sitting fees for attending the Board Meeting in
Indiaof WOS of an U.S. Company.
Discuss the taxability of above Income in the hands of
Mr.Purohit.
Would it make difference if he is resident of U.K.
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Case study 4:
Mr. Kapadia (NRI and resident of U.S.A.) is working
withGovernment of India and has been deputed to Indian High
Commission in U.S.A. He is getting a Salary and fixed
allowance
from Govt. of India in U.S.A. Discuss the taxability of such
income in India.
He retires from the Government service and settles in U.S.A.and
gets a monthly pension from the Govt. of India (credited to
his NRO account in India). Discuss the taxability of such
income
in India.
Case study 5:
Mr. Hashimoto is a citizen of Japan. He is deputed to an
Indiansubsidiary of Japanese Company to provide his technical
expertise for setting up a plant in India. According to
theDeputation Contract, he will be residing in India for a period
of
Nine months beginning 1st
November 2006. His Salary and
Social security benefits will be paid in Japan. However he
will
get a monthly allowance in India from an Indian subsidiary
as
per the Contract entered into by Japanese Company with the
Indian subsidiary. He remains on the payroll of Japanese
Company. Discuss the taxability of such Income in the hands
of
Mr. Hashimoto.
Whether the answer will change if he is seconded to an
Indiansubsidiary from 1
stSeptember 2006 for a period of one year.
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Case study 6:
Fosters Australia Limited (the applicant), a tax resident of
Australia
was the owner of tradename, trade mark, brand and other
intellectual
property related to Fosters Beer. The applicant entered into
Indian
market, in the year 1997, by granting an exclusive license to
an
Indian company, Fosters India Limited (FIL), to brew,
package,
label, and sell Foster's Lager (beer). During the year 2006,
the
applicant executed a sale and purchase agreement (the SandP
Agreement) in Australia, with a UK based
company SAB Miller. SandP Agreement was a composite
agreement
for sale of shares and the transfer of all right, title and
interest in India
in (a) trade marks (b) Foster's brand intellectual property and
(c)
Foster's brewing intellectual property. It was also the case of
the
applicant that erstwhile licence agreement with FIL was
terminated
prior to execution of the SandP agreement and hence the
intellectual
properties reverted back to the applicant prior to their
assignment,
without any encumbrance
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