Sunil Kumar Yadav, Member (J) -
(1.) THIS appeal is preferred by the Revenue against the order of the ld. CIT(A) deleting the addition made by the Assessing Officer under section 54F of the Income -tax Act, 1961 (hereinafter called in short "the Act") amounting to Rs. 55,10,506/ - without appreciating the facts brought on record by the Assessing Officer during the course of assessment proceedings.
(2.) THE facts in brief borne out from the record are that the assessee has filed return of income at Rs. 5,18,920/ - showing income from house property, capital gains, remuneration and interest from M/s. Zafar Alam International, a partnership firm, in which the assessee is a partner. During the impugned assessment year, assessee has sold a land at Noida for a total consideration of Rs. 70,99,200/ - and had claimed exemption under section 54F of the Act in respect of long term capital gain arising therefrom amounting to Rs. 55,10,506/ - by investing an amount of Rs. 1,05,41,675/ - in residential house situated at 66B, Peveral Street, Ricarton, Christchurch, New Zealand. Assessment was completed under section 143(3) of the Act by the Assessing Officer having disallowed the exemption claimed under section 54F of the Act only on the ground that the investment in respect of residential property has been made by the assessee outside India. The assessee preferred an appeal before the ld. CIT(A) with the submission that the entire income be it from capital gains or income from house property of resident Indian is taxable in India subject to tax credit under section 90 of the Act, if any, as per provisions of section 5 of the Act. Therefore, exemption claimed in respect of investment made outside India should also be allowable. It was further contended before the ld. CIT(A) that once sale of property out of India is taxable, the investment of sale proceeds of the same outside India are to exempt unless specifically prohibited and the assessee cannot be put to a discomfort that any sale of property out of India shall be eligible for an exemption only if the proceeds are invested in India. Had the intention of the legislature been so, a specific restriction to that effect would have been provided in the Act. It was further contended that unless specifically stated, one cannot presume and use the words that the provision is applicable only "in India". He has also placed reliance upon the provisions of section 54F of the Act with the submission that in the entire provision no reference was made that residential house is to be acquired in India in order to claim exemption under section 54F of the Act. Therefore, on this score only, the claim of the assessee cannot be disallowed. The ld. counsel for the assessee has also placed reliance upon various judicial pronouncements in support of his contentions.
(3.) THE ld. CIT(A) examined the claim of the assessee in the light of various judicial pronouncements referred to by the assessee and being convinced with it, the ld. CIT(A) has held that the appellant is entitled to benefit of deduction under section 54F of the Act in respect of purchase of residential house outside India, as all other conditions provided in that section have been fully complied with by the assessee. The relevant observations of the ld. CIT(A) with regard to the judgments referred to by the assessee and his finding are extracted hereunder: -
3. During the course of assessment the Ld. AO has interpreted the investment in the residential property should be made "in India" for the purposes of taking benefit of provisions of section 54F. It is most humbly submitted that in accordance with the rules of interpretation while interpreting a statute the Hon'ble Apex Court has given several land mark decisions and it has been held in:
Federation Of Andhra Pradesh Chambers Of Commerce & Industry & Ors. Etc. Etc. V. State Of Andhra Pradesh & Ors. Etc. Etc. : 2001 -(247) -ITR -0036 -SC
"It is trite law that a taxing statute has to be strictly construed and nothing can be read into it. In the classic passage from Cape Brandy Syndicate's case (supra), which was noticed in the judgment under appeal, it was said:
In a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can look fairly at the language used.
Furthermore in another para it has been held that
"The wider meaning given to the word "used" in the judgment under challenge is untenable. Having regard to the fact that the said Act is a taxing statute, no Court is justified in imputing to the legislature an intention that it has not clearly expressed in the language it has employed."
In another case Anandji Haridas & Co. P. Ltd. V. Engineering Mazdoor Sangh And Another. : (099) -ITR -0592 -SC
"As a general principle of interpretation, where the words of a statute are plain, precise and unambiguous, the intention of the legislature is to be gathered from the language of the statute itself and no external evidence such as parliamentary debates, reports of the committees of the legislature or even the statement made by the minister on the introduction of a measure or by the framers of the act is admissible to construe those words. It is only where a statute is not exhaustive or where its language is ambiguous, uncertain, clouded or susceptible of more than one meaning or shades of meaning, that external evidence as to the evils, if any, which the statute was intended to remedy, or of the circumstances which led to the passing of the statute may be looked into for the purpose of ascertaining the object which the legislature had in view in using the words in question"
In yet another case the Hon'ble Delhi High Court in the case of Commissioner Of Income Tax V. Bansal Credits Ltd. & Ors. : (259) -ITR -0069 -DEL has held that
"The cardinal rule of interpretation is that the statute must be construed according to its plain language and neither should anything be added nor subtracted therefrom unless there are adequate grounds to justify the inference that the legislature clearly so intended. It is also well -settled that in a taxing statute one has to look merely at what is clearly stated. The meaning and extent of the statute must be collected from the plain and unambiguous expression used therein, rather than from any notions which may be entertained by the Court as to what is just or expedient. In Cape Brandy Syndicate v. IRC, (1921) 1 KB 64 it was said that one must look at what is clearly stated in the statute. "
In CIT vs. T.V. Sundaram lyyengar :  101 ITR 764 (SC) it was held that If the language of the statute is clear and unambiguous, the Court cannot discard the plain meaning, even if it leads to an injustice.
In Smt. Tarulata Shyam vs. CIT :  108 ITR 345 (SC) There is no scope for importing into the statute words which are not there. Such importation would be, not to construe, but to amend the statute. Even if there be a casus omissus, the defect can be remedied only by Legislation and not by judicial interpretation.
In the case of CIT vs. Sundaradevi : (1957) (32 ITR 615) (SC), it was held by the Apex Court that unless there is an ambiguity, it would not be open to the Court to depart from the normal rule of construction which is that the intention of the legislature should be primarily to gather from the words which are used. It is only when the words used are ambiguous that they would stand to be examined and considered on surrounding" circumstances and constitutionally proposed practices.
Reiterating the same view, in the case of CIT vs. Shaan Finance (P.) Ltd. :  231 ITR 308 (SC) it has been held that in interpreting a fiscal statute, the Court cannot proceed to make good the deficiencies if there be any. The Court must interpret the statute as it stands and in case of doubt, in a manner favourable to the taxpayer.
Thus from all the judgments it is clear that nothing can be added or substituted in any section unless expressly provided or unless some ambiguity is arising out of the plain reading. Section 54F is clear and there is no ambiguity as regards the section. The plain reading of the section states that the benefit of deduction shall be allowed to a person if he fulfils certain conditions. The section is without any reservation as to the place of investment and thus this cannot be substituted by the Ld. AO.
Now coming to a specific case also the Hon'ble Apex Court had an occasion to adjudicate the same issue in respect of a different section that whether the words "In India" can be added into or read into a section when they are not specifically laid down in the statute. The Apex Court in the case of American Hotel & lodging Association Educational Institute vs. CBDT : (2008) 170 Taxman 306 has held as under
"The next question which arises for consideration is whether the words "in India" should be read into Section 10(23C)(vi) and/or in the third proviso thereto?
Section 10(23C)(vi) seeks to exempt income of institutions with laudable objects and activities such as universities, hospitals etc. As stated above, stipulation of monitoring conditions is different from compliance of those conditions. Compliance or non -compliance can only be gauged at the assessment stage.
In the case of Oxford University Press (supra), Oxford University had a branch in India. The only activity of that branch was to carry on the business of a commercial printing press which published and printed books and materials and sold the same commercially and made a profit. The Department contended that one should read the words "in India" along with the word "University". Accordingly, the Department contended that Section 10(22) exemption should be denied to the profits arising from the commercial printing activity of the University since Section 10(22) gave exemption only to profits/income of an Indian University. All the three Judges held that it was impermissible to read in the words "in India" into Section 10(22) of the 1961 Act. As stated above, Section 10(23C)(vi) is analogous to Section 10(22) of the 1961 Act. The majority view, however, was that the University must carry on educational activities in India in order to satisfy Section 10(22). According to the majority view, some educational activity had to be carried on in India and since Oxford University Press carried on no educational activity in India, the exemption did not apply to the University. In other words, the majority judges held that "non -profit" qualification has to be tested against Indian activities and it is in this context that remarks regarding "in India" are made in the judgment of the majority at page nos. 672 and 684.
Moreover, it is important to note that, even after the Finance Act, 1998 w.e.f. 1.4.1999, the third proviso to Section 10(23C)(vi), which refers to monitoring conditions, confines the words "application of income" to the objects for which the Institution is established. The third proviso does not use the words "in India" in the matter of application or accumulation of income though in several other sections like Sections 10(20A), 10(22B) and 11(1)(a) etc. Parliament has used words "in India". Therefore, for this one more reason, we cannot read in the words "in India" into the third proviso. As stated. Parliament in its wisdom has stated in the third proviso that the educational institution has to apply its income wholly and exclusively to the objects for which it is established. Therefore, the plain words of the third proviso do not require application of income to be in India. Our judgment should not be understood to mean that the applicant has not to impart educational activities in India. If the applicant wants exemption under Section 10(23C)(vi) it has to impart education in India and only then it would be entitled to claim initial approval under that section. That is the reason for our saying that the "non -profit" qualification has to be tested against Indian activities. Our conclusion is that importation of education must be in India if applicant desires exemption under Section 10(23C)(vi) and that excess/deficit of income over expenditure will not decide whether the applicant exists for profit or not. "
Thus though the discussion of the provision as regards the section is different i.e. the judgment refers to provisions of section 10(23C) but the moot question in the case of the appellant i.e. investment for the purposes of section 54F and the case of American Hotel & lodging Association Educational Institute (supra) was exactly the same i.e. whether the words "In India" could be read into a provision unless specifically laid thereon and Apex Court has specifically given its finding that the same cannot be done as so the interpretation by the Ld. AO that the investment ought to be made "in India" is not tenable as section 54F is silent on this issue.
Thus from the above observations and judgments it is abundantly clear that the appellant is eligible to get a deduction u/s. 54F if he invests the sale proceeds in a residential property wherever situated.
3. Now coming to the specific observations the A.O. in point no. 6 of his order has stated that the reply of the appellant is not acceptable in view of the decision pronounced by Hon'ble Supreme court in the cases of American Hotel & Lodging Association Educational Institute vs. CBDT : (2008) 170 Taxman 306 and Oxford University Press Vs. CIT :  247 ITR 658. In this regard it is most humbly being submitted that the Id. A.O. has erred in reading the conclusion laid down by the Hon'ble Apex Court in this case. The Hon'ble Supreme Court nowhere came to the conclusion that the words "in India" can be read into a provision of a statute unless they are already there. In fact the Hon'ble Supreme Court stated that the in both the above cases to qualify for eligibility in terms of section 10(22) or section 10(23C) the Institutions should have income in India though their applicability or application of funds could be out of India. The extracts of judgments are mentioned as under: In fact the above case fully supports the contention of the appellant and by virtue of this case only the stand of the appellant is fully justified. To elaborate the same it is submitted that
In the case of Oxford University Press Vs. CIT :  247 ITR 658 (SC), all the three judges held "that it was impermissible to read in the words 'in India' into section 10(22) of the Act. "
The judgment further stated that
"By reason of s. 10(22), any income of a university or other educational institution, existing solely for educational purposes and not for purposes of profit, is not includible in its total income.
A university is the creation of a charter or a statute. It is created exclusively for educational purposes, and not for profit. An educational institution, while it may impart education, may yet have a profit motive. Strictly speaking, therefore, the phrase "existing solely for educational purposes and not for the purposes of profit" in cl. (22) qualifies only the words "other educational institution" and not the words "a university". But this strict interpretation is of no great account for the purposes of this case, and the expression may be read to qualify both "a university" and "other educational institution". For the purposes of obtaining the exemption under cl. (22) the university must be "existing solely for educational purposes and not for the purposes of profit". What this means is that the sole purpose of a university must be to impart education and not at all to make profit. The word "existing" in the context means "being". It has no locational sense. The clause does not say "existing in India" and the words "in India" cannot be read into it. The clause does not require that the university must impart education in India before it can qualify for exemption thereunder. The High Court was in error in interpreting the clause differently.
At another page in the same judgment it has been mentioned that "Point No. 2
The conclusion urged on behalf of the Revenue is that cl. (22) of s. 10 of the Act applies only to Indian universities. Sec, 10(22) per se does not stipulate that a university or other educational institution should be Indian. The only stipulation is the existence of 'a university or other educational institution solely for educational purposes and not for purposes of profit'. Mr. M. L Verma, learned counsel for the Revenue, contends that the definition of 'university' as provided in s. 2(f) of the University Grants Commission Act, 1956, deserves to be read into s. 10(22) of the Act. Sec. 2(f) of the University Grants Commission Act, 1956, reads as under:
"'University' means a university established or incorporated by or under a Central Act, a Provincial Act or a State Act, and includes any such institution as may, in consultation with the university concerned, be recognised by the Commission in accordance with the regulations made in this behalf under this Act."
It is not permissible to read the aforesaid definition in s. 10(22) of the Act. Further, if we accept the contention of Mr. Verma that 'a university' to claim the benefit of exemption under s. 10(22) has to be Indian, what would be the position of 'other educational institution'. It would be absurd situation where 'a university' to claim benefit of exemption under s. 10(22) will have to be Indian whereas 'other educational institution' to claim the said benefit need not be so.
Let me also examine the contention of Mr. Verma from another angle. The acceptance of the contention of learned counsel would mean that 'a university' to claim the benefit of exemption under s. 10(22) ought to be established, constituted or set up in India. The words 'constituted in India', 'set up in India' and 'established in India' have been used in cls. (20A), (22B) and (23) of s. 10. The relevant portions of these provisions read as under:
"10(20A) any income of an authority constituted in India by or under any law enacted either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, or for both;
10(22B) any income of such news agency set up in India solely for collection and distribution of news as the Central Government may, by notification in the Official Gazette, specify in this behalf:
Provided that the news agency applies its income or accumulates it for application solely for collection and distribution of news and does not distribute its income in any manner to its members':
Provided further that any notification issued by the Central Government under this clause shall, at any one time, have effect for such assessment year or years, not exceeding three assessment years (including an assessment year or years commencing before the date on which such notification is issued) as may be specified in the notification; v
10(23) any income of an association or institution established in India which may be notified by the Central Government in the Official Gazette having regard to the facts that the association or institution has as its object the control, supervision, regulation or encouragement in India of the games of cricket, hockey, football, tennis or such other games or sports as the Central Government may, by notification in the Official Gazette, specify in this behalf......."
From the above provisions, it is evident that wherever the constitution, setting up or establishment 'in India', as the case may be, was intended by the legislature, it said so. The legislature did not say that in relation to cl. (22) of s. 10 of the Act. It is thus evident that the establishment, constitution or setting up of 'a university or other educational institution' in India was not intended by the legislature. Thus, the contention that s. 10(22) applies only to Indian universities cannot be accepted; it applies to all universities subject of other requirements of the section"
Thus the contention of the Ld. AO as regards the issue was totally mistaken. It shall be apparent from the judgment of The apex court in the case of American Hotel & lodging Association Educational Institute vs. CBDT : (2008) 170 Taxman 306 has held as American Hotel & lodging Association Educational Institute vs. CBDT : (2008) 170 Taxman 306 already elaborated above.
Thus in these judgments it was held that any institution which would not have been registered in India would also be eligible for exemption if its existing solely for educational purposes and not for the purposes of profit in respect of its operations in India. The Apex court categorically held that as regards words "in India" are concerned they are linked with the registration and residence of the institutions but yes as regards exemption is concerned the income to that extent has to relate to India otherwise the section would be redundant. In fact in both the judgments the Hon'ble Apex court categorically stated that had the intention of legislature been that the Investment had to be made "In India" then these words would have formed part of the section as the same form part of sections 10(20A), 10(22B) and 11(1)(a) etc.
Thus had the parliament intended that the Investment in residential property would be eligible only if the same has been made in India it would have clearly laid down the same as laid down in sections 10(20A), 10(20B), 1(1)(a) etc. The Act has not used the words "In India" in respect of Investment of sales consideration under section 54F and as laid down in the above cases and rules of interpretation it is impermissible to read the words "In India" into this section also. Thus the investment in a residential house whether made in India or out of India is eligible for exemption u/s. 54F.
Now coming to another cardinal principal of interpretation of a statute in respect of a benefit to be given the Courts have unanimously held that while granting a benefit liberal construction should be adopted
In CIT vs. Naga Hills Tea Co. Ltd. : 89 ITR 236, 240 (SC) and CIT vs. Contr ED vs. Kanakasabai : 89 ITR 251, 257(5C) it has been held that a provision for exemption or relief should be construed liberally and in favour of the assessee even if it results in his obtaining "a double advantage".
In Gursahai Saigal vs. CIT : 48 ITR (SC) 1 it has been held that Those sections which impose the charge or levy should be strictly construed; but those which deal merely with the machinery of assessment and collection should not be subjected to a rigorous construction but should be construed in a way that makes the machinery workable.
In Bajaj Tempo Ltd. : 196 ITR 188 (SC) the Hon'ble Apex court has held that a provision in a taxing statute granting incentives for promoting growth and development should be construed liberally, and since as provision for promoting economic growth has to be interpreted liberally, the restriction on it too has to be construed so as to advance the objective of the provision and not to frustrate it. While interpreting the various provisions, the Court must not adopt a hyper technical approach and apply cut and dry formula. A pragmatic approach should be adopted so that the object of the introduction/insertion of a particular provision could be achieved.
Thus by virtue of this rule of interpretation also the appellant is entitled to relief u/s. 54F if the Investment is made by him in a residential property situated out of India.;