Shri Kiritbhai Ramanlal Patel, Ahmedabad V. The Dy.CIT.,Circle-14, Ahmedabad

ITA 1064/AHD/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 9403 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 10 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 26-02-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 16-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAMIR VAKIL
• Assessee Lawyers: A C SHAH
• Keywords: Retrospective amendment
• Section: 143(3); 54

Judgement Text

I.T.A. NO.: 1064/AHD/2013 ASSESSMENT YEAR: 2007 - 08 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL, AHMEDABAD B BENCH, AHMEDABAD [CORAM : PRAMOD KUMAR AM AND KUL BHARAT JM] I.T.A. NO. : 106 4 /AHD/2013 ASSESSMENT YEAR : 2007 - 08 KIRIT IBHAI RAMANLAL PATEL .APPELLANT 26 ROYAL ENCLAVE, THALTEJ GAM AHMEDABAD 3800 59 [PAN: ABIPP8959L ] VS. DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 14, AHMEDABAD . RESPONDENT APPEARANCES BY: A C SHAH FOR THE APPELLANT SAMIR VAKIL FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : FEBRUARY 26 , 2016 DATE OF PRON OUNCING THE ORDER : FEBRUARY 29, 201 6 O R D E R PER PRAMOD KUMAR AM : 1. BY WAY OF THIS APPEAL, THE ASSESSEE APPELLANT HAS CHALLENGED CORRECTNESS OF THE ORDER DATED 13TH MARCH 2013 PASSED BY THE LEARNED CIT(A) IN THE MATTER OF ASSESSMENT UND ER SECTION 143(3) OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2007 - 08. 2 . GRIEVANCES OF THE ASSESSEE, AS SET OUT IN THE MEMORANDUM OF APPEAL, ARE AS FOLLOWS: 1. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE CHARGING OF INTEREST OF RS 4,09,490 UNDER SECTION 234C INASMUCH AS THERE IS NO LIABILITY OF THE ASSESSEE TO PAY INTEREST UNDER SECTION 234C. 1.1 THE APPELLANT SAYS AND SUBMITS THAT SECTION 54EC WAS AMENDED BY THE FINANCE ACT 2007, WITH RETROSPECTIVE EFFECT FROM 1 ST APRIL 2006 AND THAT THE REC BONDS WERE ISSUED BY NOTIFICATION DATED 22 - 12 - 2006, I.E. AFTER DUE DATE OF INSTALMENT ON 15.12.2006. I.T.A. NO.: 1064/AHD/2013 ASSESSMENT YEAR: 2007 - 08 PAGE 2 OF 4 3. BRIEFLY STATED, THE RELEVANT MATERIAL FACTS ARE LIKE THIS. THE ASSESSEE IS AN INDIVIDUAL. ON 19 TH OCTOBER 2006 , THE ASSESSEE HAD EARNED LONG TERM C APITAL GAINS OF RS 6,63,50,600 ON SALE OF SHARES . AS FOR THE FIRST INSTALMENT, THIS LTCG COULD NOT HAVE BEEN INCLUDED IN THE COMPUTATION ANYWAY SINCE THE LTCG AROSE AFTER THE DUE DATE FOR FIRST INSTALMENT I.E. 15 TH OCTOBER 2006. THE CLAIM OF THE ASSESSEE I S THAT HE WANTED TO INVEST THE ENTIRE LONG TERM CAPITAL GAINS IN THE REC BONDS, AND IT WAS FOR THIS REASON THAT HE DID NOT TAKE THIS LTCG INTO ACCOUNT WHILE COMPUTING SECOND INSTALMENT OF ADVANCE TAX ON 15 TH DECEMBER 2006. HOWEVER, WHEN SALE OF REC BONDS R ESUMED ON 26 TH DECEMBER 2006, IT WAS SPECIFICALLY PROVIDED THAT THE MAXIMUM INVESTMENT WAS ONLY RS 5,00,000. THEREFORE, EVEN THOUGH THE ASSESSEE INTENDED TO INVEST ENTIRE LTCG IN THE REC BONDS, HE COULD ONLY MAKE AN INVESTMENT OF RS 5,00,000 - WHICH HE DID INVEST ON 22 ND JANUARY 2007. IN THE MEANTIME, AND BEFORE THE ASSESSEE COULD REALIZE THAT HIS MAXIMUM INVESTMENT IN THE REC BONDS COULD ONLY BE RS 5,00,000, THE TIME FOR PAYING SECOND INSTALMENT OF ADVANCE TAX WAS ALREADY OVER ON 15 TH DECEMBER 2006. ACCORD ING TO THE ASSESSEE, ON THESE FACTS, LEVY OF INTEREST UNDER SECTION 234C, WHICH IS FOR DEFERMENT OF ADVANCE TAX LIABILITY, IS NOT APPLICABLE. THIS DISPUTE REGARDING LEVY OF INTEREST UNDER SECTION 234C HAD REACHED BEFORE A COORDINATE BENCH OF THIS TRIBUNAL , AND, VIDE ORDER DATED 12 TH SEPTEMBER 2012, HAD REMITTED THE MATTER TO THE FILE OF THE CIT(A) FOR FRESH ADJUDICATION BY WAY OF A SPEAKING ORDER. LEARNED CIT(A) WAS OF THE VIEW THAT SINCE HNAI BONDS, WHICH WERE ALSO ELIGIBLE FOR EXEMPTION UNDER SECTION 54 EC, WERE AVAILABLE AND YET THE ASSESSEE DID NOT SUBSCRIBE TO THE SAME, THE CLAIM OF THE ASSESSEE THAT HE INTENDED TO INVEST ENTIRE LTCG IN QUALIFYING INVESTMENTS DOES NOT INSPIRE CREDIBILITY. HE FURTHER NOTED THAT THE BAR OF INVESTING THE MONEY IN EXCESS OF RS 50 LAKHS CAME INTO FORCE ONLY FROM 1 ST APRIL 2007, AND, THEREFORE, THE AMENDMENT WAS NOT RETROSPECTIVE. ON THIS BASIS, HE REJECTED THE CLAIM OF THE ASSESSEE ONCE AGAIN. THE ASSESSEE IS AGGRIEVED AND IS IN APPEAL BEFORE US. 4. WE HAVE HEARD THE RIVA L SUBMISSIONS, PERUSED THE MATERIAL ON RECORD AD DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. I.T.A. NO.: 1064/AHD/2013 ASSESSMENT YEAR: 2007 - 08 PAGE 3 OF 4 5. WE FIND THAT THE CBDT NOTIFICATION NO. 380/2006 DATED 22 ND DECEMBER 2006 READS AS FOLLOWS: NOTIFICATION NO 380/2006, DAT ED 22 - 12 - 2006 IN EXERCISE OF THE POWERS CONFERRED BY SUB - CLAUSE (II ) OF CLAUSE (B) OF THE EXPLANATION TO SECTION 54EC OF THE INCOME - TAX ACT,1961 (43 OF 1961), THE CENTRAL GOVERNMENT HEREBY NOTIFIES THE BONDS FOR AN AMOUNT OF RUPEES THREE THOUSAND FIVE HU NDRED CRORES (REDEEMABLE AFTER THREE YEARS) TO BE ISSUED BY THE RURAL ELECTRIFICATION CORPORATION LIMITED, A COMPANY FORMED AND REGISTERED UNDER THE COMPANIES ACT, 1956 (1 OF 1956), DURING THE PERIOD FROM 26TH DAY OF DECEMBER, 2006 TO 31TH DAY OF MARCH, 20 07 (BOTH DAYS INCLUSIVE), AS 'LONG - TERM SPECIFIED ASSET' FOR THE PURPOSES OF THE SAID SECTION SUBJECT TO THE FOLLOWING CONDITIONS, NAMELY: - (I) A PERSON WHO HAS MADE AN INVESTMENT OF AN AMOUNT AGGREGATING MORE THAN FIFTY LAKHS RUPEES IN THE BONDS NOTIFIED AS LONG - TERM SPECIFIED ASSET BY THE CENTRAL GOVERNMENT FOR THE PURPOSES OF SECTION 54EC OF THE INCOME - TAX ACT 1961 (43 OF 1961) IN THE OFFICIAL GAZETTE VIDE NOTIFICATION NUMBER S.O. 963(E), DATED THE 29LH JUNE, 2006 OR NOTIFICATION NUMBER S.O. 964(E), D ATED THE 29TH JUNE, 2006, SHALL NOT BE ALLOTTED ANY BONDS NOTIFIED AS 'LONG - TERM SPECIFIED ASSET' BY THIS NOTIFICATION; (II) A PERSON WHO IS NOT COVERED BY CLAUSE (I), SHALL NOT BE ALLOTTED THE BONDS NOTIFIED AS LONG - TERM SPECIFIED ASSET' BY THIS NOTIFICA TION, FOR ANY AMOUNT WHICH EXCEEDS THE AMOUNT OF FIFTY LAKHS RUPEES AS REDUCED BY THE AGGREGATE OF THE INVESTMENT, IF ANY, MADE BY HIM IN THE BONDS NOTIFIED AS LONG - TERM SPECIFIED ASSET' BY THE CENTRAL GOVERNMENT FOR THE PURPOSES OF SECTION 54EC OF THE IN COME - TAX ACT 1961 (43 OF 1961) IN THE OFFICIAL GAZETTE VIDE NOTIFICATION NUMBER S.O. 963(E), DATED THE 29TH JUNE, 2006 OR NOTIFICATION NUMBER S.O. 964(E), DATED THE 29TH JUNE, 2006. [F. NO. 142/09/2006 - TPL] 6. THE RESTRICTION THAT THE REC BONDS CAN ONLY BE PURCHASED UPTO RS 50,00,000 BY EACH PERSON THUS CLEARLY CAME INTO PLAY ONLY ON 22 ND DECEMBER 2006. THE ASSESSEE WAS THUS JUSTIFIED IN BELIEVING THAT HE COULD INVEST THE ENTIRE AMOUNT OF LONG TERM CAPITAL GAINS IN THE REC BONDS AND THUS AVAIL THE BENEFIT OF SECTION 54EC. WE HAVE ALSO NOTED THAT HE DID ACTUALLY INVEST THE AMOUNT OF RS 50 LAKHS IN REC BONDS ON 22 ND JANUARY 2007. IN THIS VIEW OF THE MATTER, HIS BONAFIDE VIEW THAT HE WOULD NOT HAVE ANY TAX LIABILITY FOR THE LONG TERM CAPITAL GAINS, AND COMPU TING ADVANCE TAX LIABILITY ON THE BASIS OF THIS ASSUMPTION, CANNOT BE FAULTED. LEARNED CIT(A) WAS THUS CLEARLY IN ERROR THAT THE ASSESSEE I.T.A. NO.: 1064/AHD/2013 ASSESSMENT YEAR: 2007 - 08 PAGE 4 OF 4 COULD HAVE INVESTED THE ENTIRE AMOUNT OF CAPITAL GAINS IN THE REC BONDS BEFORE 1 ST APRIL 2007. THE RESTRICTION OF INV ESTMENT OF RS 50 LAKHS PER PERSON WAS IN FORCE VIDE THE NOTIFICATION DATED 22 ND DECEMBER 2006. AS FOR LEARNED DEPARTMENTAL REPRESENTATIVE S STAND THAT SINCE THE ALTERNATIVE INVESTMENT IN THE NHAI BONDS WAS AVAILABLE, AND THE ASSESSEE COULD HAVE, IF HE REAL LY WANTED TO AVAIL THE BENEFITS OF 54EC, INVESTED IN NHAI BONDS, WE FIND THAT THIS PLEA IS IRRELEVANT INASMUCH WHEN THE STATUTE ITSELF GIVES A CHOICE TO THE ASSESSEE, REVENUE AUTHORITIES CANNOT INSIST THAT THE ASSESSEE SHOULD HAVE INVESTED IN WHATEVER MODE AVAILABLE AT THAT POINT OF TIME. IN VIEW OF THESE DISCUSSIONS, IT IS CLEAR THAT THE DEFERMENT OF ADVANCE TAX LIABILITY WAS DUE TO BONAFIDE REASONS BEYOND THE CONTROL OF THE ASSESSEE, AND, IN THE LIGHT OF THE WELL SETTLED LEGAL POSITION, 234C INTEREST CAN NOT BE LEVIED TO THAT EXTENT. THE IMPUGNED INTEREST LEVY OF RS 4,09,490 IS ACCORDINGLY HEREBY DELETED. 6. IN THE RESULT, THE APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT TODAY ON 29 TH DAY OF FEBRUARY, 2016. SD/ - SD/ - KUL BHARAT PR AMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) DATED: THE 29 TH DAY OF FEBRUARY , 2016 . COPIES TO : (1) THE APPELLANT (2) THE RESPONDENT (3) CIT (4) CIT(A) (5) DR (6) GUARD FILE BY ORDER ETC AS SISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD