Income Tax Officer, ward-3(4), Bangalore V. Sri TNN Shetty(HUF), Bangalore

ITA 1129/BANG/2014

• Counselvise Citation: 112921114 RSA 2014
• Duration Of Justice: 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-07-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 02-07-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 02-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P DHIVAHAR JT
• Assessee Lawyers: VISHNU BHARATH
• Keywords: Capital asset; Source of fund; Reassessment proceedings
• Section: 148; 54; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI JASON P. BOAZ , ACCOUNTANT MEMBER ITA NO.1129/BANG/2014 ASSESSMENT YEAR : 2005-06 THE INCOME TAX OFFICER, WARD 3(4), BANGALORE. VS. SHRI T.N.N. SHETTY (HUF), NO.34, 1 ST MAIN ROAD, KALIDASA ROAD, GANDHINAGAR, BANGALORE 560 009. PAN: AAAHT 2684M APPELLANT RESPONDENT APPELLANT BY : SHRI P. DHIVAHAR, JT. CIT(DR) RESPONDENT BY : SHRI VISHNU BHARATH, CA DATE OF HEARING : 02.07.2015 DATE OF PRONOUNCEMENT : 10.07.2015 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER D ATED 13.5.2014 OF THE CIT(APPEALS)-II, BANGALORE RELATING TO ASSESSME NT YEAR 2005-06, 2. THE ONLY ISSUE THAT ARISES FOR CONSIDERATION IN THIS APPEAL IS AS TO WHETHER THE CIT(APPEALS) WAS JUSTIFIED IN ALLOWING THE CLAIM OF ASSESSEE FOR ITA NO.1129/BANG/2014 PAGE 2 OF 10 EXEMPTION U/S. 54EC OF THE INCOME-TAX ACT, 1961 [T HE ACT]. THE FACTS AND CIRCUMSTANCES UNDER WHICH THE APPEAL ARISES ARE AS FOLLOWS. 3. THE ASSESSEE IS A HUF BY NAME T.N.N. SHETTY (HUF ). THE DEPARTMENT HAD INFORMATION THAT ONE OF THE MEMBER O F THE HUF, SHRI T.N. NANJUNDA SHETTY HAD DEPOSITED MONEY IN REC BONDS DU RING THE PREVIOUS YEAR ENDING 31.3.2005. THIS IS BECAUSE WHILE MAKIN G THE SAID DEPOSIT, T.N. NANJUNDA SHETTY HAD GIVEN HIS INDIVIDUAL PAN: AASPN 9963. IN THE COURSE OF INDIVIDUAL ASSESSMENT OF SHRI T.N. NANJUN DA SHETTY, HE EXPLAINED THAT HE HAD NOT MADE THE INVESTMENT IN REC BONDS IN HIS INDIVIDUAL CAPACITY. HE SUBMITTED THAT T.N.N. SHETTY (HUF) OW NED A PROPERTY AND ON SALE OF THAT PROPERTY, THEY DERIVED LONG TERM CAPIT AL GAINS, THE PROCEEDS OF LONG TERM CAPITAL GAINS HAD BEEN DEPOSITED IN THE C APITAL ACCOUNT OF THE HUF WITH A FIRM, M/S TALLAM TEXTILES. A SUM OF RS. 75,60,000 WAS WITHDRAWN BY THE HUF FROM ITS CAPITAL ACCOUNT AND D EPOSITED IN NHB BONDS WORTH RS.9,10,000 AND RS.66,50,000 IN REC BON DS. THE EXPLANATION WAS ACCEPTED IN THE ASSESSMENT OF THE I NDIVIDUAL WHO WAS THE MEMBER OF THE HUF. TO VERIFY THE CORRECTNESS OF TH E CLAIM MADE BY THE MEMBER OF THE HUF, ASSESSMENT OF HUF WAS REOPENED B Y ISSUE OF NOTICE U/S. 148 OF THE ACT. 4. IN THE REASSESSMENT PROCEEDINGS, THE QUESTION WH ETHER THE ASSESSEE SHOULD BE ALLOWED EXEMPTION U/S. 54EC OF T HE ACT CAME UP FOR CONSIDERATION BEFORE THE AO. ACCORDING TO THE AO, THE SALE PROCEEDS OF ITA NO.1129/BANG/2014 PAGE 3 OF 10 THE PROPERTY FROM THE HUF WERE CREDITED IN THE PART NERS CAPITAL ACCOUNT IN M/S. TALLAM TEXTILES AND HUF OBTAINED A LOAN FROM T HE FIRM AND OUT OF THE SAID LOAN, THE BONDS OF NHB AND REC WERE PURCHASED. SINCE THE SALE PROCEEDS OF THE CAPITAL ASSET WERE NOT INVESTED IN REC/NHB BONDS AND WHAT WAS INVESTED WAS ONLY LOAN TAKEN FROM THE PART NERSHIP FIRM, M/S. TALLAM TEXTILES, THE CLAIM OF EXEMPTION U/S. 54EC W AS NOT TO BE ALLOWED. IN THIS REGARD, THE AO HAD RELIED ON THE LETTER DAT ED 21.8.2007 GIVEN BY TALLAM TEXTILES WHEREIN THEY HAVE STATED AS FOLLOWS :- REG: LOAN GIVEN TO SRI T.N. NANJUNDA SETTY (HUF) THIS IS TO CONFIRM THAT WE HAVE ADVANCED LOAN O FRS.3,66,48,200/- FOR INVESTMENT IN BONDS. SRI T.N . NANJUNDA SETTY HAS HIS CREDIT BALANCE OF RS.2,61,68,466.65 A S ON 31-03-05 IN HIS CURRENT ACCOUNT. 5. BEFORE THE CIT(APPEALS), THE ASSESSEE FILED AN A FFIDAVIT WHICH READS IN WHICH THE ASSESSEE AFFIRMED THAT HE HAD WITHDRAW N MONIES FROM HIS CURRENT ACCOUNT WITH THE PARTNERSHIP, WHEREIN HE HA D ENOUGH CREDIT BALANCE AND THE WITHDRAWAL FROM THE FIRM TALLAM TEXTILES, W AS NOT AS A LOAN BUT A WITHDRAWAL FROM HIS CURRENT ACCOUNT IN THE FIRM IN WHICH HE HAD SUFFICIENT CREDIT BALANCE. THE AFFIDAVIT FILED IN THIS REGARD READS AS FOLLOWS:- AFFIDAVIT I, SRI TALLAM NANJUNDA SETTY AGED ABOUT 87 YEARS, S ON OF TALLAM PEDANARYAN SETTY RESIDING AT BANGALORE DO HEREBY ST ATE ON OATH THAT I HAD SOLD TWO RESIDENTIAL FLATS AT KUMARA PAR K FOR THE SALE CONSIDERATION OF RS.6527000/- AND THE PROCEEDS I HA D DEPOSITED WITH M/S. TALLAM TEXTILES DURING THE YEAR 03/04 (AS S 04/05). I ITA NO.1129/BANG/2014 PAGE 4 OF 10 HAD WITHDRAWN THE AMOUNT FROM M/S. TALLAM TEXTILES AND INVESTED IN BONDS WITH IN SIX MONTHS AND THE PROOF WAS FILED WITH THE INCOME TAX DEPARTMENT. I HAD CREDIT BALANCE IN MY ACCOUNT ON 1/4/2003 RS.2.25 CRS AND AS ON 31/3/2004 RS.2.18 CRORES AND HAD CREDIT BALANCE MORE THAN 2 CRS THROUGHOUT THE P ERIOD AND I HAVE NOT BORROWED ANY AMOUNT TO INVEST IN THE BONDS . I HAD NOT GIVEN ANY DECLARATION TO THE EFFECT THAT I HAVE BOR ROWED AND INVESTED AND IN FACT THE FIRM M/S. TALLAM TEXTILES HAD MADE ERROR IN THEIR LETTER DT. 21/8/2007, FOR WHICH DETAILS FU RNISHED WITH THE INCOME TAX OFFICER WARD 3(4) BANGALORE. I SHOULD N OT BE MADE VICTIM FOR THE MISTAKE OF THE FIRM WHO HAD GIVEN WR ONG INFORMATION. I HAVE LEGITIMATELY CLAIMED THE EXEMP TION AND THE ASSESSMENT COMPLETED IS IN ORDER AND THEREFORE NO R EVISION OF THE ORDER IS REQUIRED. TO THIS EFFECT, I AM SWEARING THIS DAY OF 13 TH MARCH 2013 AND STATE THAT WHAT IS STATED IS TRUE AND CORRECT T O THE BEST OF MY INFORMATION AND FACTS, WHICH ARE IN MY POSSESSION. 6. THE ASSESSEE THEREFORE SUBMITTED THAT THERE WAS NO LOAN TAKEN BY IT FROM M/S. TALLAM TEXTILES, BUT IT WAS DRAWINGS FROM THE CAPITAL ACCOUNT. THE ASSESSEE FOLLOWED IT UP WITH A CONFIRMATION LET TER FROM M/S. TALLAM TEXTILES DATED 13.4.2013, WHICH READS THUS:- THIS IS TO CLARIFY THAT THERE IS AN ERROR IN OUR LETTER DT 21-8-2007 TO THE EXTENT OF STATING THAT LOAN OF RS.3.56 CRORE S WAS GIVEN FOR THE INVESTMENT IN BONDS. IT IS FACTUALLY WRONG AS T HE SALE PROCEEDS OF FLATS SOLD BY SRI. TALLAM N.NANJUNDA SE TTY IS ONLY RS.65,27,000.00 WHICH WAS DEPOSITED IN OUR FIRM AND THE INVESTMENT WAS MADE FOR RS. 66,50,000.00. THE ACCOU NT EXTRACTS WERE ENCLOSED AND THE DEPOSIT AND WITHDRAWALS ARE N OT CREDITED TO THE CURRENT ACCOUNT AND SEPARATE ACCOUNT WAS MAINTA INED AND THE CREDIT BALANCE OF SRI.TALLAM NANJUNDA SETTY, THROUG HOUT THE PERIOD IS MORE THAN 2 CRORES AS PER THE ACCOUNT COP IES FILED IN YOUR OFFICE. ITA NO.1129/BANG/2014 PAGE 5 OF 10 WE ARE WITHDRAWING THE LETTER DT 21-8-2007 WHICH WA S WRITTEN WRONGLY AND THIS IS TO REQUEST YOU TO REPLACE THE S AME WITH THIS LETTER DT 13-3-2013 WHICH IS FACTUALLY CORRECT. 7. THE CIT(APPEALS) ON A CONSIDERATION OF THE ABOVE EVIDENCE, CAME TO THE FOLLOWING CONCLUSION:- 3.5 I HAVE CAREFULLY CONSIDERED THE APPELLANTS SUBMISSIONS AND THE REASONS GIVEN BY THE AO IN THE ASSESSMENT O RDER. THE ONLY GROUND ON WHICH THE AO REFUSED TO GIVE DEDUCTI ON U/S 54EC TO THE APPELLANT IS THAT IT HAD A LOAN FROM M/S TAL LAM TEXTILES FOR MAKING THE INVESTMENT IN THE SPECIFIED SECURITIES V IZ, BONDS OF RURAL ELECTRIFICATION CORPORATION LTD. AND NATIONAL HOUSING BANK IN SUMS OF RS.66,50,000/- AND RS.9,10,000/- SI NCE THE FIRM HAD STATED IN ITS LETTER TO THE AO THAT THE APPELLA NT HAD TAKEN LOAN FROM THE FIRM. ON THE OTHER HAND, THE APPELLANT STA TED THAT IT HAD PARKED THE SALE PROCEEDS OF THE IMMOVABLE PROPERTY CONCERNED IN ITS CAPITAL ACCOUNT WITH THE FIRM FROM WHICH IT HAD DRAWN THE MONEY FOR MAKING THE INVESTMENT. THE FIRM HAS CERTI FIED VIDE LETTER DATED 13/5/2014 FILED AT THE TIME OF APPEAL HEARING THAT THE APPELLANT HAD CREDIT BALANCE AMOUNTING TO RS.3,21,0 0,000/- AT THE RELEVANT TIME. ACCORDING TO THE APPELLANT, EVEN IF IT HAD TAKEN A LOAN AND INVESTED THE SAME IN THE SPECIFIED SECURIT IES IT WAS ENTITLED TO THE DEDUCTION U/S 54EC OF THE ACT. IN T HE CASE OF IAC VS. JAYANTILAL CHIMANLAL (HUF) [32 TTJ 110] RELIED ON BY THE APPELLANT, IT HAS BEEN CLEARLY HELD BY THE HONBLE ITAT, AHMEDABAD THAT THE SOURCE OF FUNDS FOR INVESTMENT I N THE SPECIFIED ASSETS IS IRRELEVANT IF THE INVESTMENT HA D BEEN MADE WITHIN THE PERIOD OF SIX MONTHS FROM THE DATE OF SA LE OF THE IMMOVABLE PROPERTY. THE RELEVANT PORTION FROM THE S AID JUDGEMENT IS REPRODUCED BELOW: 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE PARTIES AND WE ARE CONSTRAINED TO OBSERVE THAT THE REVENUE OUGHT NOT TO HAVE COME UP IN APPEAL IN THE PRESENT CASE IN VIEW OF THE FACT THAT THERE IS NO A MBIGUITY IN UNDERSTANDING THE PROVISIONS OF SECTION 54E OF T HE ACT. DURING THE COURSE OF HIS ARGUMENT, THE LEARNED COUN SEL FOR THE ASSESSEE HAS RIGHTLY POINTED OUT THAT THE P URPOSE OF SECTION 54E OF THE ACT WAS TO ARREST INFLATION. THE ITA NO.1129/BANG/2014 PAGE 6 OF 10 LEGISLATURE ITSELF HAS APPRECIATED THE FACT THAT IT WOULD NOT ALWAYS BE POSSIBLE TO INVEST THE SALE REALIZATIONS IMMEDIATELY AFTER THE SALE TRANSACTION. THEREFORE, SIX MONTHS TIME IS GIVEN FOR THE INVESTMENT IN THE RURA L BONDS. IT IS NOT EXPECTED OF AN ASSESSEE TO KEEP TH E SALE REALIZATIONS INTACT AND INVEST THE SAME MONEY IN TH E RURAL BONDS WITHIN A PERIOD OF SIX MONTHS. IN THIS VIEW O F THE MATTER, WE ENTIRELY AGREE WITH THE SUBMISSIONS MADE ON THE MATTER, WE ENTIRELY AGREE WITH THE SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE THAT IN ORDER TO QUALIFY FOR EXEMPTION U/S. 54E OF THE ACT, IT WOULD BE SUFFICIE NT IF INVESTMENT IS MADE IN THE RURAL BONDS EQUIVALENT TO THE SALE REALIZATION, IRRESPECTIVE OF THE FACT FROM WHI CH FUNDS SUCH INVESTMENT IS MADE. 3.6 THE HONBLE ITAT, KOLKATA IN THE CASE OF HARISH CHANDRA G.KATHPAL [ITA.NO.6264 OF 2020 DATED 21/10/2011], H ONBLE ITAT, MUMBAI IN ACIT V. PASRICHA (20 SOT 468) AND B OMBAY HOUSING CORPORATION V. ACIT (81 ITD 545) HAVE ALSO HELD THAT THE ASSESSEES WERE ENTITLED TO EXEMPTION U/S 54EC T HOUGH THEY HAD MADE INVESTMENTS IN THE SPECIFIED SECURITIES OU T OF MONEY TAKEN ON OVERDRAFT. RESPECTFULLY FOLLOWING THE SAID DECISIONS, I HOLD THAT THE APPELLANT IS ENTITLED TO THE DEDUCTIO N U/S S4EC CLAIMED BY IT IN RESPECT OF THE INVESTMENT MADE BY IT OUT OF WITHDRAWALS MADE FROM ITS CAPITAL ACCOUNT OR EVEN O UT OF LOAN TAKEN FROM THE SAID FIRM. THE APPELLANT, AT THE TIM E OF APPEAL HEARING, HAS FURNISHED .EVIDENCE TO SHOW THAT THE S ALE PROCEEDS OF THE PROPERTY HAD BEEN KEPT BY IT IN ITS CAPITAL ACC OUNT WITH THE FIRM. IN THE CIRCUMSTANCES, ADDITION OF RS.75,10,62 0/- MADE BY THE A0 IS DELETED. 8. THUS THE CIT(A) DID NOT DECIDE THE QUESTION AS T O WHETHER THE ASSESSEE OBTAINED A LOAN FROM TALLAM TEXTILES AND U TILIZED THE PROCEEDS IN MAKING INVESTMENTS IN BONDS TO CLAIM EXEMPTION U/S. 54EC OF THE ACT BUT PROCEEDED TO GIVE RELIEF TO THE ASSESSEE ON THE PRE MISE THAT EVEN IF THE AMOUNTS WERE BORROWED, THE ASSESSEE WOULD BE ENTITL ED TO THE DEDUCTION U/S.54EC OF THE ACT. AGGRIEVED BY THE ORDER OF CIT (APPEALS), THE REVENUE HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNA L. ITA NO.1129/BANG/2014 PAGE 7 OF 10 9. WE HAVE HEARD THE SUBMISSIONS OF THE LD. DR, WHO REITERATED THE STAND OF THE REVENUE AS REFLECTED IN THE ORDER OF A O. HE ALSO DISTINGUISHED THE DECISION RELIED ON BY THE LD. CIT (APPEALS). ACCORDING TO HIM, THE DECISION OF THE TRIBUNAL IN THE CASE OF JAYANTILAL CHIMANLAL (HUF) (SUPRA) WAS A CASE OF PARTITION AMONGST MEMBERS OF HUF, WH EREAS IN THE PRESENT CASE, THERE WAS SALE OF PROPERTY BY THE HUF. HE ALSO BROUGHT TO OUR NOTICE THAT IN THE CASE OF BOMBAY HOUSING CORPORATION V. ACIT, 81 ITD 545 , THE ISSUE WAS WITH REGARD TO, WHETHER FULL CONSID ERATION SHOULD BE INVESTED FOR CLAIMING EXEMPTION U/S. 54E OF THE ACT OR NOT? 10. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE CIT(APPEALS). 11. WE HAVE GIVEN A VERY CAREFUL CONSIDERATION TO T HE RIVAL SUBMISSIONS. THE EVIDENCE FILED BY THE ASSESSEE BEFORE THE CIT(A ), IN OUR VIEW, CLEARLY DEMONSTRATES THAT THERE WAS NO LOAN TAKEN BY THE AS SESSEE FROM M/S. TALLAM TEXTILES. IT WAS A CASE WHERE ASSESSEE DEPO SITED THE SALE PROCEEDS IN HIS CAPITAL ACCOUNT (CURRENT ACCOUNT) A ND WITHDREW MONIES THEREFROM AND MADE INVESTMENTS IN THE BONDS. THERE FORE, THERE WAS NO QUESTION OF DENYING EXEMPTION TO THE ASSESSEE U/S. 54EC ON THE PREMISE THAT ASSESSEE TOOK A LOAN FROM TALLAM TEXTILES AND MADE INVESTMENTS IN THE BONDS AND NOT OUT OF SALE PROCEEDS RECEIVED ON SALE OF CAPITAL ASSET. 12. EVEN ASSUMING THAT THE ASSESSEE HAD TAKEN LOAN AND MADE INVESTMENTS IN REC BONDS, THAT CANNOT BE A BAR TO C LAIM EXEMPTION U/S. ITA NO.1129/BANG/2014 PAGE 8 OF 10 54EC OF THE ACT. IN OUR VIEW, THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN BOMBAY HOUSING CORPORATION (SUPRA) CLEARLY SUPPORTS THE CLAIM OF THE ASSESSEE IN THIS REGARD. IN THE AFORE SAID DECISION, THE BRIEF FACTS GIVING RISE TO THE ISSUE WERE THAT DURING THE RELEVANT ACCOUNTING YEAR, THE ASSESSEE, WHICH WAS A PARTNERSHIP FIRM DISPOSED OF ITS ENTIRE BUSINESS AS A GOING CONCERN FOR A PRICE OF RS. 3.55 CRORES. THIS WAS AS PER THE BALANCE SHEET AS ON 26TH SEPT., 1991. THE BUSINESS WAS SOLD TO M/S MONDE CONSULTANTS (P) LTD. THE SALE PRICE WAS RECEI VED IN FULL BETWEEN 27TH SEPT., 1991, AND 22ND OCT., 1991. A SUM OF RS. 84 LAKHS WAS RECEIVED ON 27TH SEPT., 1991, AND THIS WAS PAID OVER TO B.C. VASWANI (HUF) FOR THE CREDIT OF DIFFERENT PARTNERS OF THE ASSESSEE-FIRM O N THE VERY SAME DAY. THE AMOUNT OF RS. 1.5 CRORES RECEIVED ON 10TH OCT., 199 1, WAS PAID TO B.C. VASWAMI (HUF) AND TO VASWANI TRUST FOR THE CREDIT O F THE PARTNERS OF THE ASSESSEE-FIRM ON THE VERY SAME DAY. SIMILARLY, THE BALANCE AMOUNT OF RS. 1.21 CRORES RECEIVED ON 22ND OCT., 1991, WAS PAID T O VASWANI TRUST FOR THE CREDIT OF THE ASSESSEES PARTNERS ON THE SAME DAY. ON 28TH OCT., 1991, THE ASSESSEE BORROWED A SUM OF RS. 1.42 CRORES FROM M/S VASWANI TRUST AND THE BORROWED AMOUNT WAS INVESTED IN IDBI BONDS ON 3 0TH OCT., 1991, WHICH ARE SPECIFIED ASSETS FOR THE PURPOSE OF S. 54 E. 13. ON THE QUESTION WHETHER DEDUCTION U/S.54E OF T HE ACT, WHICH IS IDENTICAL TO SEC.54EC OF THE ACT, COULD BE ALLOWED ON THE ABOVE FACTS, THE HONBLE MUMBAI BENCH, HELD AS FOLLOWS:- ITA NO.1129/BANG/2014 PAGE 9 OF 10 9. WHAT THE SECTION REQUIRES AS WE UNDERSTAND I T, IS THAT IT IS NECESSARY FOR THE ASSESSEE ONLY TO INVEST AN AMO UNT WHICH IS ARITHMETICALLY EQUAL TO THE NET CONSIDERATION IN TH E SPECIFIED ASSETS. IT CANNOT BE THE INTENTION OF THE SECTION T HAT THE OTHER NORMAL TRANSACTIONS OR ACTIVITIES OF AN ASSESSEE SH OULD BE CURTAILED OR THAT THE SALE PRICE SHOULD BE IMMOBILI SED. ONE EXAMPLE WHICH IMMEDIATELY COMES TO OUR MIND IS AS T O WHAT WOULD HAPPEN IF THE SALE PRICE IS LOST BY THEFT AND THE DEADLINE OF 6 MONTHS IS ABOUT TO BE CROSSED. IN SUCH A CASE, TH E ASSESSEE SHOULD NOT BE DEADLINE OF 6 MONTHS IS ABOUT TO BE C ROSSED. IN SUCH A CASE, THE ASSESSEE SHOULD NOT BE DENIED THE EXEMP TION IF HE, IN A DESPERATE ATTEMPT TO AVAIL OF THE EXEMPTION, RESORT S TO BORROWING AND UTILISES THE BORROWED AMOUNT FOR INVESTMENT. NO DISTINCTION CAN BE MADE BETWEEN AN ASSESSEE WHO IS FORCED TO BO RROW FOR THE PURPOSE OF MAKING THE INVESTMENT AND ANOTHER ASSESS EE WHO EFFECTS THE BORROWING NOT BECAUSE OF FORCED CIRCUMS TANCES, BUT BECAUSE HE CONSCIOUSLY OR DELIBERATELY USED THE SAL E CONSIDERATION FOR A DIFFERENT PURPOSE. AS WE HAVE ALREADY SEEN TH E OBJECT OF THE PROVISION IS THAT FUNDS SHOULD BE CHANNELISED INTO CERTAIN SECTORS AND THIS OBJECT IS ACHIEVED IN BOTH THE CASES. WE A RE OF THE VIEW THAT IN GIVING EFFECT TO THE OBJECT, WE SHOULD SHUN A WOODEN APPROACH. 10. WE SUPPOSE THAT THE REQUIREMENT OF THE SECTIO N WOULD HAVE BEEN MET IF THE ASSESSEE HAD FIRST PAID OVER T HE AMOUNT OF RS. 1.42 CRORES BORROWED FROM VASWANI TRUST TO ITS PARTNERS AND THEREAFTER TAKEN OUT AN EQUAL AMOUNT FROM THE PARTN ERS ACCOUNTS FOR BEING INVESTED IN THE BONDS. IN THAT CASE, IT W OULD NOT HAVE BEEN POSSIBLE TO SAY THAT THE BONDS WERE PURCHASED OUT OF BORROWED MONIES. THE AMOUNT INVESTED WOULD HAVE BEE N TRACEABLE TO THE SALE PROCEEDS ADVANCED TO THE PART NERS. THE FACTS THAT INSTEAD OF DOING THAT, THE BORROWED AMOUNT WAS DIRECTLY INVESTED IN THE BONDS SHOULD NOT, IN OUR VIEW, MAKE ANY DIFFERENCE TO THE PRINCIPLE. 14. IN OUR VIEW, THEREFORE, THE CLAIM OF THE ASSESS EE IN THE PRESENT CASE FOR EXEMPTION U/S. 54EC OUGHT TO HAVE BEEN ALLOWED AND WAS RIGHTLY ALLOWED BY THE CIT(A). THE ORDER OF THE CIT(APPEAL S), THEREFORE, DOES NOT ITA NO.1129/BANG/2014 PAGE 10 OF 10 CALL FOR ANY INTERFERENCE. CONSEQUENTLY, THE APPEA L BY THE REVENUE IS DISMISSED. 15. IN THE RESULT, APPEAL BY THE REVENUE IS DISMISS ED. PRONOUNCED IN THE OPEN COURT ON THIS 10 TH DAY OF JULY , 2015 . SD/- SD/- ( JASON P. BOAZ ) ( N.V. VASUDEVA N ) ACCOUNTANT MEMBER JUDICIAL MEMBE R BANGALORE, DATED, THE 10 TH JULY , 2015 . /D S/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR/ SENIOR PRIVATE SECRETARY ITAT, BANGALORE.