Gadgil Parag Yeshwant, V. Asstt.CIT Cir 1(2) Pune,

ITA 1272/PUN/2008

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 3343 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 10 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2002-2003
• Appeal Filed On: 01-10-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A S SINGH
• Assessee Lawyers: MUKUND BHAGWAT

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES B, PUNE BEFORE SHRI D. MANMOHAN HONBLE VICE PRESIDENT AND SHRI D. KARUNAKARA RAO, AM I.T.A. NO. 1272/PN/2008 : A.Y. 2002-03 GADGIL PARAG YESHWANT 693 NARAYAN PETH, PUNE-411 030 PAN ACWPG 2456 J APPELLANT VS. ASSTT. CIT CIR. 1(2) PUNE RESPONDENT APPELLANT BY : SHRI MUKUND BHAGWAT RESPONDENT BY : SHRI A.S. SINGH ORDER PER D. MANMOHAN (VICE PRESIDENT) THIS APPEAL PERTAINS TO A.Y. 2002-03 THOUGH IT ARIS ES OUT OF COMMON ORDER DATED 7-7-2008 PASSED BY THE CIT(A) -I PUNE IN RESPECT OF ASSESSMENT YEARS 2000-01 TO 2005-06. 2. AT THE TIME OF HEARING, LEARNED COUNSEL FAIRLY S UBMITTED THAT GROUNDS NO. 7 AND 8 ARE GENERAL IN NATURE AND GROUNDS NO. 1 TO 5 ARE REFERABLE TO ONLY ONE ISSUE WHICH WA S DECIDED AGAINST THE ASSESSEE AND IN FAVOUR OF THE REVENUE B Y THE DECISION OF I.T.A.T. B BENCH IN ASSESSEES OWN CA SE FOR A.Y. 2001-02 & 2003-04 TO 2005-06 (ITA NO. 1271 AND 1273 TO 1275/PN/2008). CONSISTENT WITH THE VIEW TAKEN THERE IN, WE UPHOLD THE ORDER OF THE CIT(A) AND REJECT GROUNDS N O. 1 TO 5 OF THE ASSESSEE. SIMILARLY, GROUNDS NO. 7 AND 8, BEIN G GENERAL IN ITA NO. 1272/PN/2008 GADGIL PARAG A.Y. 2002-03 - 2 - NATURE, NEED NOT BE TAKEN UP SEPARATELY. THIS LEAV ES US WITH GROUND NO. 6 WHICH READS AS UNDER : 6. THE LEARNED CIT(A) ERRED IN SUSTAINING THE REFU SAL BY THE A.O OF GIVING INDEXATION BENEFIT WHILE CALCULAT ING LONG TERM CAPITAL GAIN ON UNITS UNDER SECTION 45(6) R.W. SECTION 80-CCB OF THE INCOME-TAX ACT, 1961. 3. FACTS GIVING RISE TO THE ISSUE IN DISPUTE, IN BR IEF, ARE THAT THE ASSESSEE PURCHASED UNITS OF LIC MUTUAL FUND AND UTI- MEP-92 UNDER THE SCHEME REFERABLE TO SECTION 80-CCB (1) OF THE ACT. THE INVESTMENTS MADE UNDER BOTH THE SCHEM ES WERE REDEEMED IN THE FINANCIAL YEAR RELEVANT TO THE A.Y. 2002-03 AND ASSESSEE WAS PAID RS. 27,000/- AND RS. 13,800/- RESPECTIVELY. THE ASSESSEE CLAIMED INDEXATION BENEF IT ON SUCH RECEIPTS. THE A.O AS WELL AS THE CIT(A) WERE HOWEV ER, OF THE VIEW THAT THE PLAIN LANGUAGE OF THE SPECIAL PROVISI ON I.E. SECTION 45(6) OF THE I.T. ACT, 1961 OVERRIDES THE O THER PROVISIONS UNDER THE ACT, IN WHICH EVENT, CAPITAL G AIN, IF ANY, HAS TO BE COMPUTED AS PER THE SPECIFIC MANDATE PRES CRIBED UNDER SECTION 45(6) OF THE ACT, IN WHICH EVENT, TH ERE IS NO ROOM FOR ALLOWING INDEXATION BENEFIT TO THE ASSESSE E. SECTION 45(6) WHICH IS RELEVANT IN THIS CONTEXT IS REPRODUC ED BELOW FOR READY REFERENCE. 45(6) NOTWITHSTANDING ANYTHING CONTAINED IN SUB-SE CTION (1), THE DIFFERENCE BETWEEN THE REPURCHASE PRICE OF THE UNITS REFERRED TO IN SUB-SECTION (2) OF SECTION 80- CCB AND THE CAPITAL VALUE OF SUCH UNITS SHALL BE DEEMED TO BE THE CAPITAL GAINS ARISING TO THE ASSESSEE IN THE PREVIO US YEAR IN WHICH SUCH REPURCHASE TAKES PLACE OR THE PLAN REFERRED T IN THAT SECTION IS TERMINATED AND SHALL BE TAXED ACCORDINGLY. EXPLANATION FOR THE PURPOSE OF THIS SUB-SECTION, CAPITAL VALUE OF SUCH UNITS MEANS ANY AMOUNT INVE STED BY THE ASSESSEE IN THE UNITS REFERRED TO IN SUB-SEC TION (2) OF SECTION 80-CCB. ITA NO. 1272/PN/2008 GADGIL PARAG A.Y. 2002-03 - 3 - 4. THE CASE OF THE ASSESSEE WAS THAT THE ISSUE IS S QUARELY COVERED IN FAVOUR OF TAX PAYER BY VIRTUE OF JUDGMEN T OF I.T.A.T. MUMBAI (SMC) BENCH IN THE CASE OF KIRTI BABULAL SHA H VS. ITO (2002) 77 TTJ (MUM) 30. THE LEARNED CIT(A) OBS ERVED IN THIS REGARD THAT THE METHOD OF COMPUTATION PRESCRIB ED U/S 45 OF THE ACT COMES INTO PLAY ONLY WHEN MECHANISM OF COMPUTATION OF CAPITAL GAIN IS NOT SPECIFIED UNDER SECTION 45(6) OF THE ACT. SINCE SECTION 45(6) READ WITH EXPLANAT ION PRESCRIBES THE METHOD OF COMPUTATION OF CAPITAL GAI NS, INDEXATION BENEFIT IS NOT AVAILABLE TO SUCH AN ASSE SSEE ON SUCH REDEMPTION. HE ACCORDINGLY AFFIRMED THE ORDER OF T HE A.O. AGGRIEVED ASSESSEE IS IN APPEAL BEFORE US. 5. LEARNED COUNSEL STRONGLY RELIED UPON THE ORDER P ASSED BY THE I.T.A.T. BOMBAY (SMC) IN THE CASE OF KIRTI BABU LAL SHAH (SUPRA). HE HOWEVER, BROUGHT TO OUR NOTICE A CONTR ARY DECISION OF I.T.A.T. HYDERABAD BENCH (SMC) IN THE CASE OF AS STT. CIT VS. G. RAJAIAH SETTY (2002) 81 ITD 451 (HYD) WHEREIN TH E BENCH HELD THAT, GOING BY PLAIN MEANING OF TERMINOLOGY US ED IN SECTION 45(6) OF THE ACT, INDEXATION BENEFIT CANNOT BE EXTENDED IN RESPECT OF DEBENTURES OR UNITS. LEARNED COUNSEL STRONGLY SUBMITTED THAT THE VIEW TAKEN BY I.T.A.T. MUMBAI IS A MORE REASONABLE VIEW ON THE ISSUE INASMUCH AS SECTION 45 (6) SPEAKS OF ASSESSABLE CAPITAL GAINS REFERABLE TO DIF FERENCE BETWEEN REPURCHASE PRICE AND THE CAPITAL VALUE OF S UCH UNITS AND ONCE IT IS ASSESSABLE TO TAX AS CAPITAL GAIN TH E PROVISIONS OF SECTION 45(1) COMES INTO PLAY AND, IN PARTICULAR , SECTION 48 OF THE ACT, WHICH SPEAKS OF THE MODE OF COMPUTATION , HAS TO BE NECESSARILY TAKEN INTO CONSIDERATION, AS OTHERWI SE IT WOULD AMOUNT TO TAXING THE ASSESSEE ON AN ARTIFICIAL INCO ME AND NOT ITA NO. 1272/PN/2008 GADGIL PARAG A.Y. 2002-03 - 4 - ON A REAL INCOME. HE ALSO HIGHLIGHTED THAT WHENEVE R THE LEGISLATURE INTENDED TO MAKE A DEPARTURE FROM THE U SUAL COURSE OF COMPUTATION OF CAPITAL GAIN BY GIVING THE BENEFIT OF INDEXATION COST, IT WAS SPECIFICALLY PROVIDED IN TH AT. THIRD PROVISO STATES THAT INDEXATION COST METHOD IS NOT A PPLICABLE IN RESPECT OF TRANSFER OF LONG TERM ASSETS BEING BONDS OR DEBENTURES WHICH IMPLIES THAT OTHER THAN SUCH BONDS OR DEBENTURES THE SECOND PROVISO COMES INTO PLAY IN WH ICH EVENT EVEN THE UNITS WHICH WERE REPURCHASED (SURRENDERED) SHOULD BE SUBJECTED TO COMPUTATION OF CAPITAL GAIN BY APPL YING COST INDEXATION METHOD. 6. ON THE OTHER HAND, LEARNED DR STRONGLY RELIED ON THE ORDER PASSED BY THE TAX AUTHORITIES AND SUBMITTED T HAT AS PER SUB-SECTION (6) READ WITH EXPLANATION TO SECTION 45 LEAVES NO ROOM FOR DOUBT WITH REGARD TO METHODOLOGY OF COMPUT ATION OF CAPITAL GAINS INSOFAR AS THE SPECIFIED UNITS ARE CO NCERNED. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND PERUSED THE RECORD. SECTION 48 REFERS TO MODE OF C OMPUTATION AND EXPLAINS THE METHODOLOGY IN ARRIVING AT THE CO ST OF ACQUISITION OF ASSETS AND SPECIFIES THAT THE COST INDEXATION METHOD HAS TO BE ADOPTED IN ARRIVING THE COST OF AC QUISITION. CONTRARY TO THE LANGUAGE USED IN SECTION 45(1) AND 48 OF THE ACT, SECTION 45(6) WHICH OPENS WITH A NON-OBSTANTE CLAUSE I.E. NOTWITHSTANDING ANYTHING CONTAINED IN SUB-SECTION (1) STATES THAT THE DIFFERENCE BETWEEN REPURCHASE PRICE OF THE UNIT AND CAPITAL VALUE OF SUCH UNIT SHALL BE DEEMED TO BE TH E CAPITAL GAINS. THERE IS NO DISPUTE WITH REGARD TO REPURCHA SE PRICE OF THE UNITS. AS REGARDS EXPRESSION CAPITAL VALUE OF SUCH UNITS, ITA NO. 1272/PN/2008 GADGIL PARAG A.Y. 2002-03 - 5 - TO AVERT ANY POSSIBILITY OF WRONG ANALYSIS OF THAT PHRASE, THE SAME WAS EXPLAINED BY INSERTING EXPLANATION BELOW S ECTION 45(6) WHEREIN IT WAS STATED THAT CAPITAL VALUE OF SUCH UNITS MEANS ANY AMOUNT INVESTED BY THE ASSESSEE IN THE UN ITS .. IT COULD THUS BE SEEN THAT SECTION 45(6) SPE CIFIED THE CAPITAL VALUE OF ITS UNITS AND REPURCHASE PRICE OF THE UNITS BY AFFIRMING THAT ONLY THE DIFFERENCE BETWEEN THE TWO SHALL BE DEEMED TO BE THE CAPITAL GAIN THAT ACCRUES TO THE A SSESSEE. IT IS A WELL SETTLED PRINCIPLE OF LAW THAT DEEMING PRO VISION SHOULD BE INTERPRETED STRICTLY AND TO BE CARRIED TO ITS LO GICAL CONCLUSION WITHOUT STRETCHING IT TO AN EXTENT OF GI VING A NEW MEANING TO THE PLAIN LANGUAGE EMPLOYED IN THE DEEMI NG PROVISION. HAVING REGARD TO THE CIRCUMSTANCES OF T HE CASE, WE ARE OF THE VIEW THAT THE DECISION OF I.T.A.T. HYDER ABAD BENCH IS BASED ON A LOGICAL ANALYSIS OF THE LANGUAGE EMPLOYE D THEREIN I.E. SECTION 45(6) OF THE ACT WHEREAS THE DECISION OF I.T.A.T. (SMC) BOMBAY BENCH HAS COMMITTED A MISTAKE IN LAW W HILE UNDERSTANDING THE IMPORT OF PROVISIONS OF SECTION 4 5(6) READ WITH EXPLANATION. UNDER THESE CIRCUMSTANCES, WE PR EFER TO FOLLOW THE DECISION OF I.T.A.T. HYDERABAD BENCH (SU PRA) AND THUS AFFIRM THE ORDER OF THE LEARNED CIT(A_). 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DIS MISSED. ORDER PRONOUNCED ACCORDINGLY IN THE OPEN COURT ON 31 ST AUGUST 2010. SD/- SD/- (D. KARUNAKARA RAO) (D. MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT PUNE DATED THE 31 ST AUGUST 2010. ANKAM ITA NO. 1272/PN/2008 GADGIL PARAG A.Y. 2002-03 - 6 - COPY OF ORDER FORWARDED TO : 1. ASSESSEES 2. DEPARTMENT 3. CIT(A) II PUNE 4. CIT - III PUNE 5. ITAT, D.R. B BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR INCOME TAX APPELLATE TRIBUNAL PUNE.