DCIT, Bangalore V. Sri. Srinivasan Ravindran, Bangalore

ITA 1316/BANG/2013

• Counselvise Citation: 131621114 RSA 2013
• Duration Of Justice: 1 year(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 10-09-2014
• Assessment Year: 2010-2011
• Appeal Filed On: 05-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR SHANKAR PRASAD K JT
• Assessee Lawyers: K MANJUNATH SHENOY
• Keywords: Capital asset; Cost of acquisition; Benefit of exemption
• Section: 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER ITA NO.1316/BANG/2013 ASSESSMENT YEAR : 2010-11 THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 4(1), BANGALORE. VS. SHRI SRINIVASAN RAVINDRAN, NO.701, 7 TH FLOOR, STERLING TERRACE, 100 FEET ROAD, BSK III STAGE, BANGALORE 560 085. PAN : AGEPR 6608M APPELLANT RESPONDENT APPELLANT BY : DR. SHANKAR PRASAD K., JT. CIT(DR) RESPONDENT BY : SHRI K. MANJUNATH SHENOY, C.A. DATE OF HEARING : 10.09.2014 DATE OF PRONOUNCEMENT : 19.09.2014 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORD ER DATED 24.6.2013 OF THE CIT(APPEALS)-II, BANGALORE RELATING TO ASSES SMENT YEAR 2010-11. 2. THE ASSESSEE IS AN INDIVIDUAL. THE ASSESSEE SOL D AN IMMOVABLE PROPERTY AT CHENNAI ON 17.2.2010. ON SUCH SALE, TH E ASSESSEE DERIVED ITA NO.1316/BANG/2013 PAGE 2 OF 12 LONG TERM CAPITAL GAIN OF RS.3,69,55,649. FOR THE A.Y. 2010-11, THE ASSESSEE FILED RETURN OF INCOME DECLARING TOTAL INC OME OF RS.3,83,12,360. UNDER THE HEAD LONG TERM CAPITAL GAIN, THE ASSESS EE DECLARED INCOME AS FOLLOWS:- LONG TERM CAPITAL GAINS ON SALE OF PROPERTY 5,19,55,649 LESS: DEDUCTION U/S. 54 50,00,000 DEDUCTION U/S. 54EC - REC BONDS 31.3.2010 - NHAI BONDS 06.5.2010 1,00,00,000 1,50,00,000 3,69,55,649 3. IN RESPECT OF CLAIM FOR DEDUCTION U/S. 54 OF THE ACT, THE ASSESSEE DEPOSITED A SUM OF RS.50 LAKHS IN SBI CAPITAL GAINS ACCOUNT SCHEME ON 22.3.2010. IN VIEW OF THE ABOVE, DEDUCTION U/S. 54 WAS TO BE ALLOWED TO THE ASSESSEE. HOWEVER, SUBSEQUENTLY, ASSESSEE WAS UNAB LE TO PURCHASE RESIDENTIAL HOUSE AND THEREFORE OFFERED THE SUM OF RS.50 LAKHS FOR TAXATION UNDER THE PROVISO TO SECTION 54 OF THE ACT FOR A.Y. 2012-13. THE DISPUTE IN THE PRESENT APPEAL IS ONLY WITH REGARD TO THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S. 54EC OF THE ACT OF A SUM OF RS.1 CRO RE. 4. THE PROVISIONS OF SECTION 54EC(1) READ AS FOLLOW S:- CAPITAL GAIN NOT TO BE CHARGED ON INVESTMENT IN CE RTAIN BONDS. 54EC. (1) WHERE THE CAPITAL GAIN ARISES FROM THE TRANSFE R OF A LONG-TERM CAPITAL ASSET (THE CAPITAL ASSET SO TRANS FERRED BEING HEREAFTER IN THIS SECTION REFERRED TO AS THE ORIGIN AL ASSET) AND THE ITA NO.1316/BANG/2013 PAGE 3 OF 12 ASSESSEE HAS, AT ANY TIME WITHIN A PERIOD OF SIX MO NTHS AFTER THE DATE OF SUCH TRANSFER, INVESTED THE WHOLE OR ANY PA RT OF CAPITAL GAINS IN THE LONG-TERM SPECIFIED ASSET, THE CAPITAL GAIN SHALL BE DEALT WITH IN ACCORDANCE WITH THE FOLLOWING PROVISI ONS OF THIS SECTION, THAT IS TO SAY, ( A ) IF THE COST OF THE LONG-TERM SPECIFIED ASSET IS NOT LESS THAN THE CAPITAL GAIN ARISING FROM THE TRANSFER OF THE ORIGI NAL ASSET, THE WHOLE OF SUCH CAPITAL GAIN SHALL NOT BE CHARGED UND ER SECTION 45; ( B ) IF THE COST OF THE LONG-TERM SPECIFIED ASSET IS LESS THAN THE CAPITAL GAIN ARISING FROM THE TRANSFER OF THE ORIGI NAL ASSET, SO MUCH OF THE CAPITAL GAIN AS BEARS TO THE WHOLE OF T HE CAPITAL GAIN THE SAME PROPORTION AS THE COST OF ACQUISITION OF T HE LONG-TERM SPECIFIED ASSET BEARS TO THE WHOLE OF THE CAPITAL G AIN, SHALL NOT BE CHARGED UNDER SECTION 45 : PROVIDED THAT THE INVESTMENT MADE ON OR AFTER THE 1ST DAY O F APRIL, 2007 IN THE LONG-TERM SPECIFIED ASSET BY AN ASSESSEE DURING ANY FINANCIAL YEAR DOES NOT EXCEED FIFTY LAKH RUPEES. (EMPHASIS SUPPLIED) 5. ACCORDING TO THE ASSESSING OFFICER, AS PER THE P ROVISIONS OF SECTION 54EC OF THE ACT, THE OVERALL LIMIT OF DEDUCTION U/. S 54EC OF THE ACT CANNOT EXCEED RS.50 LAKHS. THE ASSESSEE, HOWEVER, POINTED OUT BEFORE THE AO THAT THE ASSESSEE INVESTED RS.50 LAKHS IN THE F.Y. 2009-10 I.E., ON 31.3.2010 AND MADE ANOTHER INVESTMENT OF RS.50 LAKH S IN THE F.Y. 2010-11 I.E., ON 6.5.2010. ACCORDING TO THE ASSESSEE, THE PROVISO PERMITS INVESTMENT OF RS.50 LAKHS IN EACH FINANCIAL YEAR (S UBJECT TO THE TIME LIMIT OF 6 MONTHS FROM THE DATE OF TRANSFER OF CAPITAL ASSET GIVING RAISE TO CAPITAL GAIN) AND THEREFORE THE ASSESSEE SHOULD BE ALLOWED THE BENEFIT OF EXEMPTION U/S. 54EC OF THE ACT ON A SUM OF RS.ONE C RORE. ITA NO.1316/BANG/2013 PAGE 4 OF 12 6. THE AO, HOWEVER, WAS OF THE VIEW THAT THE PROVI SO WAS INTRODUCED BY FINANCE ACT 2007, EARLIER TO WHICH THERE WAS NO LIMIT PRESCRIBED FOR INVESTMENT IN LONG TERM SPECIFIED ASSETS. ACCORDING TO THE AO, A READING OF THE PROVISO WOULD INDICATE THAT THE LIMIT OF RUPEES FIFTY LAKHS IS NOT WITH RESPECT TO THE CAPITAL GAIN ON TRANSFER OF ANY PROP ERTY BUT IS ONLY WITH RESPECT TO INVESTMENT TO BE MADE OUT OF SUCH CAPITA L GAINS. THE AO ALSO REFERRED TO THE MEMORANDUM EXPLAINING THE PROVISION S IN THE FINANCE BILL 2007, 289 ITR 292, AT PAGE 300 WHEREIN IT HAS BEEN CLEARLY SPELT OUT THAT THE INVESTMENT IN ANY FINANCIAL YEAR SHALL NOT EXCE ED FIFTY LAKHS. THE CONTENTION OF THE ASSESSEE THAT RS. 50 LAKHS EACH C AN BE INVESTED IN 2 DIFFERENT FINANCIAL YEARS, IF THE 6 MONTHS PERIOD A FTER DATE OF TRANSACTION EXTENDS TO TWO FINANCIAL YEARS, IN THE OPINION OF T HE AO WAS FAR-FETCHED AND WAS STRETCHING TOO FAR BEYOND THE INTENDED PURPOSE OF THE LEGISLATURE. ACCORDING TO THE AO, THE PURPOSE OF AMENDMENT IN TH E SECTION WAS TO BRING THE PROVISO IS TO LIMIT THE INVESTMENT TO RS. 50 LA KHS FOR THE RELEVANT FINANCIAL YEAR IN WHICH THE CAPITAL GAIN HAS ARISEN AND THE BENEFIT OF 6 MONTHS PERIOD HAS BEEN PROVIDED FOR THE OBVIOUS REA SON. HENCE, THE ARGUMENT OF THE ASSESSEE WAS REJECTED AND THE CLAIM OF THE ASSESSEE U/S 54EC WAS RESTRICTED TO RS. 50 LAKHS ONLY AND THE BA LANCE RS. 50 LAKHS WAS DISALLOWED AND ADDED TO THE INCOME OF THE ASSESSEE AS INCOME FROM LONG TERM CAPITAL GAINS. ITA NO.1316/BANG/2013 PAGE 5 OF 12 7. ON APPEAL BY THE ASSESSEE, THE CIT(APPEALS), FOL LOWING THE DECISION OF THE BANGALORE BENCH OF THE TRIBUNAL IN THE CASE OF SHRI VIVEK JAIRAZBHOY V. DCIT, ITA NO.236/BANG/2012 DATED 14.1 2.2012 , HELD THAT THE ASSESSEE WAS ENTITLED TO CLAIM EXEMPT ION OF RS.ONE CRORE. THE FOLLOWING WERE THE RELEVANT OBSERVATIONS OF THE CIT(A) IN THIS REGARD:- 3.4 I HAVE CAREFULLY CONSIDERED THE APPELLANTS S UBMISSIONS AND PERUSED THE ASSESSMENT ORDER. AS ALREADY STATED ABOVE, OUT OF THE LONG TERM CAPITAL GAINS OF RS.3,69,55,949/-, TH E APPELLANT INVESTED A SUM OF RS.50,00,000/- IN REC BONDS ON 31 /3/2010 AND ANOTHER SUM OF RS.50,00,000/- IN NHGAI BONDS ON 6/5/2010. I FIND MERIT IN THE APPELLANTS SUBMISSIO NS THAT, SINCE THE INVESTMENT OF RS.50,00,000/- IN NHAI BONDS MADE ON 6/5/2011 IS WELL WITHIN THE SIX-MONTH PERIOD LAID D OWN IN SECTION 54EC OF THE ACT, THE APPELLANT IS ENTITLED TO EXEMP TION ON THE AGGREGATE AMOUNT OF RS.1,00,00,000/-. IN THIS CONNE CTION, THE APPELLANT HAS FILED A COPY OF THE ORDER OF THE HON BLE ITAT, BANGALORE BENCH C IN THE CASE OF SHRI VIVEK JAIRA ZBHOY, BANGALORE V. DCIT, CIRCLE-2, BANGALORE IN ITA.NO.23 6/ BANG/2012 WHEREIN THE HONBLE ITAT HAS ALLOWED THE ASSESSEES CLAIM FOR DEDUCTION U/S 54EC OF THE ACT OF THE AGGR EGATE AMOUNT OF RS.1,00,00,000/-. THE RELEVANT PORTIONS OF THE S AID ORDER SUMMARISING THE FACTS AND THE DECISION THEREON ARE REPRODUCED BELOW: 9.2 THE ASSESSEE, IN THE RELEVANT PERIOD, SAID AGRICULTURAL PROPERTY MEASURING 6 ACRES AND 5 GUNTAS SITUATED AT SURVEY NO.43/1, KOTHANUR VILLAGE, K.R.PURAM HOBLI, BANGALORE ON 14.12.2007 FOR A CONSIDERATION OF RS.3,50,93,750. AS PER THE DETAILS O N RECORD, THE ASSESSEE INVESTED A SUM OF RS.50 LAKHS ON 3.3.2008 IN BONDS ISSUED BY RURAL ELECTRIFICATION CORPORATION (REC LTD) AND A FURTHER SUM OF RS.50 LAK HS BY CHEQUE DT.4.6.2008, WHICH GOT ENCASHED ON 916.2008 IN BONDS OF NATIONAL HIGHWAYS AUTHORITY OF INDIA (NHAI). THUS IN ALL HE HAS INVESTED AN AMOUNT O F RS.1 CRORE OUT OF SALE CONSIDERATION IN BONDS ISSUED BY ITA NO.1316/BANG/2013 PAGE 6 OF 12 REC LTD AND NHAI. THE ASSESSING OFFICER RELYING UPON THE PROVISION TO SECTION 54EC RESTRICTED THE CLAIM TO RS.50 LAKHS HOLDING THE SAME TO BE THE MAXIMUM AMOUNT OF EXEMPTION PERMISSIBLE UNDER SECTION 54EC OF THE ACT. 9.8 ... TAKING INTO CONSIDERATION THE OVERALL FACTS AN D CIRCUMSTANCES OF THE CASE, THE CBDTS CIRCULAR NO.3/2008, AND THE PRINCIPLES LAID DOWN BY THE HONBLE APEX COURT FOR INTERPRETING STATUTES, WE ARE OF THE CONSIDERED VIEW THAT IT WOULD BE IN THE FITNESS OF THINGS, TO FOLLOW THE DECISION OF THE ITAT, AHMEDABAD IN THE CASE OF ASPI GINWALA & OTHERS (SUPRA) RELIED ON BY THE ASSESSEE AND HOLD THAT THE ASSESSEE IS ENTITLED TO TOTAL DEDUCTION UNDER SECTION 54EC OF THE ACT SPREAD OVER A PERIOD OF TWO FINANCIAL YEARS @RS.50 LAKHS EACH ON INVESTMENTS MADE IN SPECIFIED INSTRUMENTS WITHIN A PERIOD OF SIX MONTHS FROM THE DATE OF SALE OF THE PROPERTY. 3.5 IT CAN THUS BE SEEN THAT THE FACTS OF THE CAS E CITED ABOVE AND THE FACTS OF THE APPELLANTS CASE ARE IDENTICAL EXCEPT FOR THE DATES OF INVESTMENT. HENCE, THE DECISION OF THE HON BLE ITAT CITED ABOVE IS APPLICABLE TO THE APPELLANTS CASE. RESPECTFULLY FOLLOWING THE SAID DECISION, I HOLD THAT THE APPELL ANT IS ENTITLED TO DEDUCTION U/S 54EC OF THE ACT ON THE AGGREGATE INVE STMENT OF RS.1,00,00,000/- REFERRED TO ABOVE AND DIRECT THE A O TO GIVE DEDUCTION ACCORDINGLY. 8. AGGRIEVED BY THE ORDER OF THE CIT(APPEALS), THE REVENUE HAS FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 9. BEFORE US, THE LD. DR RELIED ON THE ORDER OF THE AO, WHILE THE LD. COUNSEL FOR THE ASSESSEE SUPPORTED THE ORDER OF THE CIT(A). ITA NO.1316/BANG/2013 PAGE 7 OF 12 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE AR E OF THE VIEW THAT THE ORDER OF CIT(A) DOES NOT CALL FOR INTERFERENCE. THE ISSUE RAISED BY THE REVENUE IN THIS APPEAL HAS DIRECTLY COME UP FOR CON SIDERATION BEFORE THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF SHRI VIVEK JAIRAZBHOY (SUPRA) AND THE SAME WAS DEALT WITH AS FOLLOWS:- 9.4 THE ISSUES NOW BEFORE US FOR ADJUDICATION ARE THE FOLLOWING : (I) WHETHER THE PROVISO TO SECTION 54EC OF THE ACT RESTRICTS THE EXEMPTION TO RS.50 LAKHS OR DOES IT MERELY RESTRICT THE INVESTMENT THAT CAN BE MADE IN A SINGLE FINANCIAL YEAR TO RS.5 0 LAKHS? (II) IF THE ANSWER TO THE ABOVE IS THAT IT IS THE I NVESTMENT THAT IS RESTRICTED AND NOT THE EXEMPTION, THEN IN VIEW OF T HE FACT THAT NHAI HAD ALLOTTED THE BONDS ONLY ON 30.6.2008 IN RE SPECT OF THE SECOND INVESTMENT OF RS.50 LAKHS, WHICH IS BEYOND T HE PERIOD OF SIX MONTHS FROM THE DATE OF SALE OF PROPERTY, CAN I T BE SAID THAT THE SECOND INVESTMENT OF RS.50 LAKHS IS SAID TO HAV E BEEN MADE OUTSIDE THE PERIOD OF SIX MONTHS AND NO EXEMPTION I S TO BE ALLOWED UNDER SECTION 54EC OF THE ACT IN RESPECT OF THE SAME. 9.5 THE LEARNED COUNSEL FOR THE ASSESSEE HAS PLACE D RELIANCE ON THE DECISION OF THE ITAT, AHMEDABAD BENCH IN THE CA SE OF ASPI GINWALA & OTHERS VS. ACIT IN ITA NOS.3226 & 3227/AH D/2011 DT.30.3.2012 WHEREIN ON SIMILAR FACTS I.E INVESTMEN T OF RS.50 LAKHS EACH WAS MADE IN TWO DIFFERENT FINANCIAL YEAR S BUT WITHIN THE PERIOD OF SIX MONTHS FROM THE DATE OF SALE, IT WAS HELD IN PARA 8 OF THE SAID ORDER THAT THE ASSESSEE IS ENTITLED T O EXEMPTION OF RS.1 CRORE AS THE SIX MONTHS PERIOD FOR INVESTMENT IN ELIGIBLE INVESTMENTS INVOLVED IN TWO FINANCIAL YEARS. 9.6 THE LEARNED DEPARTMENTAL REPRESENTATIVE HOWEVE R PLACED BEFORE US AN EARLIER JUDGMENT, CONTRARY TO THE DECI SION OF THE AHMEDABAD BENCH OF THE ITAT, RENDERED BY THE ITAT, JAIPUR BENCH IN THE CASE OF ACIT VS. RAJ KUMAR JAIN & SONS IN ITA NO.648/JP/2011 DT.30.1.2012 WHEREIN THE TRIBUNAL ON SIMILAR FACTS, WAS OF THE VIEW THAT A LIBERAL INTERPRETATIO N WILL LEAD TO DISCRIMINATION ADVERSELY AFFECTING THOSE WHO SELL A PROPERTY AT ITA NO.1316/BANG/2013 PAGE 8 OF 12 ANY TIME FROM APRIL TO SEPTEMBER OF A FINANCIAL YEA R VIS--VIS THOSE WHO SELL PROPERTY IN THE PERIOD OCTOBER TO MA RCH OF THE SAME FINANCIAL YEAR. IN THIS VIEW OF THE MATTER, TH EY CAME TO THE CONCLUSION THAT FOR THE INVESTMENT TO BE MADE WITHI N A PERIOD OF SIX MONTHS, THE EXEMPTION UNDER SECTION 54EC OF THE ACT IS TO BE RESTRICTED TO RS.50 LAKHS ONLY. 9.7 THE LEARNED COUNSEL FOR THE ASSESSEE PLACED RE LIANCE ON CIRCULAR NO.3/2008 DT.12.3.2008 ISSUED BY CBDT, BEI NG AN EXPLANATORY NOTE ON THE PROVISIONS RELATING TO DIRE CT TAXES IN FINANCE ACT, 2007. IN THE SAID PARA 28.2 THEREOF TH E REASON FOR IT TO SET A LIMIT ON THE QUANTUM OF INVESTMENT BY A PE RSON IN A FINANCIAL YEAR, READS AS UNDER : 28.2 THE QUANTUM OF INVESTIBLE BONDS ISSUED BY NHAI AND REC BEING LIMITED, IT WAS FELT NECESSARY TO ENSURE THAT THE BENEFIT WAS AVAILABLE TO ALL THE INVESTORS. FOR THIS PURPOSE, IT WAS NECESSARY TO ENSURE THAT THE LIMITED NUMBER OF BONDS AVAILABLE FOR SUBSCRIPTION IS ALSO AVAILABLE FOR SMALL INVESTORS. THEREFORE, WITH A VIEW TO ENSURE EQUITABLE DISTRIBUTION OF BENEFITS AMONGST PROSPECTIVE INVESTORS, THE GOVERNMENT DECIDED TO IMPOSE A CEILING ON THE QUANTUM OF INVESTMENT THAT COULD BE MADE IN SUCH BONDS. ACCORDINGLY, THE SAID SECTION HAS BEEN AMENDED SO AS TO PROVIDE FOR A CEILING ON INVESTMENT BY AN ASSESSEE IN SUCH LONG-TERM SPECIFIED ASSETS. INVESTMENTS IN SUCH SPECIFIED ASSETS TO AVAIL EXEMPTION UNDER SECTION 54EC, ON OR AFTER 1 ST DAY OF APRIL, 2007 WILL NOT EXCEED FIFTY LAKH RUPEES IN A FINANCIAL YEAR. IT IS CLEAR FORM THE CIRCULAR NO.3/2008 OF CBDT (SU PRA) THAT THE GOVERNMENT ONLY INTENDED TO RESTRICT THE INVESTMENT IN A PARTICULAR FINANCIAL YEAR AND THUS HAS FIXED A LIMI T OF RS.50 LAKHS AS PERMISSIBLE INVESTMENT IN A PARTICULAR FINANCIAL YEAR. IT ALSO APPEARS CLEAR THAT THE GOVERNMENT DID NOT INTEND TO RESTRICT THE MAXIMUM AMOUNT OF EXEMPTION PERMISSIBLE UNDER SECTI ON 54EC OF THE ACT. THE FACT THAT THE LEGISLATURE HAS CONSC IOUSLY USED THE WORDS IN A FINANCIAL YEAR IN THE PROVISO TO SECTION 54EC OF THE ACT ALSO FORTIFIES THE SAME. IF THE LEGISLATURE WAN TED TO RESTRICT THE EXEMPTION ITSELF TO RS.50 LAKHS IT COULD HAVE S IMPLY DISPENSED WITH USING THE WORDS IN A FINANCIAL YEAR . ITA NO.1316/BANG/2013 PAGE 9 OF 12 9.8 THE JUDICIAL DECISIONS RELIED UPON BY THE LEAR NED COUNSEL FOR THE ASSESSEE ALSO SUPPORT THE STAND OF THE ASSE SSEE. THE HON'BLE APEX COURT WHILE DECIDING THE CASE OF VIKRA NT TYRES LTD VS. FIRST ITO REPORTED IN 247 ITR 821 HAVE ALREADY LAID DOWN THE LAW ON INTERPRETING OF STATUTES BY HOLDING THEREOF THAT :- IT IS SETTLED PRINCIPLE IN LAW THAT THE COURTS WH ILE CONSTRUING REVENUE ACTS HAVE TO GIVE A FAIR AND REASONABLE CONSTRUCTION TO THE LANGUAGE OF A STATUTE WITHOUT LEANING TO ONE SIDE OR THE OTHER, MEANING THEREBY THAT NO TAX OR LEVY CAN BE IMPOSED ON A SUBJECT BY AN ACT OF PARLIAMENT WITHOUT THE WORDS OF THE STATUTE CLEARLY SHOWING AN INTENTION TO LAY THE BURDEN ON THE SUBJECT. IN THIS PROCESS, THE COURTS MUST ADHERE TO THE WORDS OF THE STATUTE AND THE SO CALLED EQUITABLE CONSTRUCTION OF THOSE WORDS OF THE STATUTE IS NOT PERMISSIBLE. THE TASK OF THE COURT IS TO CONSTRUE THE PROVISIONS OF THE TAXING ENACTMENTS ACCORDING TO THE ORDINARY AND NATURAL MEANING OF THE LANGUAGE USED AND THEN TO APPLY THAT MEANING TO THE FACTS OF THE CASE AND IN THAT PROCESS IF THE TA X PAYER IS BROUGHT WITHIN THE NET HE IS CAUGHT, OTHERWISE HE HAS TO GO FREE. IN THE CASE OF CWT VS. HASHMATUNNISA BEGUM REPORTED IN 176 ITR 98 (SC), THE HON'BLE APEX COURT HELD THAT WHILE INTERPRETING STATUTES, LITERAL CONSTRUCTION HAS TO BE APPLIED RE GARDLESS OF RESULTS AND THAT ONLY IN A SITUATION WHERE TWO VIEWS ARE RE ASONABLY POSSIBLE, SHOULD REFERENCE BE GIVEN TO THAT VIEW WH ICH PROMOTES CONSTITUTIONALITY AND NOT WHERE THE STATUTE CAN BE READ ONLY IN A PARTICULAR WAY. THE FOLLOWING DECISIONS OF THE HON'BLE APEX COURT HAVE LAID DOWN THE PROPOSITION THAT PROVISIONS FOR DEDUC TION, EXEMPTION OR RELIEF ARE TO BE CONSTRUED LIBERALLY I N ORDER TO ADVANCE THE OBJECTIVE AND NOT TO FRUSTRATE IT. (I) CIT VS. GWALIOR RAYON SILK MANUFACTURING CO. LTD. (196 ITR 149)(SC) (II) CIT VS. VEGETABLE PRODUCTS LTD. ( 88 ITR 192) (III) BAJAJ TEMPO LTD. VS. CIT (196 ITR 188)(SC) 1 7 ITA NO.1316/BANG/2013 PAGE 10 OF 12 TAKING INTO CONSIDERATION THE OVERALL FACTS AND CIRCUMSTANCES OF THE CASE, THE CBDTS CIRCULAR NO.3 /2008, AND THE PRINCIPLES LAID DOWN BY THE HON'BLE APEX COURT FOR INTERPRETING STATUTES, WE ARE OF THE CONSIDERED VIE W THAT IT WOULD BE IN THE FITNESS OF THINGS, TO FOLLOW THE DECISION OF THE ITAT, AHMEDABAD BENCH IN THE CASE OF ASPI GINWALA & OTHER S (SUPRA) RELIED ON BY THE ASSESSEE AND HOLD THAT THE ASSESSE E IS ENTITLED TO TOTAL DEDUCTION UNDER SECTION 54EC OF THE ACT SPREA D OVER A PERIOD OF TWO FINANCIAL YEARS @ RS.50 LAKHS EACH ON INVESTMENTS MADE IN SPECIFIED INSTRUMENTS WITHIN A PERIOD OF SI X MONTHS FROM THE DATE OF SALE OF THE PROPERTY. 11. IT MAY ALSO BE MENTIONED THAT SECTION 54EC HAS BEEN AMENDED BY THE FINANCE (NO.2) ACT, 2014 W.E.F. 1.4.2015 AS FOL LOWS:- THE FOLLOWING SECOND PROVISO SHALL BE INSERTED AFT ER THE EXISTING PROVISO TO SUB-SECTION (1) OF SECTION 54EC BY THE FINANCE (NO. 2) ACT, 2014, W.E.F. 1-4-2015 : PROVIDED FURTHER THAT THE INVESTMENT MADE BY AN ASSESSEE IN THE LONG-TERM SPECIFIED ASSET, FROM CAPITAL GAINS ARISI NG FROM TRANSFER OF ONE OR MORE ORIGINAL ASSETS, DURING THE FINANCIAL YEAR IN WHICH THE ORIGINAL ASSET OR ASSETS ARE TRANSFERR ED AND IN THE SUBSEQUENT FINANCIAL YEAR DOES NOT EXCEED FIFTY LAK H RUPEES. 12. THE PURPOSE OF INSERTION OF THE ABOVE PROVISO I S EXPLAINED IN THE EXTRACT FROM THE EXPLANATORY MEMORANDUM TO FINANCE (NO.2) BILL, 2014, WHICH IS REPRODUCED BELOW:- CAPITAL GAINS EXEMPTION ON INVESTMENT IN SPECIFIED BONDS THE EXISTING PROVISIONS CONTAINED IN SUB-SECTION (1 ) OF SECTION 54EC OF THE ACT PROVIDE THAT WHERE CAPITAL GAIN ARI SES FROM THE TRANSFER OF A LONG-TERM CAPITAL ASSET AND THE ASSES SEE HAS, WITHIN A PERIOD OF SIX MONTHS, INVESTED THE WHOLE OR PART OF CAPITAL GAINS IN THE LONG-TERM SPECIFIED ASSET, THE PROPORTIONATE CAPITAL GAINS SO ITA NO.1316/BANG/2013 PAGE 11 OF 12 INVESTED IN THE LONG TERM SPECIFIED ASSET, OUT OF T HE WHOLE OF THE CAPITAL GAIN, SHALL NOT BE CHARGED TO TAX. THE PROV ISO TO THE SAID SUB-SECTION PROVIDES THAT THE INVESTMENT MADE IN TH E LONG-TERM SPECIFIED ASSET DURING ANY FINANCIAL YEAR SHALL NOT EXCEED FIFTY LAKH RUPEES. HOWEVER, THE WORDINGS OF THE PROVISO HAVE CREATED A N AMBIGUITY. AS A RESULT THE CAPITAL GAINS ARISING DURING THE YE AR AFTER THE MONTH OF SEPTEMBER WERE INVESTED IN THE SPECIFIED A SSET IN SUCH A MANNER SO AS TO SPLIT THE INVESTMENT IN TWO YEARS I .E., ONE WITHIN THE YEAR AND SECOND IN THE NEXT YEAR BUT BEFORE THE EXPIRY OF SIX MONTHS. THIS RESULTED IN THE CLAIM FOR RELIEF OF ON E CRORE RUPEES AS AGAINST THE INTENDED LIMIT FOR RELIEF OF FIFTY LAKH RUPEES. ACCORDINGLY, IT IS PROPOSED TO INSERT A PROVISO IN SUB-SECTION (1) SO AS TO PROVIDE THAT THE INVESTMENT MADE BY AN ASS ESSEE IN THE LONG-TERM SPECIFIED ASSET, OUT OF CAPITAL GAINS ARI SING FROM TRANSFER OF ONE OR MORE ORIGINAL ASSET, DURING THE FINANCIAL YEAR IN WHICH THE ORIGINAL ASSET OR ASSETS ARE TRANSFERRED AND IN THE SUBSEQUENT FINANCIAL YEAR DOES NOT EXCEED FIFTY LAK H RUPEES. THIS AMENDMENT WILL TAKE EFFECT FROM 1 APRIL, 2015 AND WILL, ACCORDINGLY, APPLY IN RELATION TO ASSESSMENT YEAR 2 015-16 AND SUBSEQUENT ASSESSMENT YEARS . [CLAUSE 23] (EMPHASIS SUPPLIED) 13. IT CAN BE SEEN FROM THE ABOVE STATUTORY AMENDME NT AND THE EXPLANATORY MEMORANDUM TO FINANCE (NO.2) BILL, 2014 THAT THE LEGISLATURE HAS ACCEPTED THE AMBIGUITY IN THE LANGUAGE OF THE P ROVISO, BUT HAS AMENDED THE LAW WITH PROSPECTIVE EFFECT I.E., FROM A.Y. 2015-16. 14. IN THE LIGHT OF AFORESAID DISCUSSION, WE ARE OF THE VIEW THAT THERE IS NO MERIT IN THIS APPEAL. ACCORDINGLY, THE APPEAL BY THE REVENUE IS DISMISSED. ITA NO.1316/BANG/2013 PAGE 12 OF 12 PRONOUNCED IN THE OPEN COURT ON THIS 19 TH DAY OF SEPTEMBER , 2014 . SD/- SD/- ( ABRAHAM P. GEORGE ) ( N.V. VASUDEVA N ) ACCOUNTANT MEMBER JUDICIAL MEM BER BANGALORE, DATED, THE 19 TH SEPTEMBER , 2014 . /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.