Jayshree Gowrishankar, Sec'bad, Secunderabad V. ACIT, Circle-10(1), Hyderabad, Hyderabad

ITA 144/HYD/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2643 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 1 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-04-2017
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 06-12-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 11-02-2016
• Court: TRIBUNAL
• Department Lawyers: K J RAO
• Assessee Lawyers: R D AHUJA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B (SMC), HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 144/HYD/2016 ASSESSMENT YEAR: 2010-11 MRS. JAYSHREE GOWRISHANKAR, SECUNDERABAD [PAN: ACVPG2223N] VS ASSISTANT COMMISS IONER OF INCOME TAX, CIRCLE-10(1), HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI R.D. AHUJA, AR FOR REVENUE : SHRI K.J. RAO, DR DATE OF HEARING : 08-03-2017 DATE OF PRONOUNCEMENT : 12-04-2017 O R D E R THIS IS AN APPEAL BY ASSESSEE AGAINST THE ORDER OF TH E COMMISSIONER OF INCOME TAX (APPEALS)-6, HYDERABAD D ATED 16-11-2015. THE ISSUE IN THIS APPEAL IS WITH REFERE NCE TO CLAIM OF INVESTMENT MADE IN BONDS U/S. 54EC INCOME TAX ACT [ACT ]. IN THE APPEAL FILED, ASSESSEE HAS RAISED GROUNDS OF APPEAL RUNNING TO THREE PAGES WHICH INCLUDED SUBMISSIONS, CASE LAW AND SUB-CLAUSE WHICH SHOULD NOT BE PART OF GROUNDS OF APPEAL. ACCO RDINGLY, ASSESSEE WAS ASKED TO FILE CONCISE GROUNDS. IN RESP ONSE, ASSESSEE FILED THE FOLLOWING GROUND(S) OF APPEAL. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, HON'BLE COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN ALLO WING APPELLANTS CLAIM OF EXEMPTION U/S. 54EC ON PRO-RATA BASIS INSTEAD OF ACTUAL INVESTMENT IN 54EC BONDS. I.T.A. NO. 144/HYD/2016 MRS. JAYSHREE GOWRISHANKAR :- 2 - : 2. BRIEFLY STATED, ASSESSEE SOLD A RESIDENTIAL FLAT FO R A CONSIDERATION AMOUNTING TO RS. 94,50,000/-. THE CAP ITAL GAINS EARNED THEREON WAS TO THE TUNE OF RS. 63,35,796/-. THE RE IS NO DISPUTE ON THE SALE CONSIDERATION OR THE CAPITAL GAINS EARNED. ASSESSEE INVESTED AN AMOUNT OF RS. 50 LAKHS IN BONDS FOR CLAIMING DEDUCTION U/S. 54EC. ASSESSEE CLAIMED PRO-RATA DEDU CTION IN THE COMPUTATION OF INCOME. LATER ASSESSEE CLAIMED THE ENTI RE AMOUNT OF DEDUCTION WHEREAS THE AO RESTRICTED THE SAME INVOKING THE PROVISIONS OF SECTION 54EC(1)(B), THEREBY RESTRICTING THE SAME PROPORTIONATELY TO RS. 33,52,273/-, THE NET CAPITAL GAIN S WAS ACCORDINGLY WORKED OUT TO RS. 38,18,854/- AS AGAINST RS. 13,35,796/- OFFERED BY ASSESSEE. IT WAS THE CONTENTION BEFORE THE CIT(A) THAT ASSESSEE HAS WRONGLY CLAIMED LESSER AMOU NT BUT WAS ENTITLED FOR DEDUCTION OF ENTIRE RS. 50 LAKHS U/S. 54E C. IT WAS FURTHER SUBMITTED THAT WITHOUT PREJUDICE TO THE ABOVE CLAIM , AO HAS GIVEN DEDUCTION ON THE NET CONSIDERATION AS AGAINST THE CAPITAL GAINS, WHICH IS TO BE CONSIDERED AS PER THE PROVISION S. LD.CIT(A) HOWEVER, DID NOT AGREE WITH ASSESSEES CONTENTION AND H ELD AS UNDER: (IV) DEDUCTION U/S. 54EC: THE APPELLANT HAD INVEST ED RS. 50 LAKHS U/S. 54EC WHICH IS LESS THAN THE AMOUNT OF CAPITAL GAINS ARISING TO HER, THEREFORE, CLAUSE (B) OF SEC 54(1) OF THE ACT IS AP PLICABLE IN THIS CASE. THE PROVISO TO THIS SECTION LIMITS INVESTMENT AT RS. 50 LAKHS FOR CLAIMING ELIGIBILITY FOR DEDUCTION U/S. 54EC. IN VIEW OF TH IS, THE CLAIM MADE AND GIVEN ON PRO-RATA BASIS WAS CORRECT AND CALLS FOR N O INTERFERENCE. BUT, SINCE THE QUANTUM OF EXEMPTION U/S. 54EC IS PROPORT IONATE TO QUANTUM OF CAPITAL GAIN, THE ASSESSING OFFICER IS DIRECTED TO RECOMPUTE THE EXEMPTION WITH REFERENCE TO QUANTUM OF CAPITAL GAINS DETERMIN ED AFTER GIVING EFFECT TO THIS APPEAL ORDER. ASSESSEE IS AGGRIEVED. I.T.A. NO. 144/HYD/2016 MRS. JAYSHREE GOWRISHANKAR :- 3 - : 3. LD. COUNSEL REITERATED THE SUBMISSIONS MADE BEFOR E THE LD.CIT(A) AND RELIED ON THE DECISION OF THE HON'BLE B OMBAY HIGH COURT IN THE CASE OF PRUTHVI BROKERS & SHAREHOLDERS PV T. LTD., [349 ITR 336] AND ALSO DELHI HIGH COURT DECISION IN THE C ASE OF CIT VS. ROSE SERVICES APARTMENT INDIA PVT. LTD., [326 ITR 100] FOR THE PROPOSITION THAT ASSESSEE CAN RAISE NEW PLEA ON LEGAL SUBMISSIONS AND IT SHOULD BE ALLOWED. HE FURTHER RELIED ON THE CI RCULAR NO. 14 DT. 11-04-1995 THAT AO SHOULD ALLOW THE RELIEF TO WHICH ASSESSEE IS ENTITLED. WITH REFERENCE TO THE DEDUCTION U/S. 54EC OF E NTIRE RS. 50 LAKHS, IT WAS SUBMITTED THAT DUE TO AMENDMENT TO THE PROVISION THE DEDUCTION WAS RESTRICTED BY THE LAW AND E NTIRE AMOUNT WAS NOT ALLOWED TO BE INVESTED AND ACCORDINGLY , THE AMOUNT INVESTED IN THE SPECIAL BONDS WAS TO BE ALLOWED AS A DEDUCTION U/S. 54EC. THUS, ASSESSEE IS ELIGIBLE FOR DEDUCTION OF ENTIRE INVESTMENT OF RS. 50 LAKHS AND NOT PRO-RATA. 4. LD.DR HOWEVER, RELIED ON THE PROVISIONS OF THE AC T AND SUPPORTED THE ORDER OF CIT(A). 5. I HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE PROVISIONS OF LAW. AS FAR AS DEDUCTION U/S. 54EC IS CONCERNED, THIS PROVISION CAME ON STATUTE W.E.F. 01-04-2001 SUBSTITUTI NG THE EARLIER PROVISIONS OF 54EA AND 54EB BY FINANCE ACT, 2000. WHEN THE PROVISION WAS ORIGINALLY INTRODUCED, THE FIRST PROV ISO TO SECTION 54EC INTRODUCED BY THE FINANCE ACT, 2007 W.E.F. 01-04- 2007 WAS NOT THERE. THEN, ASSESSEES WERE ELIGIBLE TO INVEST IN THE LONG TERM SPECIFIED ASSETS TO THE EXTENT OF CAPITAL GAINS TO CLAIM DEDUCTION. IF THE COST OF THE LONG TERM SPECIFIED ASSET INVESTED IS NOT LESS THAN THE CAPITAL GAIN ARISING FROM THE TRANSFER OF ORIGINAL ASSET, THE I.T.A. NO. 144/HYD/2016 MRS. JAYSHREE GOWRISHANKAR :- 4 - : WHOLE OF SUCH CAPITAL GAIN SHALL NOT BE CHARGED U/S. 45 AS PER SECTION 54EC(1)(A). IN CASE THE COST OF LONG TERM SPEC IFIED ASSET IS LESS THAN THE CAPITAL GAIN ARISING FROM TRANSFER OF TH E ORIGINAL ASSET, THEN PROPORTIONATE DEDUCTION WAS ELIGIBLE AS PROVIDED UNDER CLAUSE-(B) OF SUB-SECTION (1) TO SECTION 54EC. AT THAT TI ME, ASSESSEES WERE FREE TO INVEST ANY AMOUNT IN LONG TERM S PECIFIED ASSET AND NO RESTRICTION WAS PLACED BY THE STATUTE. HOWEV ER, BY THE AMENDMENT TO THE PROVISION W.E.F. 01-04-2007, THE F IRST PROVISO WAS INTRODUCED WHICH IS AS UNDER: PROVIDED THAT THE INVESTMENT MADE ON OR AFTER FIRS T DAY OF APRIL, 2007 IN THE LONG TERM SPECIFIED ASSET BY AN ASSESSE E DURING ANY FINANCIAL YEAR DOES NOT EXCEED RS. 50 LAKHS. 5.1. THE INTENTION OF LEGISLATURE CAN BE UNDERSTOOD FR OM THE NOTIFICATION ISSUED WITH REFERENCE TO SUCH AMENDMENT. CIRCULAR NO. 3 DT. 12-03-2008 [299 ITR (ST.) 8] EXPLAINS THE AMEND MENT AS UNDER: 28.. 28.1. 28.2. THE QUANTUM OF INVESTIBLE BONDS ISSUED BY NHA I AND REC BEING LIMITED, IT WAS FELT NECESSARY TO ENSURE THAT THE B ENEFIT 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 GOVERNM ENT DECIDED TO IMPOSE A CEILING ON THE QUANTUM OF INVESTMENT THAT COULD B E MADE IN SUCH BONDS. ACCORDINGLY, THE SAID SECTION HAS BEEN AMENDED SO A S TO PROVIDE FOR A CEILING ON INVESTMENT BY AN ASSESSEE IN SUCH LONG-T ERM SPECIFIED ASSETS. INVESTMENTS IN SUCH SPECIFIED ASSETS TO AVAIL EXEMP TION UNDER SECTION 54EC, ON OR AFTER 1 ST DAY OF APRIL, 2007 WILL NOT EXCEED FIFTY LAKH RUPE ES IN A FINANCIAL YEAR. I.T.A. NO. 144/HYD/2016 MRS. JAYSHREE GOWRISHANKAR :- 5 - : 5.2. THUS, SINCE THE LEGISLATION HAS RESTRICTED THE INVE STMENT TO AVAIL EXEMPTION U/S. 54EC MADE ON OR AFTER 1 ST APRIL, 2007, THE MAXIMUM INVESTMENT THAT IS PERMITTED IS RS. 50 LAKHS A ND THE ENTIRE AMOUNT IS ELIGIBLE FOR DEDUCTION. IN FACT CLAUS E (A) AND CLAUSE (B) OF SUB-SECTION (1) GETS QUALIFIED BY THE PR OVISO WHICH ALLOWS INVESTMENT IN LONG TERM CAPITAL GAIN ONLY UPTO RS. 50 LAKHS AND THIS CANNOT BE FURTHER QUALIFIED BY CLAUSE- A AND CLAUSE-B. SINCE ASSESSEE IN THIS CASE HAS INVESTED THE AMOUNT OF RS. 50 LAKHS, THE ENTIRE AMOUNT IS ELIGIBLE FOR DEDUCTI ON. SINCE THE PROVISO IS INSERTED AFTER CLAUSE (A) AND CLAUSE (B) , I AM OF THE OPINION THAT RESTRICTION OF CLAUSE (B) DOES NOT APPLY T O THE INVESTMENT THAT WAS RESTRICTED BY THE PROVISO. IN THIS C ASE, CAPITAL GAIN BEING MORE THAN THE AMOUNT INVESTED OF RS. 50 LA KHS, I AM OF THE OPINION THAT BY VIRTUE OF PROVISO TO SECTION 54EC(1 ), ASSESSEE IS ELIGIBLE FOR DEDUCTION OF THE ENTIRE AMOUNT, AS SUPPORT ED BY THE BOARD CIRCULAR AND ALSO THE NOTIFICATIONS ISSUED IN T HIS REGARD. ASSESSEES GROUNDS ARE ACCORDINGLY ALLOWED AND AO I S DIRECTED TO ALLOW THE DEDUCTION TO THE EXTENT OF RS. 50 LAKHS U/S. 5 4EC. 6. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH APRIL, 2017 SD/- (B. RAMAKOTAIAH) ACCOUNTANT MEMBER HYDERABAD, DATED 12 TH APRIL, 2017 TNMM I.T.A. NO. 144/HYD/2016 MRS. JAYSHREE GOWRISHANKAR :- 6 - : COPY TO : 1. MRS. JAYSHREE GOWRISHANKAR, PLOT NO. 8, RADHIKA COLONY, SECUNDERABAD. 2. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE -10(1), HYDERABAD. 3. COMMISSIONER OF INCOME TAX(APPEALS)-6, HYDERABAD . 4. THE PR. COMMISSIONER OF INCOME TAX-6, HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.