Smt. Sriram Indubal, CHENNAI V. ITO, CHENNAI

ITA 1950/CHNY/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 0909 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 17-01-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 02-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIDISHA KALRA
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Capital asset
• Section: 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI V. DURGA RAO, JUDICIAL MEMBER I.T.A. NO. 1950/MDS/2012 (ASSESSMENT YEAR : 2008-09) SMT. SRIRAM INDUBAL, NO.15/2, OCEAN TOWERS, NO.77, WALLAJAH ROAD, TRIPLICANE, CHENNAI - 600 002. PAN : AAAPI 7528 R (APPELLANT) V. THE INCOME TAX OFFICER, BUSINESS WARD VI(3), CHENNAI - 600 034 . (RESPONDENT) APPELLANT BY :SHRI R. VIJAYARAGHAVAN, ADVOCATE RESPONDENT BY :SMT. VIDISHA KALRA , CIT-DR DATE OF HEARING : 17.01.2013 DATE OF PRONOUNCEMENT : 31.01.2013 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY THE ASSESSEE, ITS GRIEVANC E IS THAT THE CIT(APPEALS) CONFIRMED THE RESTRICTION OF HER CLAIM OF EXEMPTION OF ` 1 CRORE UNDER SECTION 54EC OF INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT'), TO ` 50 LAKHS. I.T.A. NO. 1950/MDS/12 2 2. FACTS APROPOS ARE THAT ASSESSEE HAD, DURING THE RELEVANT PREVIOUS YEAR, SOLD A PROPERTY COMPRISING OF LAND A ND BUILDING AT PLOT NO.21, DOOR NO.142, MGR SALAI, PALAVAKKAM, CHENNAI- 41, FOR A CONSIDERATION OF ` 3,46,50,000/-. SALE PROCEEDS WERE INVESTED BY THE ASSESSEE AS UNDER:- SL. NO. DESCRIPTION OF THE PROPERTY/INVESTMENT DATE OF INVESTMENT AMOUNT INVESTED ( ` ) 1. RURAL ELECTRIFICATION CORPORATION BONDS 27.02.2008 50,00,000 2. BONDS ISSUED BY NATIONAL HIGHWAYS AUTHORITY OF INDI A 30.06.2008 50 ,00,000 3. CAPITAL GAINS ACCOUNT SCHEME IN SYNDICATE BANK, MOUNT ROAD BRANCH, CHENNAI 27.06.2008 26,00,000 4. FLAT NO.33 AT ANKUR GRAND, NO.252/254 POONAMALLEE HIGH ROAD, CHENNAI - 600 010 FROM M/S ANKUR FOUNDATIONS, NO.25, BARNABY ROAD, KELLYS, CHENNAI - 600 010. 23.06.2008 2,05,68,904 5. FLAT NO.43 AT ANKUR GRAND, NO. 252/254 POONAMALLEE HIGH ROAD, CHENNAI - 600 010 FROM M/S ANKUR FOUNDATIONS, NO.25, BARNABY ROAD, KELLYS, CHENNAI - 600 010. AS PER THE A.O., THE SUM OF ` 1 CRORE INVESTED BY THE ASSESSEE IN CAPITAL GAINS BONDS WERE IN TWO INSTALMENTS. FIRST ` 50 LAKHS IN REC BOND ON 27.2.2008 AND SECOND ` 50 LAKHS IN NHAI BOND ON 27.06.2008. SECOND INSTALMENT OF ` 50 LAKHS IN NHAI BOND WAS PAID IN FINANCIAL YEAR 2008-09. A.O. WAS OF THE OPINION THAT THERE WAS RESTRICTION PLACED FOR INVESTMENTS UNDER SECTION 54 EC OF THE ACT WITH EFFECT FROM 1.4.2007. ACCORDINGLY, INVESTMENTS HAD TO BE MADE WITHIN I.T.A. NO. 1950/MDS/12 3 SIX MONTHS FROM THE DATE OF TRANSFER OF CAPITAL ASS ET. ASSESSEE, HERE, HAD MADE INVESTMENT OF ` 50 LAKHS ON 27.2.2008 IN REC BONDS AND ANOTHER ` 50 LAKHS ON 30.6.2008 IN NHAI BONDS. SINCE THE STA TUTE PEGGED THE INVESTMENT FOR WHICH EXEMPTION WAS ALLOW ABLE IN AN ASSESSMENT YEAR TO ` 50 LAKHS, THE SECOND SUM OF ` 50 LAKHS INVESTED ON 30.6.2008, AS PER THE A.O., WAS NOT ELI GIBLE FOR DEDUCTION UNDER SECTION 54EC OF THE ACT. TAKING THIS VIEW, A .O. CURTAILED THE EXEMPTION CLAIMED BY THE ASSESSEE UNDER SECTION 54E C, PRO RATA TO 50 LAKHS INVESTMENT MADE IN REC BONDS. 3. IN HER APPEAL BEFORE CIT(APPEALS), ARGUMENT OF T HE ASSESSEE WAS THAT CEILING MENTIONED IN PROVISO TO SECTION 54 EC(1) WAS APPLICABLE FOR INVESTMENT MADE IN A FINANCIAL YEAR ONLY. AS PER THE ASSESSEE, CEILING WAS TO BE APPLIED YEAR-WISE AND N OT TRANSACTION- WISE. BOTH THE INVESTMENTS, I.E. IN REC AS WELL AS NHAI WERE DONE WITHIN SIX MONTHS FROM THE DATE OF TRANSFER OF CAPI TAL ASSET. THEREFORE, BOTH OF THEM WERE ELIGIBLE FOR EXEMPTION UNDER SECTION 54EC OF THE ACT. THESE WERE MADE IN TWO DIFFERENT FINANCIAL YEARS AND THEREFORE, WERE WELL WITHIN THE CEILING. HOWEV ER, CIT(APPEALS) WAS NOT IMPRESSED. ACCORDING TO HIM, THE EXPLANATO RY NOTE IN FINANCE ACT, 2007 THROUGH WHICH THE LIMITATION FOR INVESTMENT IN EXEMPT ASSETS WAS INTRODUCED IN THE STATUTE, CLEARL Y IMPLIED THAT THIS I.T.A. NO. 1950/MDS/12 4 WAS WITH A VIEW TO ENSURING EQUITABLE DISTRIBUTION OF BENEFITS AMONG PROSPECTIVE INVESTORS. THEREFORE, ACCORDING TO HIM , IT HAD TO BE CONSTRUED AS APPLICABLE TRANSACTION-WISE AND NOT YE AR-WISE. THUS, HE CONFIRMED THE VIEW TAKEN BY THE A.O. IN THIS REG ARD. 4. NOW BEFORE US, LEARNED A.R., STRONGLY ASSAILING THE ORDERS OF AUTHORITIES BELOW, SUBMITTED THAT AUTHORITIES BELOW COMMITTED ERROR IN HOLDING THAT CEILING WAS APPLICABLE TRANSACTION-WIS E. ACCORDING TO HIM, LIMITATIONS PLACED WERE FINANCIAL YEAR-WISE AN D NOT TRANSACTION- WISE. ONLY RESTRICTION WAS THAT THE ASSESSEE SHOUL D HAVE MADE THE INVESTMENTS WITHIN SIX MONTHS FROM THE DATE OF TRAN SFER OF CAPITAL ASSET. HERE, IT WAS ADMITTEDLY DONE WITHIN SIX MON THS FROM THE DATE OF TRANSFER OF CAPITAL ASSET. ASSESSEE HAD INVESTE D IN REC AND NHAI BONDS IN TWO DIFFERENT FINANCIAL YEARS, BUT WITHIN SIX MONTHS FROM THE DATE OF TRANSFER OF THE CAPITAL ASSET. THEREFORE, CEILING MENTIONED UNDER PROVISO TO SECTION 54EC(1) WOULD APPLY SEPARA TELY FOR TWO INVESTMENTS. ASSESSEE, ACCORDING TO HIM, WAS THERE FORE, ELIGIBLE FOR EXEMPTION OF THE WHOLE SUM OF ` 1 CRORE UNDER PROVISO TO SECTION 54EC(1) OF THE ACT. 5. PER CONTRA, LEARNED D.R. SUBMITTED THAT THE EXPL ANATORY MEMORANDUM TO FINANCE ACT, 2007 WHICH INTRODUCED PR OVISO TO I.T.A. NO. 1950/MDS/12 5 SECTION 54EC(1) WAS CLEAR IN THAT LIMITATION PLACED WAS FOR ENSURING EQUITABLE DISTRIBUTION OF AVAILABLE EXEMPT ASSETS S O THAT ALL ASSESSEES COULD TAKE ADVANTAGE OF IT. MAXIMUM EXEMPTION THAT COULD BE GIVEN WAS ` 50 LAKHS FOR EACH TRANSACTION WHICH GAVE RISE TO C APITAL GAINS. ACCORDING TO HER, THE VIEW TAKEN BY THE A.O. WAS JU STIFIED. 6. IN REPLY, LEARNED A.R. SUBMITTED THAT THE ISSUE WAS ALREADY CONSIDERED BY AHMEDABAD BENCH OF THIS TRIBUNAL IN T HE CASE OF ASPI GINWALA & OTHERS V. ACIT (52 SOT 16) AND IT WAS HEL D THEREIN THAT ASSESSEE WAS ELIGIBLE FOR EXEMPTION OF ` 1 CRORE, IF IT COULD MAKE SUCH INVESTMENT IN TWO INTALMENTS OF ` 50 LAKHS WHICH FELL IN TWO FINANCIAL YEARS, THOUGH THE DATES WERE WITHIN SIX M ONTHS FROM THE DATE OF TRANSFER OF CAPITAL ASSET. 7. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. THERE IS NO DISPUTE THAT ASSESSEE HAD TRANSFERRED T HE CAPITAL ASSET ON WHICH SHE HAD CLAIMED EXEMPTION UNDER SECTION 54 EC ON 18.2.2008. ASSESSEE HAD ALSO CLAIMED EXEMPTION UND ER SECTION 54EC ON INVESTMENTS MADE IN REC AND NHAI BONDS. SE CTION 54EC(1), WHICH IS RELEVANT TO THE CASE, IS REPRODUC ED HEREUNDER, FOR BREVITY:- I.T.A. NO. 1950/MDS/12 6 54EC. (1) WHERE THE CAPITAL GAIN ARISES FROM THE T RANSFER 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 ASSESSEE HAS, AT ANY TIME WITHIN A PERIOD OF SIX MO NTHS AFTER THE DATE OF SUCH TRANSFER, INVESTED THE WHOLE OR ANY PART OF CAPITAL GAINS IN THE LONG-TERM SPECIFIED ASSET, THE CAPITAL GAIN SHALL B E DEALT WITH IN ACCORDANCE WITH THE FOLLOWING PROVISIONS OF THIS SE CTION, 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 O RIGINAL ASSET, THE WHOLE OF SUCH CAPITAL GAIN SHALL NOT BE CHARGED UNDER SECTION 45; (B) IF THE COST OF THE LONG-TERM SPECIFIED ASSET IS LES S THAN THE CAPITAL GAIN ARISING FROM THE TRANSFER OF THE ORIGI NAL ASSET, SO MUCH OF THE CAPITAL GAIN AS BEARS TO THE WHOLE O F THE CAPITAL GAIN THE SAME PROPORTION AS THE COST OF ACQ UISITION OF THE LONG-TERM SPECIFIED ASSET BEARS TO THE WHOLE OF THE CAPITAL GAIN, SHALL NOT BE CHARGED UNDER SECTION 45 : [ PROVIDED THAT THE INVESTMENT MADE ON OR AFTER THE 1 ST DAY OF APRIL, 2007 IN THE LONG-TERM SPECIFIED ASSET BY AN ASSESSE E DURING ANY FINANCIAL YEAR DOES NOT EXCEED FIFTY LAKH RUPEES.] 8. THE FIRST CONDITION MENTIONED IN SECTION 54EC(1) IS THAT THE INVESTMENT HAS TO BE MADE WITHIN A PERIOD OF SIX MO NTHS FROM THE DATE OF TRANSFER OF CAPITAL ASSET. SINCE THE DATE OF TRANSFER IN THE GIVEN IS 18.2.2008, SIX MONTHS PERIOD WILL ELAPSE O N 17.8.2008. ASSESSEE HAD PURCHASED REC BONDS WORTH OF ` 50 LAKHS ON 27.2.2008 AND BONDS OF NHAI FOR ` 50 LAKHS ON 30.6.2008. BOTH THESE PURCHASES WERE WITHIN THE SIX MONTHS PERIOD. ONLY QUESTION THAT ARISES IS WHETHER PROVISO TO SECTION 54EC(1) W OULD LIMIT THE I.T.A. NO. 1950/MDS/12 7 CLAIM OF EXEMPTION TO ` 50 LAKHS. SAID PROVISO MENTIONS THAT INVESTMENT ON WHICH AN ASSESSEE COULD CLAIM EXEMPTI ON UNDER SECTION 54EC(1) SHALL NOT EXCEED ` 50 LAKHS DURING A FINANCIAL YEAR. SO, THE EXEMPTION PROVISION HAS TO BE CONSTRUED NOT TRANSACTION-WISE BUT, FINANCIAL YEAR-WISE. NO DOUBT, EXPLANATORY ME MORANDUM DOES SAY THAT LIMITATION HAS BEEN PLACED WITH A VIEW TO ENSURE EQUITABLE DISTRIBUTION OF BENEFITS AMONG THE PROSPECTIVE INVE STORS. RELEVANT EXPLANATORY MEMORANDUM IS REPRODUCED FOR BREVITY:- 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 TH IS PURPOSE, IT WAS NECESSARY TO ENSURE THAT THE LIMITED NUMBER OF BONDS AVAILABLE FOR SUBSCRIPTION IS ALSO AVAILABLE FOR SM ALL INVESTORS. THEREFORE, WITH A VIEW TO ENSURE EQUITABLE DISTRIBU TION OF BENEFITS AMONGST PROSPECTIVE INVESTORS, THE GOVERNM ENT DECIDED TO IMPOSE A CEILING ON THE QUANTUM OF INVES TMENT THAT COULD BE MADE IN SUCH BONDS. ACCORDINGLY, THE SAID SECTION HAS BEEN AMENDED SO AS TO PROVIDE FOR A CEILING ON INVE STMENT BY AN ASSESSEE IN SUCH LONG-TERM SPECIFIED ASSETS. IN VESTMENTS IN SUCH SPECIFIED ASSETS TO AVAIL EXEMPTION UNDER SECT ION 54EC, ON OR AFTER THE 1 ST DAY OF APRIL, 2007 WILL NOT EXCEED FIFTY LAKH RUPEES IN A FINANCIAL YEAR. LAST SENTENCE OF THE EXPLANATORY MEMORANDUM CLEARLY STATES THAT THE EXEMPTION FOR INVESTMENT CANNOT EXCEED ` 50 LAKHS IN A FINANCIAL YEAR. THEREFORE, IF THE ASSESSEE IS ABLE TO KEEP T HE SIX MONTHS LIMIT FROM THE DATE OF TRANSFER OF CAPITAL ASSET, BUT, ST ILL ABLE TO PLACE INVESTMENT OF ` 50 LAKHS EACH IN TWO DIFFERENT FINANCIAL YEARS, WE I.T.A. NO. 1950/MDS/12 8 CANNOT SAY THAT THE RESTRICTIVE PROVISO WILL LIMIT THE CLAIM TO ` 50 LAKHS ONLY. SINCE ASSESSEE HERE HAD PLACED ` 50 LAKHS IN TWO DIFFERENT FINANCIAL YEARS BUT WITHIN SIX MONTHS PERIOD FROM T HE DATE OF TRANSFER OF CAPITAL ASSET, ASSESSEE WAS DEFINITELY ELIGIBLE TO CLAIM EXEMPTION UPTO ` 1 CRORE. THE SAME VIEW HAS BEEN TAKEN BY AHMEDABA D BENCH OF THIS TRIBUNAL IN THE CASE OF ASPI GINWALA & OTHERS (SUPRA). WE ARE, THEREFORE, OF THE OPINION THAT THE ASSESSEE HAS TO SUCCEED IN THIS APPEAL. CLAIM OF THE ASSESSEE FOR EXEMPTION U PTO ` 1 CRORE HAS TO BE ALLOWED IN ACCORDANCE WITH SECTION 54EC OF TH E ACT. 9. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS A LLOWED. THE ORDER WAS PRONOUNCED IN THE COURT ON THURSDAY, THE 31 ST OF JANUARY, 2013, AT CHENNAI. SD/- SD/- (V.DURGA RAO) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 31 ST JANUARY, 2013. KRI. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT(A)-IX, CHENNAI-34 (4) CIT-VII, CHENNAI-34 (5) D.R. (6) GUARD FILE