P.V.Gopalakrishna, Vellore V. ACIT, Vellore

ITA 2254/CHNY/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9575 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-05-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 11-04-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 17-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH IRS
• Assessee Lawyers: A MAHESH
• Keywords: Capital asset; Salary income; Opportunity of being heard; Cost of acquisition
• Section: 142(1); 54; 11

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI , . ! , '!# BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER ./ I.T.A. NO.2254/MDS/2015 ' $ %$ / ASSESSMENT YEAR : 2011-2012 SHRI. P.V. GOPALAKRISHNA, NO.25, OLD NO.8A, THIAGARAJAPURAM, VELLORE. VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, VELLORE. [PAN AAFPG 1993D ] ( / APPELLANT) ( /RESPONDENT) &' ( ) / APPELLANT BY : SHRI. A. MAHESH, C.A. *+&' ( ) /RESPONDENT BY : SHRI. A.V. SREEKANTH, IRS, JCIT. ( , / DATE OF HEARING : 11-04-2016 -.% ( , / DATE OF PRONOUNCEMENT : 04-05-2016 / O R D E R PER G. PAVAN KUMAR, JUDICIAL MEMBER : THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-13, CHENNAI, D ATED 19.10.2015 FOR THE ASSESSMENT YEAR 2011-12 PASSED U/S.143(3) AND 250 OF INCOME TAX ACT, ACT, 1961 (HEREIN AFTER REFERRED T O AS THE ACT). ITA NO.2254/MDS /2015. :- 2 -: 2. AT THE TIME OF HEARING, THE ASSESSEE HAS NOT PRESS ED GROUND NO.3.1 AND 3.2 FOR CREDIT OF TDS AND ALSO GROUND NO .4 AND MADE AN ENDORSEMENT IN THE APPEAL PETITION. 3. THE FIRST GROUND RAISED BY THE ASSESSEE IS THAT COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN UPHOL DING THE ORDER OF ASSESSING OFFICER ON DENYING THE EXEMPTION U/S.54EC OF THE ACT INVESTMENT IN REC CAPITAL GAINS BONDS FALLING IN TW O FINANCIAL YEARS. 4. THE BRIEF FACTS OF THE CASE, THE ASSESSEE IS AN I NDIVIDUAL HAVING INCOME FROM SALARY, RENTAL INCOME, CAPITAL G AINS AND INTEREST INCOME AND FILED E-RETURN ON 28.09.2011 DECLARING T OTAL INCOME =4,97,77,530/- AND SAME WAS PROCESSED U/S.143(1) OF THE ACT AND SUBSEQUENTLY THE CASE WAS SELECTED FOR SCRUTINY THR OUGH CASS AND NOTICES U/S.143(2) AND 142(1) OF THE ACT WAS ISSUE D WITH QUESTIONNAIRE. IN COMPLIANCE, THE LD. AUTHORISED RE PRESENTATIVE OF ASSESSEE APPEARED FROM TIME TO TIME AND FILED DETAI LS AND PRODUCED BOOKS OF ACCOUNTS AND WRITTEN SUBMISSIONS. THE ASS ESSING OFFICER VERIFIED THE SOURCE OF INCOME AND ASSESSING OFFICER FOUND THAT ASSESSEE HAS MADE INVESTMENTS IN REC BONDS =50,00,0 00/- ON 14.03.2011 AND =50,00,000/- ON 27.04.2011 AND ALSO ASSESSEE FILED EXPLANATION THAT ASSESSEE HAS COMPLIED WITH THE PRO VISIONS OF ITA NO.2254/MDS /2015. :- 3 -: SEC.54EC AS INVESTMENT WAS MADE WITHIN THE PERIOD O F SIX MONTHS FROM THE DATE OF TRANSFER AND RELIED ON THE TRIBUN AL DECISIONS. BUT THE ASSESSING OFFICER THOUGH ACCEPTED TRIBUNAL DECISIO N IN THE CASES OF COROMANDEL INDUSTRIES (P) LTD VS. ACIT, COMPANY CIR CLE I(3), CHENNAI 36 TAXMANN.6 (CHENNAI) AND SMT. SRIRAM INDUBAL VS. ITO 32 TAXMANN.COM 118 (CHENNAI ) AS UNDER:- 'THE ITAT HAS HELD THAT THE FIRST CONDITION MENTION ED IN SECTION 54EC(1) IS THAT THE INVESTMENT HAS TO BE MADE WITHIN A PERIOD OF SIX MONTHS FROM THE DATE OF TRANSFER OF CAPITAL ASSET. SAID PROVISO MENTIONS TH AT INVESTMENT ON WHICH AN ASSESSEE COULD CLAIM EXEMPTION 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. EXPLANATORY MEMORANDUM DOES SAY THAT LIMITATION HAS VIEW TO ENSURE EQUITAB LE DISTRIBUTION OF BENEFITS AMONG THE PROSPECTIVE INVESTORS. LAST SENTENCE OF THE EXPLANATORY MEMORANDUM CLEARLY STATES THAT THE EXEMPTION FOR INVESTMENT CANNOT EXCEED 50 LAKHS IN A FINANCIAL YEAR. SINCE THE ASSESSEE HERE HAS PLACED 50 LAKHS IN TWO DIFFERENCE FINANCIAL YEARS BUT WITHIN SIX MO NTHS PERIOD FROM THE DATE OF TRANSFER OF CAPITAL ASSETS, ASSESSEE WAS DEFINITELY ELIGIBLE TO CLAIM EXEMPTION UPTO 1 CRORE. BUT DEFERRED WITH THE DECISIONS OF TRIBUNAL AS THE DEPARTMENT HAS FILED APPEAL AGAINST THE ORDER OF TRIBUNAL IN THE HIGH CO URT AND MADE ELABORATIVE FINDING IN HIS ORDER AND CAME TO A AR BITRARY CONCLUSION THAT THE INVESTMENT OF =50,00,000/- IN BONDS SHOUL D BE RESTRICTED AS PER EXEMPTION U/S.54EC OF THE ACT AND DEALT ON THE PROVISIONS OF SEC.45 AS UNDER:- ITA NO.2254/MDS /2015. :- 4 -: CAPITAL GAIN NOT TO BE CHARGED ON INVESTMENT IN CERTAIN BONDS:- (1) WHERE THE CAPITAL GAIN ARISES FROM THE TRANSFER OF A LONG-TERM CAPITAL ASSET (THE CAPITAL ASSET SO TRANSFERRED BEING HEREAFTER IN THIS SECTION REFERRED TO AS THE ORIGINAL ASSET) AND THE ASSESSEE HAS, AT ANY TIME WITHIN A PERIOD OF SIX MONTHS 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 BE DEALT WITH IN ACCORDANCE WITH THE FOLLOWING PROVISIONS 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 ORIGINAL 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 LESS THAN THE CAPITAL GAIN ARISING FROM THE TRANSFER OF THE ORIGINAL ASSET, SO MUCH OF THE CAPITAL GAIN AS BEARS TO THE WHOLE OF THE CAPITAL GAIN THE SAME PROPORTION AS THE COST OF ACQUISITION OF THE LONG TERM SPECIFIED ASSET BEARS TO THE WHOLE OF THE CAPITAL GAIN, SHALL NOT BE CHARGED UNDER SECTION 45. THE LD. ASSESSING OFFICER BASED ON THE ACTION OF D EPARTMENT IN FILING AN APPEAL IN HIGH COURT, DISALLOWED EXEMPTION OF =5 0,00,000/- AND ASSESSED TOTAL INCOME OF =.6,48,77,528/- AND RAISED DEMAND. AGGRIEVED BY THE ORDER OF ASSESSING OFFICER, THE AS SESSEE FILED AN APPEAL BEFORE COMMISSIONER OF INCOME TAX (APPEALS). ITA NO.2254/MDS /2015. :- 5 -: 5. IN THE APPELLATE PROCEEDINGS, THE LD. AUTHORISED REPRESENTATIVE OF ASSESSEE EXPLAINED THE FACTS AND ARGUED THE GROUNDS AND SUPPORTED HIS ARGUMENTS WITH JUDICIAL DECISION S AND PRODUCED SUPPORTING DOCUMENTS IN RESPECT OF SALE OF SHARES A ND ALLOTMENT LETTER OF REC BONDS U/SED. 54EC OF THE ACT AS ON 31.03.20 11 AND SECOND ALLOTMENT LETTER DATED 30.04 . 2011. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) CONSIDERED THE SUBMISSIONS ON THE PR OVISIONS OF SEC. 54EC OF THE ACT AND DEPARTMENT CIRCULAR NO.3/2008 A ND BUT MADE DISTINCTION ON THE DECISION RELIED BY THE ASSESSEE AND DEFERRED THE JUDGMENT OF HIGH COURT AND COME TO A UNILATERAL CON CLUSION THAT ASSESSEE IS ELIGIBLE ONLY FOR =50,00,000/- AS INVES TMENT U/SEC. 54EC OF THE ACT AND CONCURRED WITH THE FINDINGS OF THE ASSE SSING OFFICER AND DISMISSED THE APPEAL OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS), THE ASSESSEE FILED AN APPEAL BEFORE TRIBUNAL. 6. BEFORE US, THE LD. AUTHORISED REPRESENTATIVE URGED THE GROUNDS AND EXPLAINED THAT THERE IS NO DISPUTE ON CALCULATION OF LONG TERM CAPITAL GAINS AND INVESTMENTS BY THE ASSESSEE EXCEPT UNDERSTANDING THE PROVISIONS OF SEC.54EC (1) OF THE ACT WERE ASSESSEE HAS MADE INVESTMENTS IN REC BONDS OF =50,00,000/- E ACH ON ITA NO.2254/MDS /2015. :- 6 -: 14.03.2011 AND 27.04.2011 IN TWO FINANCIAL YEARS. T HE LD. ASSESSING OFFICER AND COMMISSIONER OF INCOME TAX (APPEALS) HA S EXPRESSED HIS OWN OPINION IN INTERPRETING THE DEFINITION AND THE DICTIONARY MEANING OF ANY IN THE PROVISIONS FURTHER ASSESSING OFFI CER SUO-MOTU TOOK THE DECISION BY DISTINGUISHING JUDICIAL DECISION AND RE STRICTED =50,00,000/- IS FOR ONE FINANCIAL YEAR ONLY AND EXCESS CLAIM WAS DISALLOWED. THE PROVISIONS OF SEC. 54EC OF THE ACT ARE BENEFICIAL P ROVISION AND TO BE CONSTRUED LIBERALLY. THE INVESTMENT BY THE ASSESSEE IN SEC. 54EC BONDS WITHIN THE PERIOD OF SIX MONTHS FROM DATE OF SALE OF PROPERTY IS AS PER LAW AND SUPPORTED THE SUBMISSIONS WITH THE JURISDICTIONAL HIGH COURT DECISIONS AND PRAYED FOR ALLOWING THE APPEAL. 7. CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDERS OF THE LOWER AUTHORITIES, CBDT CIRCULAR AND SPIRIT OF AMENDMENT OF SEC. 54EC OF THE ACT VEHEMENTLY OPPOSED TO THE GROUNDS OF THE ASSESSEE. 8. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATE RIAL ON RECORD AND JUDICIAL DECISIONS. THE ASSESSEE HAS I NVESTED LONG TERM CAPITAL GAINS WITHIN SIX MONTHS FROM THE DATE OF TR ANSFER OF ASSET IN RURAL ELECTRIFICATION CORPORATION BONDS (REC) UNDER SEC.54EC OF THE ACT AND COMPLIED WITH THE PROVISIONS OF LAW BY PURC HASING THE BONDS IN MARCH, 2011 =50,00,000/- AND =50,00,000/- IN APRIL, 2011 BOTH FALLS ITA NO.2254/MDS /2015. :- 7 -: WITHIN SIX MONTHS FROM DATE OF TRANSFER OF ASSET AN D THERE IS NO DISPUTE ABOUT THE INVESTMENT AND THE PROVISIONS U/S.54EC O F THE ACT IN INVESTMENT IN BONDS IS AS UNDER:- PROVIDED THAT THE INVESTMENT MADE ON OR AFTER THE 1 ST DAY OF APRIL, 2007 IN THE LONG TERM SPECIFIED ASSET BY AN ASSESSEE DURING ANY FINANCIAL YEAR DOES NOT EXCEED FIFTY LAKH RUPEES THIS PROVISION HAS BEEN AMENDMENT BY FINANCE ACT, 2 014 W.E.F. 1.04.2015 AS UNDER:- PROVIDED FURTHER THAT THE INVESTMENT MADE BY AN ASSESSEE IN THE LONG TERM SPECIFIED ASSET, FROM CAP ITAL GAINS ARISING FROM TRANSFER OF ONE OR MORE ORIGINAL ASSETS, DURING THE FINANCIAL YEAR IN WHICH THE ORIG INAL ASSET OR ASSETS ARE TRANSFERRED AND IN THE SUBSEQUE NT FINANCIAL YEAR DOES NOT EXCEED FIFTY LAKH RUPEEES . ON COMBINED READING OF BOTH THE PROVISIONS, THE LE GISLATIVE INTENT IN THE SUBSEQUENT AMENDMENT IS TO RESTRICT THE INVESTM ENT OF =50,00,000/- TO ONE FINANCIAL YEAR ONLY. THERE W AS AMBIGUITY AND CONFUSION ON INTERPRETING THE PROVISIONS AS THE COM MISSIONER OF INCOME TAX (APPEALS) EXAMINED THE ISSUE ON THE INT ERPRETING THE WORD ANY REFERRING TO DICTIONARY MEANING BECAUS E THERE WAS NO CERTAINTY WAS VISUALIZED CONSIDERING THE PROVISIONS , CBDT CIRCULARS AND FACTS OF THE CASE. THE ASSESSING OFFICER TRIED TO M AKE A DISTINCTION OF PROVISIONS FOR RESTRICTING INVESTMENT OF =50,00,000 /- ONLY IN ONE ITA NO.2254/MDS /2015. :- 8 -: FINANCIAL YEAR. THE ASSESSEE HAS INVESTED IN TWO I NSTALLMENTS FALLING IN TWO FINANCIAL YEARS AND AVAILED TAX EXEMPTION. AME NDMENT OF PROVISIONS OF SEC.54EC IN FINANCE ACT, 2014 ARE PRO SPECTIVE AND APPLY FROM 01.04.2015 EFFECTIVE FROM ASSESSMENT YEAR 201 5-16 ONWARDS. WE CONSIDERING THE FACTS AND AMENDMENT OF PROVISIO NS RELY ON THE JURISDICTIONAL HIGH COURT DECISION OF CIT VS. C. JAICHANDER 370 ITR 579 (MAD) AND CIT VS. CORAMANDEL INDUSTRIES LTD 370 ITR 586 (MAD) AND SETASIDE THE ORDER OF THE COMMISSIONER OF INCOME TA X (APPEALS) AND DIRECT THE ASSESSING OFFICER TO DELETE THE ADDI TION AND ALLOW THE GROUNDS IN FAVOUR OF THE ASSESSEE. 9. THE SECOND GROUND RAISED BY THE ASSESSEE IS THAT COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN ENHAN CEMENT OF INCOME ON INVESTMENTS MADE BY THE ASSESSEES TWO MI NOR CHILDREN IN REC BONDS AND DENIAL OF EXEMPTION U/S.54ECOF THE AC T. THE ASSESSING OFFICER IN THE ASSESSMENT ORDER OF THE ASSESSEE U/ S.143(3) OF THE ACT DATED 26.03.2014 CLUBBED THE INCOME OF MINOR CHILDR EN LUKA PULLELA AND NETHRA PULLELA U/S.64(1A) OF THE ACT DETERMINED IN THE ASSESSMENT ORDER DT. 16.12.2013. AGGRIEVED THE ASSESSEE RAISE D GROUNDS AGAINST ACTION OF ASSESSING OFFICER BEFORE COMMISSIONER O F INCOME TAX (APPEALS) ALONGWITH OTHER GROUNDS. ITA NO.2254/MDS /2015. :- 9 -: 10. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) UNDER THE POWERS U/S.251(1) & 251(2) OF THE ACT ISSUED SHOW C AUSE NOTICE FOR ENHANCEMENT OF INCOME OF MINOR CHILDREN AGGREGATED U/S.64(1A) OF THE ACT. IN THE OPINION OF THE COMMISSIONER OF INCO ME TAX (APPEALS) ALL SUCH INCOME SHOULD BE CLUBBED IRRESPECTIVE OF A NY BENEFIT OR EXEMPTION TO BE GRANTED TO THE MINORS. IN COMPLIAN CE TO THE SHOW CAUSE NOTICE, THE ASSESSEE FILED OBJECTIONS ON ENHA NCEMENT AND DENIAL OF EXEMPTION U/S.54EC OF THE ACT TO MINOR C HILDREN. 11. THE LD. AUTHORISED REPRESENTATIVE HAS FILED AND EXP LAINED ELABORATELY BY PETITION DATED 16.10.2015 ON THE FAC TS WITH JUDICIAL DECISIONS. AT THE TIME OF HEARING ASSESSEE SUBMITTE D COPY OF ALLOTMENT LETTER OF REC BONDS OF =50,00,000/- AS ON 31.03.201 1 TO LUKA AND NETHRA AND ANOTHER =50,00,000/- ALLOTTED ON 30.04.2 011 AND ALSO PRODUCED COPY OF ASSESSMENT ORDERS OF THE MINOR CH ILDREN WERE DEDUCTION U/S.54EC OF THE ACT WAS RESTRICTED ONLY TO =50,00,000/- INSTEAD OF =1,00,00,000/-. THE CONTENTION OF THE LD . AUTHORISED REPRESENTATIVE THAT THE CLUBBING PROVISIONS U/SEC. 64(1A) OF THE ACT SHALL BE APPLICABLE ON AGGREGATING OF TOTAL INCOME AFTER ALLOWING EXEMPTION U/S.54EC OF THE ACT. THE LD. COMMISSIONE R OF INCOME TAX (APPEALS) CONSIDERED THE SUBMISSIONS ON DENIAL OF E XEMPTION U/S.54EC OF THE ACT OF TWO MINOR CHILDREN AND ENHANCEMENT U/ S.251(1) OF THE ITA NO.2254/MDS /2015. :- 10 -: ACT AND OBSERVED AT PARA 6 OF HIS ORDER AND RELIED ON WRITTEN SUBMISSIONS FILED BY THE ASSESSEE ON 13.10.2015. T HE LD. COMMISSIONER OF INCOME TAX (APPEALS) CONSIDERED THE SUBMISSIONS AND ACCEPTED THE PRINCIPLES BASED ON JURISDICTIONAL HIGH COURT AND KARNATAKA HIGH COURT DECISION BUT DEFERRED ON CLUB BING OF TOTAL INCOME AND RELIED ON SEC. 64(1A) OF THE ACT OBSERV ED AT PAGE 16 OF HIS ORDER AND INTERPRETED THE COMPUTATION OF TOTAL INCOME SHOULD INCLUDE ALL SUCH INCOME AND NOT TOTAL INCOME ON WHICH TAX IS LEVIED AND DISMISSED THE GROUND OF THE ASSESSEE OBSERVED AT PAGE 16 OF HIS ORDER AS UNDER:- I HAVE CAREFULLY CONSIDERED THE CONTENTIONS OF THE APPELLATE ON THE ABOVE ISSUE. THE RELEVANT PORTION OF SEC. 64(1A) READS UNDER:- [(1A) IN COMPUTING THE TOTAL INCOME OF ANY INDIVIDU AL, THERE SHALL BE INCLUDED ALL SUCH INCOME AS ARISES O R ACCRUES TO HIS MINOR CHILD, NOT BEING A MINOR CHILD REN SUFFERING FROM ANY DISABILITY OF THE NATURE SPECIFI ED IN SECTION 80U: PROVIDED THAT NOTHING CONTAINED IN THIS SUB-SECTION SHALL APPLY IN RESPECT OF SUCH INCOME AS ARISES OR ACCRUE S TO THE MINOR CHILD ON ACCOUNT OF ANY- (A) MANUAL WORK DONE BY HIM OR (B) ACTIVITY INVOLVING APPLICATION OF HIS SKILL, TA LENT OR SPECIALIZED KNOWLEDGE AND EXPERIENCE. EXPLANATION:- FOR THE PURPOSES OF THIS SUB- SECTI ON, THE INCOME OF THE MINOR CHILD SHALL BE INCLUDED, A) WHERE THE MARRIAGE OF HIS PARENTS SUBSISTS, IN THE INCOME OF THAT PARENT WHOSE TOTAL INCOME (EXCLUDING THE INCOME INCLUDIBLE UNDER THIS SUB- SECTION) IS GREATER ; OR ITA NO.2254/MDS /2015. :- 11 -: (B) WHERE THE MARRIAGE OF HIS PARENTS DOES NOT SUBSIST, IN THE INCOME OF THAT PARENT WHO MAINTAINS THE MINOR CHILD IN THE PREVIOUS YEAR, AND WHERE ANY SUCH INCOME IS ONCE INCLUDED IN THE TOTAL INCOME OF EITHER PARENT, ANY SUCH INCOME ARISING IN ANY SUCCEEDING YEAR SHALL NOT BE INCLUDED IN THE TOTAL INCOME OF THE OTHER PARENT, UNLESS THE ASSESSING OFFICER IS SATISFIED, AFTER GIVING THAT PARENT AN OPPORTUNITY OF BEING HEARD, THAT IT IS NECESSARY SO TO DO] THUS I N COMPUTING THE TOTAL INCOME OF AN INDIVIDUAL, THERE SHALL BE INCLUDED ALL SUCH INCOME AS ............. AND ALL SUCH INCOME IS NOT THE TO TAL INCOME THE TOTAL INCOME IS THE ONE ON WHICH TAX IS LEVIED. MOREOVER AFTER CLUBBING THE MINOR'S INCOME WITH THE FATHER I.E. WHAT DEDUCTION IS ELIGIBLE ARE ALLOWED IN THE HANDS OF FATHER ONLY I.E. THE ASSESSEE. THUS RELYING ON THE TOTAL INCOME AND ALL SUCH INCOME ARE NOT SAME BECAUSE THE TOTAL INCOME IS THE ONE ON WHICH TAX IS COMPUTED AS APPLICABLE WHERE AS AFTER ALLOWING EXEMPTIONS/DEDUCTIONS ETC THE ALL SUCH INCOME LEADS TO TOTAL INCOME. SO ALL SUCH INCOME ARISING IN THE MINOR'S CASE WILL BE CLUBBED U/ S 64(1A) IN THE FATHER'S GROSS INCOME AND EXEMPTIONS AND DEDUCTIONS ELIGIBLE WILL BE ALLOWED ACCORDINGLY TO THE SUM OF INCOME I.E. THAT IS INCOME OF THE FATHER AGGREGATED WITH THE INCOME OF THE MINOR. IN THE INSTANT CASE CAPITAL GAIN WHICH AROSE IN THE CASE OF MINOR WILL BE AGGREGATED WITH THE CAPITAL GAIN THAT AROSE IN THE HANDS OF FATHER AND FROM THERE THE ELIGIBILITY OF SEE 54EC W ILL BE DECIDED. THUS FACTS OF THE CASES SIGHTED ABOVE AND INSANT CASE ARE DISTINGUISHABLE THEREFORE AS DISCUSSED ABOVE IN THE CASE OF FATHER THE ELIGIBILITY OF CLAIM OF SEC 54EC BASED ON THE STATUTE PROVISO TO SEC 54EC AND DEPARTMENTAL CIRCULAR NO 3 J 2008 WHERE IN CLARIFICATION IS CLEARLY GIVEN THAT CLAIM OF SEC 54 EC SHOULD NOT EXCEED 50LACS IN ANY FY BASED ON THIS ASSESSING OFFICER IS DIRECTED TO ADD 'ALL SUCH INCOME' OF THE MINOR'S IN ITA NO.2254/MDS /2015. :- 12 -: THE HANDS OF FATHER U/.S 64(1A) AND NOT THE TOTAL INCOME OF THE MINORS AND FROM THE TOTAL INCOME ARRIVED THEREAFTER FATHER ALONE WILL BE ELIGIBLE FOR EXEMPTION U/S 50EC BASED ON THE FINDINGS GIVEN ABOVE. THUS IN VIEW OF SEE 251(1) & (2) OF THE IT ACT 1961 THE INCOME OF THE APPELLANT IS ENHANCED AND THE ASSESSING OFFICER IS DIRECTED THAT THE ALL SUCH INCOME OF THE MINOR CHILDREN BE AGGREGATED U/S.54(1A) WITHOUT ALLOWING EXEMPTION U/S.54EC, THUS THIS GROUND OF APPELLANT IS DISMISSED. AGGRIEVED BY THE ORDER OF COMMISSIONER OF INCOME TA X (APPEALS), THE ASSESSEE ASSAILED AN APPEAL BEFORE TRIBUNAL. 12. BEFORE US, THE LD. AUTHORISED REPRESENTATIVE ARGUED ON THE DENIAL OF EXEMPTION U/S.54EC OF THE ACT AND SUBSTAN TIATED THE ARGUMENTS THAT COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN ENHANCING INCOME OF THE ASSESSEE BY DENYING EXEMPTI ON U/SEC. 54EC OF =50,00,000/- ALLOWED TO TWO MINOR CHILDREN AND WHOSE INCOME HAS BEEN AGGREGATED WITH PARENTS. FURTHER, THE OBSERVA TIONS OF COMMISSIONER OF INCOME TAX (APPEALS) THAT CLUBBING OF INCOME SHOULD BE BEFORE ALLOWING ANY EXEMPTION U/S. 54EC O F THE ACT ON THE INTERPRETATION OF WORD ALL SUCH INCOME. BUT T HE TOTAL INCOME OF THE MINOR SHOULD BE CLUBBED AFTER ALLOWING RELIEF AND P RAYED FOR ALLOWING THE GROUND. ITA NO.2254/MDS /2015. :- 13 -: 13. CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDERS OF THE LOWER AUTHORITIES AND VEHEMENTLY OPPO SED THE GROUNDS OF THE ASSESSEE AND PRAYED FOR DISMISSAL OF APPEAL. 14. WE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIA L ON RECORDS AND JUDICIAL DECISIONS CITED. IT IS NOBODY CASE THAT FATHER HAS INVESTED IN SHARES IN THE NAME OF TWO MINOR CHILDRE N. THE ISSUE ON THE INVESTMENT U/SEC 54EC OF THE ACT HAS BEEN PIND OWN ON TWO ASPECTS, THE COMMISSIONER OF INCOME TAX (APPEALS) H AS DENIED EXEMPTION TO THE MINOR CHILD AND SECOND ISSUE BE ING WHETHER INCOME TO BE CLUBBED WITH PARENTS TOTAL INCOME OR SUCH INCOME CONTESTED BY THE REVENUE. WE HIGHLIGHT THE PROVISI ONS OF SEC. 64(1A) OF THE ACT WERE INCOME OF THE MINOR HAS TO BE COMP UTED BEFORE APPLICATION OF CLUBBING PROVISIONS. IN RESPECT OF CLAM OF EXEMPTION OF CAPITAL GAIN, THE COMPUTATION HAS TO BE WORKED OUT IN THE HANDS OF THE MINOR AND ALLOW THE EXEMPTION AND SUBSEQUENT IN COME SHOULD BE ADDED IN THE HANDS OF THE FATHER U/S.64(1A) OF THE ACT. THE LD. AUTHORISED REPRESENTATIVE SUPPORTED HIS ARGUMENTS W ITH THE JUDICIAL DECISIONS WERE (I) JCIT VS GOVIND ROHIRA ALIAS SRICHAND ROHRA 95 ITD 0077 WERE IT WAS HELD THAT RESIDENTIAL HOUSE PROPER TY PURCHASED BY FATHER IN THE NAME OF MINOR SON, OUT O F CAPITAL GAINS ARISING FROM SALE OF SHARES HELD IN T HE NAME OF MINOR, IS ELIGIBLE FOR EXEMPTION U/S.54F. ITA NO.2254/MDS /2015. :- 14 -: (II) M.A.C. KHALEELI VS. DCIT 48 ITD 0191 WERE IT W AS HELD THAT CAPITAL GAINS LIABLE TO BE CLUBBED U/SEC 64(1)(IV) ARE ALSO ELIGIBLE FOR EXEMPTION U/S.54F O F THE ACT. (III) CIT VS. V.S. CHELLIAH 147 ITR 590 WERE IT WAS HELD THAT THE INCOME OF WIFE OUT OF WHICH INSURANCE PREM IUM OF HER LIFE WAS PAID BEING INCLUDIBLE IN THE HANDS OF HUSBAND, DEDUCTION U/S.80C(2)(A)(I) IS ALLOWABLE IN HUSBANDS HAND (IV) CIT VS. S.K. NAYAK 145 ITR 0791 WERE IT WAS H ELD THAT ONLY THE NET SALARY INCOME OF SPOUSE AFTER PRO VIDING SEC. 16(1) DEDUCTION AND NOT THE GROSS SALARY IS LI ABLE TO BE CLUBBED WITH THAT OF THE ASSESSEE U/SEC.64(1)(II ) OF THE ACT. (V) SMT. BABITA P. KUNUNGO VS. DCIT 96 ITD 0091 WER E IT WAS HELD THAT AGRICULTURAL INCOME NOT BEING A PA RT OF TOTAL INCOME AS DEFINED IN SEC. 2(45) R.W.S. 10(1) , S. 64(1A) CANOE BE APPLIED TO AGRICULTURAL INCOME OF M INOR NOR THE AGRICULTURAL INCOME OF THE MINOR CHILDREN O F THE ASSESSEE CAN BE SAID TO BE AGRICULTURAL INCOME OF T HE ASSESSEE AND THEREFORE, AGRICULTURAL INCOME OF THE MINOR CHILDREN OF THE ASSESSEE CANOE BE INCLUDED IN THE INCOME OF THE ASSESSEE FOR RATE PURPOSES. SO, CONSIDERING THE DEFINITION, INTERPRETATION OF S TATUTES, JUDICIAL PROVISIONS OF LAW APPLICABLE FOR MINOR CHILDREN. W E RELY ON THE DECISION OF TRIBUNAL DCIT VS. RAJEEV GOYAL, KOLKATA IN ITA NO.951/KOL/2011, DATED 1 ST JUNE, 2012 WERE HELD AS UNDER:- THERE IS NOTHING IN THE NOTIFICATION ISSUED BY RURA L ELECTRICITY CORPORATION LTD, DATED 29.06.2006, IN S O FAR AS DEDUCTION IS TO BE ALLOWED U/S.54EC. SECTION 64(1A) SPEAKS OF ADDITION OF TOTAL INCOME OF MINOR CHILD A ND INCOME OF A MINOR CHILD FOR PURPOSE OF INCLUSION U/S.64(1A) WILL BE HIS TOTAL INCOME. FROM ABOVE ITA NO.2254/MDS /2015. :- 15 -: DEFINITION OF TOTAL INCOME AS GIVEN U/S.2(45), IT I S CLEAR THAT IT IS NOT GROSS TOTAL INCOME BUT INCOME OF ANY PERSON, WHO IS AN ASSESSEE, AS COMPUTED UNDER PROVISIONS OF THE ACT, MEANS TOTAL INCOME AS COMPUT ED UNDER PROVISIONS OF THE ACT IS TO BE ADDED. CAPITAL GAIN IS TO BE COMPUTED UNDER CHAPTER IV-E. SECTION 54EC PROVIDES THAT CAPITAL GAIN NOT TO BE CHARGE ON INVESTMENT ON CERTAIN BONDS. THEREFORE INVESTMENTS MADE IN CERTAIN BONDS SHALL BE OUTSIDE SCOPE OF CAP ITAL GAIN FOR PURPOSE OF COMPUTATION OF TOTAL INCOME ITS ELF, IT IS NOT A DEDUCTION UNDER CHAP. VIA WHICH COMES INTO PICTURE ONLY AFTER COMMUTING TOTAL INCOME AND DEDUCTIONS ARE BEING ALLOWED FROM GROSS TOTAL INCOM E AS PER SEC. 80A(1). NOTIFICATION ON WHICH ASSESSING O FFICER RELIED UPON HAVE NOT PUT ON ANY EMBARGO ON INVESTMENTS BY AN ASSESSEE BUT EMBARGO IS ON ALLOTM ENT OF BONDS TO A PERSON; AND SUCH EMBARGO IS ON ALLO TTING AUTHORITY. BONDS HAVE BEEN ALLOTTED TO THREE PERSON S AS PER NOTIFICATION ITSELF AND ASSESSEE IS ENTITLED TO BENEFITS AS PER PROVISIONS OF SEC. 54EC UNDER WHICH RESTRICT ION HAVE BEEN PUT ONLY FOR INVESTMENTS FROM 01.04.2007. THEREFORE, IN VIEW OF JUDGMENT IN THE CASE OF SEGU HARNATH 171 ITR 318 (AP), WHEREIN INCOME WAS CLUBBE D IN HANDS OF HER HUSBAND AND WHERE REVENUE DID NOT ALLOW STANDARD DEDUCTION. WHERE ASSESSEE WAS A PARTNER IN A FIRM AND HIS MINOR DAUGHTER WAS ADMITT ED TO BENEFIT OF PARTNERSHIP IN FIRM AND ASSESSEE BORROWE D FUNDS AND INVESTED SAME IN PARTNERSHIP FIRM IN NAME OF HIS MINOR DAUGHTER, INTEREST PAYABLE BY ASSESSEE ON CAPITAL BORROWED BY ASSESSEE ON BEHALF OF MINOR DAUGHTER WAS DEDUCTIBLE U/S.67(3) FROM SHARE INCOME ARISING TO MINOR CHILD AND IT WAS ONLY RESULTANT IN COME, AFTER DEDUCTION WHICH WAS TO BE INCLUDED IN TOTAL I NCOME OF ASSESSEE U/S.64(1)(III). EVEN IF INCOME OF THE MINOR IS CLUBBED WITH INCOME OF OTHER INDIVIDUAL, ALL DEDUCT IONS ARE TO BE ALLOWED WHILE COMPUTATION OF INCOME OF MI NOR /SPOUSE AND ONLY NET TAXABLE INCOME IS TO BE CLUBBE D U/S.64. CLAIM OF ASSESSEE IS ALLOWED AND ASSESSING OFFICER IS DIRECTED TO RECOMPUTED LONG TERM CAPITAL GAINS ACCORDINGLY. APPEAL DISMISSED. THE OBSERVATIONS OF COMMISSIONER OF INCOME TAX (AP PEALS) IS BAD IN LAW AND MINOR CHILDREN SHOULD BE ELIGIBLE FOR CLAIM OF EXEMPTION ITA NO.2254/MDS /2015. :- 16 -: U/S.54EC OF THE ACT AND REMAINING AMOUNT HAS TO BE CLUBBED WITH THE INCOME OF THE ASSESSEE . 15. ON THE ISSUE OF INVESTMENTS U/SEC. 54EC OF THE ACT BY MINOR CHILDREN FALLING IN TWO FINANCIAL YEARS WERE ALLOT MENT OF REC BONDS OF =50,00,000/- IN MONTH OF APRIL, 2011, WE HAVE ALREA DY DECIDED THE ISSUE IN FAVOR OF THE ASSESSEE REFERRED AT PARA 8 OF THIS ORDER AND SAME PROVISION SHALL APPLY TO MINOR CHILDREN ALSO A ND ALLOW THE GROUND OF THE ASSESSEE. 16. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN ITA NO.2254/MDS/2015 IS ALLOWED. ORDER PRONOUNCED ON WEDNESDAY, THE 4TH DAY OF MAY , 2016, AT CHENNAI. SD/- SD/- ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER ( . ! ) (G. PAVAN KUMAR) /JUDICIAL MEMBER / CHENNAI 2 / DATED:04.05.2016 VENU 3 ( *',45 65%, / COPY TO: 1 . &' / APPELLANT 3. 7, () / CIT(A) 5. 589 *',' / DR 2. *+&' / RESPONDENT 4. 7, / CIT 6. 9:$ ; / GF