P.R.Viswanath, Vellore V. ACIT, Vellore

ITA 2274/CHNY/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9521 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 11-04-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 14-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH IRS
• Assessee Lawyers: A MAHESH
• Keywords: Capital asset; Salary income; Source of fund; Cost of acquisition
• Section: 142(1); 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.2274/MDS/2015 ' $ %$ /ASSESSMENT YEAR : 2011-2012 SHRI. P.R. VISWANATH, NO.330/2-12, MANGUDU VILLAGE,V.K. MANGUDI TO PUDUPADI ROAD, ARCOT TALUK, VELLORE VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, VELLORE, [PAN AADPV 6060G ] ( / 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 : 27-04-2016 / O R D E R PER G. PAVAN KUMAR, JUDICIAL MEMBER : THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AG AINST ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS)-13, CHENNAI IN ITA NO.202/CIT(A)-13/2014-15, DT. 19.10.2015 FOR THE AS SESSMENT YEAR ITA NO. 2274/2015. :- 2 -: 2011-2012 PASSED U/S.143(3) AND 250 OF THE INCOME TAX ACT, 1961 (HEREIN AFTER REFERRED TO AS THE ACT). 2. THE ASSESSEE HAS RAISED ONLY ONE SUBSTANTIVE GROUN D WERE 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. 3. THE BRIEF FACTS OF THE CASE, THE ASSESSEE IS AN IN DIVIDUAL HAVING INCOME FROM SALARY, RENTAL INCOME, CAPITAL G AINS AND INTEREST INCOME AND FILED E-RETURN ON 28.09.2011 DECLARING T OTAL INCOME <95,07,370/- AND SAME WAS PROCESSED U/S.143(1) OF T HE ACT 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 FILED WRITTEN SUBMISSIONS. ON VERIFICATION OF SOURCES OF INCOME AND CALCULATION OF LONG TERM CAPI TAL GAINS AND CLAIM OF EXEMPTION BY THE ASSESSEE, THE LD. ASSESSING FOU ND THAT ASSESSEE MADE INVESTMENTS IN REC BONDS <50,00,000/- ON 28.02 .2011 AND <50,00,000/- ON 27.04.2011 AND ASSESSEE FILED EXPL ANATIONS THAT ASSESSEE HAS COMPLIED WITH THE PROVISIONS OF SEC.54 EC OF THE ACT AND INVESTMENTS ARE MADE WITHIN A PERIOD OF SIX MONTHS FROM THE DATE OF ITA NO. 2274/2015. :- 3 -: TRANSFER OF THE ASSET AND RELIED ON THE TRIBUNAL D ECISIONS 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. AND BUT ASSESSING OFFICER DEFERRED WITH THE DECISI ONS OF TRIBUNAL AS THE DEPARTMENT HAS FILED APPEAL AGAINST THE ORDER OF TRIBUNAL IN THE HIGH COURT AND MADE ELABORATIVE FINDING IN HIS OR DER AND CAME TO A ARBITRARY CONCLUSION THAT THE INVESTMENT OF <50,00, 000/- IN BONDS SHOULD BE RESTRICTED AS PER EXEMPTION U/S.54EC OF THE ACT AND DEALT ON THE PROVISIONS OF SEC.45 AS UNDER:- CAPITAL GAIN NOT TO BE CHARGED ON INVESTMENT IN CERTAIN BONDS:- (1) WHERE THE CAPITAL GAIN ARISES FROM THE ITA NO. 2274/2015. :- 4 -: 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 <.1,45,07,369/- AND RAISED DEMAND. AGGRIEVED BY THE ORDER OF ASSESSING OFFICER, THE AS SESSEE FILED AN APPEAL BEFORE COMMISSIONER OF INCOME TAX (APPEALS). 4. 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 ITA NO. 2274/2015. :- 5 -: 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. COMMISS IONER 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. 5. 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 28.02.2011 AND 27.04.2011 IN TWO FINANCIAL YEARS. T HE LD. ASSESSING OFFICER AND COMMISSIONER OF INCOME TAX (APPEALS) HA S EXPRESSED THEIR OWN OPINION IN INTERPRETING THE DEFINITION AND THE DICTIONARY MEANING OF ANY IN THE PROVISIONS FURTHER ASSESSING OFFI CER SUO-MOTU TOOK THE ITA NO. 2274/2015. :- 6 -: 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. 6. 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. 7. 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 BONDSD IN FEBRUARY, 2011 <50,00,000/- AND <50,00,000/- IN APRIL, 2011 BOTH FALLS WITHIN SIX MONTHS FROM DATE OF TRANSFER OF AS SET AND THERE IS NO DISPUTE ABOUT THE INVESTMENT AND THE PROVISIONS U/ S.54EC OF THE ACT IN INVESTMENT IN BONDS IS AS UNDER:- ITA NO. 2274/2015. :- 7 -: 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 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 ITA NO. 2274/2015. :- 8 -: 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. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN ITA NO.2274/MDS/2015 IS ALLOWED. ORDER PRONOUNCED ON WEDNESDAY, THE 27 TH DAY OF APRIL, 2016, AT CHENNAI. SD/- SD/- ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER ( . ! ) (G. PAVAN KUMAR) /JUDICIAL MEMBER / CHENNAI 1 / DATED:27.04.2016 KV 2 ( *',34 54%, / COPY TO: 1 . &' / APPELLANT 3. 6, () / CIT(A) 5. 489 *',' / DR 2. *+&' / RESPONDENT 4. 6, / CIT 6. 9:$ ; / GF