ITO, Ward-4(2), Hyderabad, Hyderabad V. Subrahmanyam Kotikalapudi, Hyderabad, Hyderabad

ITA 269/HYD/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 6494 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 17-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KOMALI KRISHNA
• Assessee Lawyers: GE E TINDERMANN
• Keywords: Capital asset; Period of limitation; Reasonable cause; Time period of passing order
• Section: 54F; 54; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SMT P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 269/HYD/2017 ASSESSMENT YEAR: 2013-14 INCOME-TAX OFFICER, WARD 4(2), HYDERABAD. VS. SUBRAHMANYAM KOTIKALAPUDI, HYDERABAD. PAN AGXPK 5752 E (APPELLANT) (RESPONDENT) REVENUE BY : SMT. KOMALI KRISHNA ASSESSEE BY : SMT GEETINDER MANN DATE OF HEARING 04/07/2018 DATE OF PRONOUNCEMENT 20/07/2018 O R D E R PER S. RIFAUR RAHMAN, A.M.: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER DATED 25/11/2016 OF CIT(A) 1, HYDERABAD FOR AY 20 13-14. 2. BRIEFLY THE FACTS OF THE CASE ARE, ASSESSEE FILE D HIS RETURN OF INCOME FOR THE AY 2013-14 ON 26/07/2013 DECLARING T OTAL INCOME OF RS. 9,50,290/-. THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS TO EXAMINE THE LARGE DEDUCTION CLAIMED U/S 54B, 54C, 5 4D, 54G AND 54GA. AGAINST THE NOTICE U/S 143(2) ISSUED BY THE A O, THE AR OF THE ASSESSEE FILED THE REQUIRED INFORMATION. 2.1 THE AO OBSERVED THAT THE ASSESSEE CLAIMED DEDUC TION U/S 54EC TO THE EXTENT OF RS. 1,00,00,000/- FOR ONE SAL E TRANSACTION I.E. SALE PROPERTY AT PLOT NO. 26A, H. NO. 8-3-191/3, VE NGALRAO NAGAR, HYDERABAD ON 28/03/2013 FOR A CONSIDERATION OF RS. 2,75,00,000/-. THE AR OF THE ASSESSEE STATED THAT THE DEDUCTION OF RS. 1 CRORE U/S 2 ITA NO. 269/HYD/17 SUBRAHMANYAM KOTIKALAPUDI 54EC IS ELIGIBLE, SINCE ASSESSEE INVESTED RS. 50 LA KHS IN ONE FY I.E. 2012-13, AND ANOTHER RS. 50 LAKHS IN THE FY 2013-14 I.E. ON 12/04/2014 BEFORE FILING OF RETURN U/S 139(1) OF TH E IT ACT AND IN THIS CONTEXT, HE PLACED RELIANCE ON THE DECISION OF ITAT , CHENNAI BENCH IN THE CASE OF COROMANDEL INDUSTRIES (P.) LTD. VS. ACI T IN ITA NO. 411/MDS/2013 FOR THE AY 2009-10. 2.2 AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESS EE AS WELL AS REFERRING TO THE PROVISIONS OF SECTION 54EC OF THE ACT, THE AO OBSERVED THAT THE THRESHOLD LIMIT FOR CLAIMING EXEM PTION IS RS. 50 LAKHS PER ONE SALE TRANSACTION, HENCE, THE CLAIM OF THE ASSESSEE RELYING ON THE DECISION OF THE ITAT (SUPRA) IS NOT TENABLE IN PRINCIPLE AND WHICH IS AGAINST THE PROVISIONS OF SECTION 54 O F THE ACT. HE FURTHER OBSERVED THAT THE ASSESSEE PAID ADVANCE TAX ON LIABILITY OF CAPITAL GAINS TAX AFTER CLAIMING DEDUCTION OF RS. 5 0 LAKHS ONLY, LATER ON, THE ASSESSEE MADE FURTHER INVESTMENT IN REC BON DS TO CLAIM DOUBLE DEDUCTION. IN VIEW OF THE ABOVE OBSERVATIONS , THE AO RESTRICTED THE DEDUCTION U/S 54EC TO RS. 50 LAKHS A ND BALANCE DEDUCTION OF RS. 50 LAKHS WAS DISALLOWED. 3. AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE CIT(A) AND THE CIT(A) DELETED THE DISALL OWANCE MADE BY THE AO BY OBSERVING AS UNDER: 6. BEFORE ME APPLICANT SUBMITTED THE INVESTMENT 'CO PIES IN NATIONAL AUTHORITIES HIGH WAY OF INDIA 1ST DATED ON 25.03.2013(SIC) AND THE 2ND INVESTMENT MADE ON 12.04.2013(SIC). THE SALE OF THE PROPERTY WAS DONE ON 28/03/2013(SIC) FOR A CONSIDERATION OF RS.2,75,00,0 00/- AND CLAIMED DEDUCTION U/S.54EC FOR 1 CRORE. I FIND THE INVESTMENT HAS BEEN MADE WITHIN THE STIPULATE TIME OF SEC 54EC FOR THIS SPREADING OVER NEXT YEAR HAS NO BEARING ON NONE ALL OWABILITY OF 54EC. HOWEVER FOR TAX PURPOSES SINCE INVESTMENTS SP AN OVER 2 YEARS DEDUCTION FOR RESPECT YEARS. IT IS ALSO NOTIC ED THAT APPELLANT HAS PAID TAXES FOR BALANCE AMOUNT, AS CAP ITAL GAINS. HENCE, I ACCEPT THE CONTENTION OF THE APPLICANT AND ALLOW THE APPEAL. 3 ITA NO. 269/HYD/17 SUBRAHMANYAM KOTIKALAPUDI 4. AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE IS IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF APPEAL: (I) LD. CIT(A) ERRED IN HOLDING THAT ASSESSEE IS EL IGIBLE FOR DEDUCTION OF RS. 1,00,00,000/- I.E. IN EXCESS OF LI MIT OF RS. 50,00,000/U/ S 54EC OF THE I.T. ACT FROM CAPITAL GA INS ARISING ON TRANSFER OF LONG TERM CAPITAL ASSET DURING THE Y EAR UNDER CONSIDERATION. (II) LD. CIT(A) OUGHT TO HAVE APPRECIATED THAT THE LIMIT FOR DEDUCTION U/ S 54EC I.T. ACT IS ONLY RS. 50,00,000/ - AND THE SAID LIMIT OF RS. 50,00,000/- IS AN INVESTMENT CAP AS WELL AS THE DEDUCTION CAP AND THEREFORE THE ASSESSEE IS ENTITLE D TO DEDUCTION OF RS. 50,00,090/- ONLY FROM CAPITAL GAIN S IN RESPECT OF TRANSFER OF LONG TERM CAPITAL ASSET IN A YEAR. (III) LD. CIT (A) OUGHT TO HAVE CONSIDERED EVEN IF THE SPECIFIED TIME PERIOD OF SIX MONTHS FOR INVESTMENT U/S 54EC F ALLS IN TWO FINANCIAL YEARS, ASSESSEE CANNOT TAKE ADVANTAGE OF THE INVESTMENT OF RS. 50,00,000/- EACH IN TWO FINANCIAL YEARS TO DERIVE EXCESS BENEFIT THAN WHAT IS CONTEMPLATED UND ER THE LAW. (IV) LD. CIT(A) OUGHT TO HAVE FURTHER APPRECIATED T HAT THE 2ND PROVISO TO SECTION 54EC INSERTED BY THE FINANCE (NO .2) ACT 2014 WITH EFFECT FROM 01-04-2015 IS CLARIFICATORY I N NATURE AS THE MEMORANDUM EXPLAINING THE PROVISIONS CLEARLY STATE THAT THE INTENDED LIMIT FOR RELIEF U/S 54EC IS ONLY RS. 50,0 0,000/-. (V) WITHOUT PREJUDICE TO THE ABOVE, THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THAT ASSESSEE WAS NOT ELIGIBLE FOR DEDU CTION U/S.54EC OF THE IT ACT FOR RS. 50,00,000/- INVESTED ON 25-03- 2013 IN NHAI BONDS PRIOR TO THE DATE OF TRANSFER OF LONG TERM CAPITAL ASSET ON 28-03-2013 (VI) THE APPELLANT CRAVES LEAVE TO ADD, DELETE, SUB STITUTE, AND AMEND ANY OF THE GROUNDS OF APPEAL BEFORE THE HEARI NG OF APPEAL AND/ OR AT THE TIME OF HEARING OF THE APPEAL . FOR THESE AND OTHER GROUNDS OF APPEAL THAT MAY BE C ANVASSED AT THE TIME OF THE HEARING OF APPEAL, IT IS PRAYED THAT DISALLOWANCE MADE BY THE ASSESSING OFFICER U/ S 54E C OF THE I.T. ACT BE RESTORED. 5. LD. DR RELIED ON THE ORDER OF AO. 4 ITA NO. 269/HYD/17 SUBRAHMANYAM KOTIKALAPUDI 6. LD. AR RELIED ON THE ORDER OF ITAT, MUMBAI BENCH IN THE CASE OF SHRI UPENDRA C PAREKH IN ITA NO. 3351/MUM/2017 V IDE ITA NO. 04/09/2017 WHEREIN THE BENCH HAS HELD AS UNDER: 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFUL LY CONSIDERED THE SAME. WE NOTED THAT THIS ISSUE IS DULY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE BANGALORE BENCH IN CASE OF VIVEK JA IRAZBHOY VS. DY. COMMISSIONER OF INCOME-TAX, ITA NO. 236/BANG/2012 A ND AHMEDABAD BENCH IN THE CASE OF ASPI GINWALA, SHREE RAM ENGG. & MFG. INDUSTRIES VS. ASST. COMMISSIONER OF INCOME-TAX, 20 TAXMANN.COM 75 (AHD.). IN THE CASE OF ASPI GINWALA, THE CO-ORDINATE BENCH HAS HELD AS UND ER: - '7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORDS AND FIND THAT THE ASSESSEE AND HIS BROTHER SHRI RUSTOM GINWALA SO LD A PROPERTY ON 22-10- 2007 FOR RS. 6.21 CRORES. THE ASSESSEE AND HIS BROT HER HAD 50% SHARE IN THIS PROPERTY. THE ASSESSEE MADE INVESTMENT OF RS. 50 LA KHS ON 31-12-2008 IN REC BONDS AND RS. 50 LAKHS ON 26-05-2008 IN NHAI BO NDS AND CLAIMED EXEMPTION OF RS. 1 CRORE U/S 54EC OF THE ACT. THE I NVESTMENT IN REC BONDS WAS ALLOWED BY THE AO AS IT WAS WITHIN THE TIME LIM IT OF SIX MONTHS PRESCRIBED IN SECTION 54EC OF THE ACT, WHILE THE INVESTMENT IN NHAI BONDS WHICH WAS MADE ONLY ON 26-05-2008 WAS NOT ALLOWED A S ACCORDING TO THE LOWER AUTHORITIES THE ASSESSEE IS ONLY ENTITLED FOR EXEMPTION U/S 54EC UPTO RS. 50 LAKHS ONLY. THE ASSESSEE'S CASE, HOWEVER, IS THAT AS PER THE PROVISO TO SECTION 54EC , INVESTMENT MADE ON OR AFTER 1ST APRIL, 2007 IN TH E LONG TERM SPECIFIED ASSET BY AN ASSESSEE DURING ANY FINA NCIAL YEAR SHOULD NOT EXCEED RS. 50 LAKHS. THE ASSESSEE'S CASE IS THAT SI NCE THE PROPERTY WAS SOLD ON 22-10-2007 HE COULD HAVE INVESTED IN ELIGIBLE IN VESTMENT WITHIN SIX MONTHS I.E. ON OR BEFORE 21-04-2008 IN ORDER TO AVA IL EXEMPTION U/S 54EC OF THE ACT. THERE IS NO DISPUTE ABOUT RS. 50 LAKHS SHR I UPENDRA C. PAREKH INVESTED ON 31-12-2007 IN REC BONDS. THE DISPUTE IS ONLY ABOUT FURTHER INVESTMENT OF RS. 50 LAKHS IN NHAI BONDS MADE ON 26 -05-2008. SINCE SIX MONTHS IN THIS CASE INVOLVES TWO FINANCIAL YEARS, T HE ASSESSEE'S CASE IS THAT IF HE HAD DEPOSITED ANOTHER RS. 50 LAKHS FROM 1ST APRI L, 2008 TO 21- 04-2008, HE WAS ENTITLED FOR EXEMPTION U/S 54EC OF THE ACT. AS DURING THIS PERIOD FROM 01-04-2008 TO 26-05-2008 SUBSCRIPTION IN ELIGIBLE I NVESTMENT WAS CLOSED, THE INVESTMENT MADE BY THE ASSESSEE ON 26-05-2008 I.E. 1ST DAY OF THE REOPENING OF THE SUBSCRIPTION OF ELIGIBLE INVESTMEN T IN NHAI BONDS SHOULD BE TREATED IN TIME. THERE IS ALSO NO DISPUTE ABOUT THE FACT THAT SUBSCRIPTION TO THE ELIGIBLE INVESTMENT WAS CLOSED DURING THE PERIO D 01-04-2008 TO 26-05- 2008. THE DISPUTE WHICH REMAINS TO BE DECIDED BY US IN THIS CASE IS WHETHER AS PER THE PROVISIONS OF SECTION 54EC THE ASSESSEE IS ENTITLED FOR EXEMPTION OF RS. 1 CRORE AS SIX MONTHS PERIOD FOR INVESTMENT IN ELIGIBLE INVESTMENT INVOLVES TWO FINANCIAL YEARS. IF THE ANSWER TO THIS QUESTION IS 'YES', WHETHER INVESTMENT MADE BY THE ASSESSEE ON 26-05- 2008 BEYO ND SIX MONTHS PERIOD 5 ITA NO. 269/HYD/17 SUBRAHMANYAM KOTIKALAPUDI IS ELIGIBLE FOR EXEMPTION IN VIEW OF THE FACT THAT NO SUBSCRIPTION FOR ELIGIBLE INVESTMENT WAS AVAILABLE TO THE ASSESSEE FROM 1ST A PRIL, 2008 TO 26-05- 2008. 8. WHILE GOING THROUGH THE PROVISO OF SECTION 54EC , WE FIND THAT THE PROVISO TO SECTION READS AS UNDER. - '[PROVIDED THAT THE INVESTMENT MADE ON OR AFTER THE 1ST DAY OF APRIL, 2007 IN THE LONG TERM SPECIFIED ASSET BY AN ASSESSEE DURING ANY FINANCIAL YEAR DOES NOT EXCEED FIFTY LAKH RUPEE]' IT IS CLEAR FROM THIS PROVISO THAT WHERE ASSESSEE T RANSFERS HIS CAPITAL ASSET AFTER 30TH SEPTEMBER OF THE FINANCIAL YEAR HE GETS AN OPPORTUNITY TO MAKE AN INVESTMENT OF RS. 50 LAKHS EACH IN TWO DIFFERENT FI NANCIAL YEARS AND IS ABLE TO CLAIM EXEMPTION UPTO RS. 1 CRORE U/S 54EC OF THE AC T. SINCE THE LANGUAGE OF THE PROVISO IS CLEAR AND UNAMBIGUOUS, WE HAVE NO HE SITATION IN HOLDING THAT THE ASSESSEE IS ENTITLED TO GET EXEMPTION UPTO RS. 1 CRORE IN THIS CASE. THIS VIEW OF OURS GETS SUPPORT FROM THE FOLLOWING FINDIN G OF THE HON'BLE SUPREME COURT IN THE CASE OF IPC A LABORATORY LTD. V. DY. CIT[2004] 266 ITR 521 /135 TAXMAN 594 (SC), WHEREIN IT HAS BEEN HELD BY T HE HON'BLE SUPREME COURT THAT - 'EVEN THOUGH A LIBERAL INTERPRETATION HAS TO BE GIV EN TO SUCH A PROVISION THE INTERPRETATION HAS TO BE AS PER THE WORDING OF THE SECTION. IF THE WORDING OF THE SECTION IS CLEAR, THEN BENEFITS WHICH ARE NOT A VAILABLE CANNOT BE CONFERRED BY IGNORING OR MISINTERPRETING WORDS IN T HE SECTION' HERE THE SITUATION IS REVERSE. SINCE THE WORDING OF THE PROVISO TO SECTION 54EC IS CLEAR, THE BENEFITS WHICH ARE AVAILABLE TO THE ASSESSEE CANNOT BE DENIED. IN VIEW OF ABOVE, IT IS HEREBY HELD THAT TH E ASSESSEE IS ENTITLED FOR EXEMPTION OF RS. 1 CRORE AS SIX MONTHS' PERIOD FOR INVESTMENT IN ELIGIBLE INVESTMENTS INVOLVED IS TWO FINANCIAL YEARS. 9. NOW, COMING TO THE SECOND ASPECT OF THE MATTER, WHETHER INVESTMENT OF RS. 50 LAKHS MADE IN NHAI BONDS ON 26-05-2008 CAN BE SH RI UPENDRA C. PAREKH CONSIDERED TO BE MADE WITHIN SIX MONTHS PERI OD AS PER THE PROVISO TO SEC. 54EC, WE FIND THAT THE ASSESSEE WAS TO MAKE IN VESTMENT IN SUCH BONDS BETWEEN 01-04-2008 TO 21-04-2008. THERE IS NO DISPU TE ABOUT THE FACT THAT SUBSCRIPTION OF ELIGIBLE BONDS WAS CLOSED DURING TH IS PERIOD TILL 26-05-2008 AND ON THE 1ST DAY OF THE REOPENING OF THE SUBSCRIP TION, THE ASSESSEE MADE THIS INVESTMENT. UNDER THE CIRCUMSTANCES, WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSEE WAS PREVENTED BY SUFFICIENT CAUSE WHICH WAS BEYOND HIS CONTROL IN MAKING INVESTMENT IN THESE BONDS WITHIN THE TIME PRESCRIBED. WE FURTHER FIND THAT VARIOUS JUDICIAL AUTHORITIES HAVE TAKEN A VIEW THAT EXEMPTION SHOULD BE GRANTED IN SUCH CASES WHERE THE RE IS A DELAY IN MAKING INVESTMENT DUE TO NON-AVAILABILITY OF THE BONDS AND HAVE HELD THAT IT IS A 6 ITA NO. 269/HYD/17 SUBRAHMANYAM KOTIKALAPUDI REASONABLE CAUSE AND THE EXEMPTION SHOULD BE GRANTE D. IN THE CASE OF RAM AGANVAL V. JT. CIT [2002] 81 ITD 163 (MUM), IT HAS BEEN HELD AS UNDER : 'IN REGARD TO CLAIM OF EXEMPTION UNDER SECTION 54F WE MAY MENTION THAT IT IS FOUND BY THE LEARNED CIT(A) THAT THE BANK WAS CLOSE D ON 31 -8-1995 ON ACCOUNT OF STRIKE AS CERTIFIED BY THE OFFICIALS OF THE CONCERNED BANK. FROM THE CERTIFICATION GIVEN BY THE BANK OFFICIALS, THE ASSE SSEE HAD APPROACHED THE BANK OFFICIALS WITH THE CHEQUE FOR THE AMOUNT OF DE POSIT ON 30-8-1995. THE ASSESSEE REMAINED UNABLE TO OBTAIN RECEIPT ON 31-8- 1995 DUE TO BANK STRIKE AND THE CHEQUE WAS CLEARED ON 1-9-1995. IN THIS VIE W OF THE SITUATION, IT CAN WELL BE SAID THAT THE DEPOSIT OF THE ASSESSEE WAS I N ACCORDANCE WITH THE PROVISIONS OF STATUTE AS ON THE LAST DATE I.E. THE 31-8- 1995, THE DEPOSIT COULD NOT BE MADE DUE TO THE REASON WHICH WAS BEYOND THE CONTROL OF THE ASSESSEE PARTICULARLY IN VIEW THAT THE EFFORTS WERE MADE BY THE ASSESSEE A DAY PRIOR TO LAST DATE TO DEPOSIT THE REQUISITE AMOUNT IN THE BA NK TO MAKE HIM ENTITLE FOR EXEMPTION UNDER SEC 54F. AS MENTIONED EARLIER, THIS POSITION HAS ALSO BEEN ACCEPTED BY THE LEARNED CIT(A). THEREFORE, WE DIREC T THE ASSESSING OFFICER TO ALLOW THE NECESSARY EXEMPTION TO THE ASSESSEE. BEFORE PARTING WE MAY OBSERVE THAT SECTION 54F IS A BENEFICIAL PROVISION TO ENCOURAGE ASSESSEE TO INVEST IN HOUSE PROPERTIES, K EEPING IN MIND THE ABOVE OBJECT BEHIND THE INSERTION OF SECTION 54F AND CONSIDERING THE FACT THAT THE ASSESSEE WAS NOT AT FAULT IN NOT DEPOSITING THE AMO UNT BEFORE 31-8- 1995, WE HOLD THAT THE DEPOSIT MADE ON 1-9-1995 SATISFIES TH E CONDITION LAID DOWN IN SECTION 54F OF THE ACT.' SINCE NO CONTRARY DECISION WAS CITED ON BEHALF OF THE REVENUE, WE ARE LEFT WITH NO OPTION BUT TO HOLD THAT THE INVESTMENTS MADE BY THE ASSESSEE ON 26-05-2008 BEYOND SIX MONTHS IS ELIGIBLE FOR EXEMPTION IN VIEW OF THE FACT THAT NO SUBSCRIPTION FOR ELIGIBLE INVESTMENT WAS AVAILABLE TO THE ASSESSEE FROM 1ST APRIL, 2008 TO 26-05- 2008. 10. IN THE RESULT, BOTH THE APPEALS ARE ALLOWED.' 4. WE HAVE ALSO NOTED THAT SUBSEQUENTLY, A CONTRARY VIEW HAS BEEN TAKEN BY JAIPUR BENCH IN ASST. COMMISSIONER OF INCOME-TAX VS. RAJ KUMAR JAIN & SONS (HUF ), 19 TAXMANN.COM 27 (JP.). SUBSEQUENT TO THAT DECI SION, SHRI UPENDRA C. PAREKH THE BANGALORE BENCH IN THE CASE O F VIVEK JAIRAZBHOY VS. DY. COMMISSIONER OF INCOME-TAX VIDE ORDER DATED 14. 12.2012 TOOK VIEW IN FAVOUR OF THE ASSESSEE. FROM THE PROVISIONS OF SEC. 54EC WE NOTED THAT THE LIMIT OF RS. 50,00,000/- AS GIVEN UNDER THE PROVISO IS PER PERSON PER FINANCIAL YEAR. THE PLAIN READING OF THE SECTION AS WELL AS T HE PROVISO CLEARLY SUGGESTS THE SAME INTERPRETATION. THERE IS NO AMBIGUITY IN T HE INTERPRETATION. HAD THERE BEEN AN INTENTION OF THE LEGISLATURE TO RESTR ICT THE EXEMPTION TO RS.50,00,000/-, THE LEGISLATURE WOULD HAVE PROVIDED THE EMBARGO IN THIS REGARD. RESTRICTION RELATES ONLY TO THE INVESTMENT MADE IN ANY FINANCIAL YEAR BY THE ASSESSEE. MAKING OF THE INVESTMENT IS A COND ITION FOR AVAILING OF THE EXEMPTION. CONDITION FOR AVAILING OF THE EXEMPTION REQUIRES THAT THE INVESTMENT CAN BE MADE WITHIN A PERIOD OF 6 MONTHS. IF 6 MONTHS FALLS WITHIN 7 ITA NO. 269/HYD/17 SUBRAHMANYAM KOTIKALAPUDI A DIFFERENT FINANCIAL YEAR, AS HAS HAPPENED IN THIS CASE, IN OUR OPINION, THIS TRIBUNAL CANNOT ADD THE EMBARGO THAT THE ASSESSEE C ANNOT MAKE THE INVESTMENT TO AVAIL OF THE EXEMPTION UNDER SECTION 54EC IN THE DIFFERENT FINANCIAL YEAR IF HE HAD ALREADY MADE THE INVESTMEN T IN THE FINANCIAL YEAR IN WHICH THE CAPITAL ASSET IS TRANSFERRED. IN OUR OPIN ION, THE LANGUAGE OF SECTION 54EC IS CLEAR AND UNAMBIGUOUS AND IT LEADS TO THE INTER PRETATION THAT THE ASSESSEE CAN MAKE THE INVESTMENT IN TWO DIFFERENT F INANCIAL YEARS PROVIDED IN A FINANCIAL YEAR THE INVESTMENT MADE DID NOT EXCEED RS.50,00,000/-. WE HAVE ALSO GONE THROUGH THE CIRCULAR NO. 3/2008 DTD. 12.3 .2008 ISSUED BY THE CBDT BEING AN EXPLANATORY NOTE ON THE PROVISIONS RELATIN G TO DIRECT TAXES IN FINANCE ACT , 2007. IN PARA 28.2 THEREOF THE REASON FOR IT TO S ET THE LIMIT ON THE QUANTUM OF THE INVESTMENT BY A PERSON IN A FINA NCIAL YEAR ARE GIVEN AS UNDER : '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 T O ENSURE THAT THE LIMITED NUMBER OF BONDS AVAILABLE FOR SUBSCRIPTION IS ALSO AVAILABLE FOR SMALL INVESTORS. THEREFORE, WITH A VIEW TO ENSURE EQUITAB LE DISTRIBUTION OF BENEFITS AMONGST PROSPECTIVE INVESTORS, THE GOVERNMENT DECID ED TO IMPOSE A CEILING ON THE QUANTUM OF INVESTMENT THAT COULD BE 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-TERM SPEC IFIED ASSETS. INVESTMENTS IN SUCH SHRI UPENDRA C. PAREKH SPECIFIED ASSETS TO AVAIL EXEMPTION UNDER SECTION 54EC , ON OR AFTER 1ST DAY OF APRIL, 2007 WILL NOT EXCEE D FIFTY LAKH RUPEES IN A FINANCIAL YEAR.' FROM THIS CIRCULAR ALSO, IT IS APPARENT THAT THE GO VERNMENT ONLY INTENDED TO RESTRICT THE INVESTMENT IN A PARTICULAR FINANCIAL Y EAR AND ACCORDINGLY HAS FIXED THE LIMIT OF RS. 50,00,000/- AS PERMISSIBLE L IMIT IN A PARTICULAR FINANCIAL YEAR. THE GOVERNMENT DID NOT INTEND TO RESTRICT THE MAXIMUM AMOUNT OF EXEMPTION PERMISSIBLE UNDER SECTION 54EC . LEGISLATURE IN OUR OPINION HAS CONSCIOUSLY USED THE WORDS 'IN A FINANCIAL YEAR' IN THE PROVISO TO SEC. 54EC OF THE ACT. IF THE LEGISLATURE WANTED TO RESTRICT T HE EXEMPTION ITSELF TO RS. 50,00,000/-, IT COULD HAVE HAVE SIMPLY DISPENSED WI TH USING THE WORDS 'IN A FINANCIAL YEAR'. THE HON'BLE SUPREME COURT WHILE DE CIDING THE CASE OF VIKRANT TYRES LTD. VS. FIRST ITO, 274 ITR 821 LAID DOWN LAW OF INTERPRETATION OF THE STATUTE BY HOLDING THEREIN AS UNDER : 'IT IS SETTLED PRINCIPLE OF LAW THAT THE COURTS WHI LE CONSTRUING REVENUE ACT S HAVE TO GIVE A FAIR AND REASONABLE CONSTRUCTION TO THE LANGUAGE OF A STATUTE WITHOUT LEANING TO ONE SIDE OR THE OTHER, MEANING T HEREBY 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 O F 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 T HE PROVISIONS OF THE TAXING 8 ITA NO. 269/HYD/17 SUBRAHMANYAM KOTIKALAPUDI ENACTMENTS ACCORDING TO THE ORDINARY AND NATURAL ME ANING OF THE LANGUAGE USED AND THEN TO APPLY THAT MEANING TO THE FACTS OF THE CASE AND IN THAT PROCESS IF THE TAX PAYER IS BROUGHT WITHIN THE NET HE IS CAUGHT, OTHERWISE HE HAS TO GO FREE.' 5. EVEN IN THE CASE OF CIT VS. VEGETABLE PRODUCTS LTD ., 88 ITR 192 THE HON'BLE SUPREME COURT HAS TAKEN VIEW THAT IF THERE ARE TWO VIEWS POSSIBLE, THE VIEW FAVOURABLE TO THE SUBJECT SHOULD BE TAKEN. WE ALSO NOTED THAT THE SECOND PROVISO HAS BEEN INSERTED IN SECTION 54EC SUB-SECTION (1) W.E.F. 01.04.2005 WHICH READS AS UNDER: - PROVIDED FURTHER THAT THE INVESTMENT MADE BY AN ASS ESSEE IN THE LONG-TERM SPECIFIED ASSET, FROM CAPITAL GAINS ARISING FROM TR ANSFER OF ONE OR MORE ORIGINAL ASSETS, DURING THE FINANCIAL YEAR IN WHICH THE ORIGINAL ASSET OR ASSETS ARE TRANSFERRED AND IN THE SUBSEQUENT FINANCIAL YEA R DOES NOT EXCEED FIFTY LAKH RUPEES. THIS PROVISO HAS BEEN INSERTED TO TAKE CARE OF THE SITUATION AS IN THIS CASE BUT THIS PROVISO IS NOT RETROSPECTIVE AND CAME INTO EFF ECT FROM 01.04.2005. SHRI UPENDRA C. PAREKH THEREFORE, THIS AMENDMENT, I N OUR VIEW, WILL NOT COME TO THE RESCUE OF THE REVENUE. 6. IN VIEW OF THE AFORESAID DISCUSSION, WE ARE OF T HE VIEW THAT NO INTERFERENCE IS CALLED FOR IN THE ORDER OF CIT(A) AND CIT(A) HAS RIGHTLY DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. WE, ACCORDI NGLY, DISMISS THE APPEAL FILED BY THE REVENUE. 6.1 THE HONBLE HIGH COURT OF MADRAS IN THE CASE OF CIT VS. C. JAICHANDER (TC(A) NOS. 419 AND 533 OF 2014) HAS HELD AS UNDER: 9. AT THIS JUNCTURE, FOR BETTER CLARITY, IT WOULD BE APPROPRIATE TO REFER TO THE NOTES ON CLAUSES _ FINANCE BILL 2014 AND THE MEMORA NDUM EXPLAINING THE PROVISIONS IN THE FINANCE (NO.2) BILL, 2014, WHICH READ AS UNDER: _NOTES ON CLAUSES _ FINANCE BILL 2014: CLAUSE 23 OF THE BILL SEEKS TO AMEND SECTION 54EC OF THE INCOME-TAX ACT RELATING TO CAPITAL GAIN NOT TO BE CHARGED ON INVES TMENT IN CERTAIN BONDS. THE EXISTING PROVISIONS CONTAINED IN SUB-SECTION (1 ) OF SECTION 54EC PROVIDE THAT WHERE CAPITAL GAIN ARISES FROM THE TRANSFER OF A LONG-TERM CAPITAL ASSET AND THE ASSESSEE 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 INVESTED IN THE LONG-TERM SPECIFIED ASSET OUT OF TOTAL CAPITAL GAIN SHALL NOT BE CHARGED TO TAX. THE PROVISO TO THE SAI D SUB-SECTION PROVIDES THAT 9 ITA NO. 269/HYD/17 SUBRAHMANYAM KOTIKALAPUDI THE INVESTMENT MADE IN THE LONG-TERM SPECIFIED ASSE T DURING ANY FINANCIAL YEAR SHALL NOT EXCEED FIFTY LAKH RUPEES. IT IS PROPOSED TO INSERT A PROVISO BELOW FIRST PROV ISO IN SAID SUB-SECTION (1) SO AS TO PROVIDE THAT THE INVESTMENT MADE BY AN ASS ESSEE IN THE LONG-TERM SPECIFIED ASSET, FROM CAPITAL GAINS ARISING FROM TR ANSFER OF ONE OR MORE ORIGINAL ASSETS, DURING THE FINANCIAL YEAR IN WHICH THE ORIGINAL ASSET OR ASSETS ARE TRANSFERRED AND IN THE SUBSEQUENT FINANCIAL YEA R DOES NOT EXCEED FIFTY LAKH RUPEES. THIS AMENDMENT WILL TAKE EFFECT FROM 1ST APRIL, 201 5 AND WILL, ACCORDINGLY, APPLY IN RELATION TO ASSESSMENT YEAR 2015-16 AND SU BSEQUENT YEARS. MEMORANDUM: EXPLAINING THE PROVISIONS IN THE FINANC E (NO.2) BILL, 2014: 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 ARISES FROM THE TRANSFER OF A LONG-TERM CAPITAL ASSET AND THE ASSESSEE HAS, AT ANY TIME WIT HIN A PERIOD OF SIX MONTHS, INVESTED THE WHOLE OR ANY PART OF CAPITAL GAINS IN THE LONG-TERM SPECIFIED ASSET, OUT OF THE WHOLE OF THE CAPITAL GAIN, SHALL NOT BE CHARGED TO TAX. THE PROVISO TO THE SAID SUB-SECTION PROVIDES THAT THE I NVESTMENT MADE IN THE LONG- TERM SPECIFIED ASSET DURING ANY FINANCIAL YEAR SHAL L 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 YEAR AFTER THE MONTH OF SEPTEMBER WERE INVESTED IN THE SPECIFIED ASSET IN SUCH A MANNER SO AS TO SPLIT THE INVESTMENT IN TWO YEARS I.E., ONE WITHIN THE YEAR AND SECOND I N THE NEXT YEAR BUT BEFORE THE EXPIRY OF SIX MONTHS. THIS RESULTED IN THE CLAI M FOR RELIEF OF ONE CRORE RUPEES AS AGAINST THE INTENDED LIMIT FOR RELIEF OF FIFTY LAKHS RUPEES. ACCORDINGLY, IT IS PROPOSED TO INSERT A PROVISO IN SUB-SECTION (1) SO AS TO PROVIDE THAT THE INVESTMENT MADE BY AN ASSESSEE IN THE LONG-TERM SPECIFIED ASSET, OUT OF CAPITAL GAINS ARISING FROM TRANSFER O F ONE OR MORE ORIGINAL ASSET, DURING THE FINANCIAL YEAR IN WHICH THE ORIGINAL ASS ET OR ASSETS ARE TRANSFERRED AND IN THE SUBSEQUENT FINANCIAL YEAR DOES NOT EXCEE D FIFTY LAKH RUPEES. THIS AMENDMENT WILL TAKE EFFECT FROM 1ST APRIL, 201 5 AND WILL, ACCORDINGLY, APPLY IN RELATION TO ASSESSMENT YEAR 2015-16 AND SU BSEQUENT ASSESSMENT YEARS._ 10. THE LEGISLATURE HAS CHOSEN TO REMOVE THE AMBIGU ITY IN THE PROVISO TO SECTION 54EC(1) OF THE ACT BY INSERTING A SECOND PROVISO WITH EFFE CT FROM 1.4.2015. THE MEMORANDUM EXPLAINING THE PROVISIONS IN THE FINANCE (NO.2) BILL, 2014 ALSO STATES THAT THE SAME WILL BE APPLIC ABLE FROM 1.4.2015 IN RELATION TO ASSESSMENT YEAR 2015-16 AND THE SUBSEQU ENT YEARS. THE INTENTION 10 ITA NO. 269/HYD/17 SUBRAHMANYAM KOTIKALAPUDI OF THE LEGISLATURE PROBABLY APPEARS TO BE THAT THIS AMENDMENT SHOULD BE FOR THE ASSESSMENT YEAR 2015-2016 TO AVOID UNWANTED LIT IGATIONS OF THE PREVIOUS YEARS. EVEN OTHERWISE, WE DO NOT WISH TO READ ANYTH ING MORE INTO THE FIRST PROVISO TO SECTION 54EC(1) OF THE ACT, AS IT STOOD IN RELATION TO THE ASSESSE ES. 11. IN ANY EVENT, FROM A READING OF SECTION 54EC(1) AND THE FIRST PROVISO, IT IS CLEAR THAT THE TIME LIMIT FOR INVESTMENT IS SIX MONTHS FROM THE DATE OF TRANSFER AND EVEN IF SUCH INVESTMENT FALLS UNDER TW O FINANCIAL YEARS, THE BENEFIT CLAIMED BY THE ASSESSEE CANNOT BE DENIED. I T WOULD HAVE MADE A DIFFERENCE, IF THE RESTRICTION ON THE INVESTMENT IN BONDS TO RS.50,00,000/- IS INCORPORATED IN SECTION 54EC(1) OF THE ACT ITSELF. HOWEVER, THE AMBIGUITY HAS BEEN REMOVED BY THE LEGISLATURE WITH EFFECT FRO M 1.4.2015 IN RELATION TO THE ASSESSMENT YEAR 2015-16 AND THE SUBSEQUENT YEAR S. FOR THE FOREGOING REASONS, WE FIND NO INFIRMITY IN THE ORDERS PASSED BY THE TRIBUNAL WARRANTING INTERFERENCE BY THIS COURT. THE SUBSTANTIAL QUESTIONS OF LAW ARE ANSWERED AGAINST THE REVENUE AND THESE APPE ALS ARE DISMISSED. NO COSTS. 7. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE NOTICE THAT THE ASSESSEE HAS SOLD THE PR OPERTY ON 28/03/2013 AND MADE 1 ST INVESTMENT ON 25/03/2013 AND SECOND INVESTMENT ON 12/04/2013. THE ASSESSEE HAS TO MAKE INVESTMENT WITHIN 6 MONTHS FROM THE DATE OF SALE I.E. BEFORE 2 8/09/2013. IN THIS CASE, THE LIMITATION PERIOD OF 6 MONTHS FALLS IN 2 FINANCIAL YEARS. SINCE THE PROVISION ALLOWS TO INVEST RS. 50 LAKHS DURING ANY FINANCIAL YEAR. ASSESSEE INTENDS TO TAKE THE ADVANTAGE OF THE ABOVE PROVISO U/S 54EC. THIS KIND OF TRANSACTIONS ARE MADE ELIGIBLE B Y THE JUDICIAL PRECEDENTS IN THE CASE OF SHRI UPENDRA C PAREKH (SU PRA). 7.1 FURTHER, WE NOTICE THAT THE LEGISLATURE HAS NOT ICES THAT THIS PROVISO WAS APPLIED AS TAX PLANNING TO TAKE ADDITI ONAL DEDUCTION UNDER THIS SECTION 54EC. THEREFORE, THEY INTRODUCED THE 2 ND PROVISO TO THIS SECTION WITH EFFECT FROM 01/04/2015 (AY 2016-1 7) PROSPECTIVELY. SINCE THE PRESENT APPEAL RELATES TO AY 2013-14, THE AMENDED PROVISION WILL NOT APPLY TO THE PRESENT CASE AS DEC IDED IN THE CASE OF CIT VS. C. JAINCHANDER (SUPRA). THEREFORE, THE GROU NDS RAISED BY THE REVENUE ARE DISMISSED. 11 ITA NO. 269/HYD/17 SUBRAHMANYAM KOTIKALAPUDI 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. PRONOUNCED IN THE OPEN COURT ON 20 TH JULY, 2018. SD/- SD/- (P. MADHAVI DEVI) (S. RIFAUR RAHM AN) JUDICIAL MEMBER A CCOUNTANT MEMBER HYDERABAD, DATED: 20 TH JULY, 2018 KV COPY TO:- 1) ITO, WARD 4(2), ROOM NO. 744, 7 TH FLOOR, D BLOCK, IT TOWERS, AC GUARDS, HYDERABAD 500 004. 2) SHRI SUBRAHMANYAM KOTIKALAPUD, H.NO. 1-9-1089/90 , VIDYANAGAR, HYDERABAD. 3) CIT(A) 1, HYDERABAD. 4) PR. CIT - 1, HYD. 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD. 6) GUARD FILE