ITO 16(2)(1), MUMBAI V. MUKUND T BHAMMAR, MUMBAI

ITA 2754/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88670 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 15-01-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 08-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIVEK BATRA SR
• Keywords: Capital asset; Cost of acquisition
• Section: 80C; 54F; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH B , MUMBAI BEFORE SHRI B.R. BASKARAN , ACCOUNTANT MEMBER AND SHRI SANJAY GARG , JUDICIAL MEMBER ITA NO. 2754/M/2013 ASSESSMENT YEAR: 2009 - 10 INCOME TAX OFFICER 16(2)(1), MATRU MANDIR, TARDEO ROAD, MUMB AI 400 0 07 VS. SHRI MUKUND T BHAMMAR, FLAT NO.8, 3 RD FLOOR, MUKUND MANSION, 14, DARBAHSHA LANE, OFF NEPEANSEA ROAD, MUMBAI 400 036 PAN: AABPB4517E (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI HIRO RAI , A .R. REVENUE BY : SHRI VIVEK BATRA , SR. A.R. DATE OF HEARING : 15.01 .201 5 DATE OF PRONOUNCEMENT : 31.03. 2015 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THIS APPEAL BY THE R EVENUE IS DIRECTED AGAINST THE ORDER DATED 04.01.2013 OF COMMISS IONER OF INCOME TAX (APPEALS) [(HEREINAFTER REFERRED TO AS THE CIT(A)] FOR THE ASSESSMENT YEAR 2009 - 10. THE R EVENUE HAS RAISED THE FOLLOWING GROUNDS IN THIS APPEAL: 1. WHETHER ON THE FACTS AND CIRCUMSTANCE OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING EXEMPTION U/S 54F OF RS.1,34,78,000/ - IN COMPUTATION OF CAPITAL GAINS AS AGAINST EXEMPTION U/S 54F ADOPTED BY THE AO AT RS.93,16,214/ - AFTER CONSIDERING EXEMPTION CLAIMED U/S. 54EC. 2. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 3. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. ITA NO.2754/M/2013 SHRI MUKUND T BHAMMAR 2 2. THE SOLE ISSUE RAISED IN THIS APPEAL IS WHETHER THE EXEMPTION UNDER SECTION 54F IS TO BE COMPUTED ON WHOLE OF THE CAPITAL GAINS OR ON THE NET OF THE CAPITAL GAINS AFTER DEDU C TING CLAIM UNDER SECTION 54EC. 3. T HE BRIEF FACTS RELATING TO THE ISSUE UNDER CONSIDERATION ARE THAT THE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS THE A O) OBSERVED THAT THE ASSESSEE HAD ALREADY TAKEN CLAIM/EXEMPTION OF AN AMOUNT OF RS.50 LAKH OUT OF THE TOTAL CAPITAL GAINS UNDER SECTION 54EC ON ACCOUNT OF INVESTMENT MADE IN REC BONDS. HE OBSERVED THAT WHILE CLAIMING EXEMPTION UNDER SECTION 54F THE ASSESS EE HAD NOT REDUCED THE EXEMPTION AMOUNT OF RS.50 LAKH ALREADY CLAIMED UNDER SECTION 54EC. HE OBSERVED THAT ONCE EXEMPTION UNDER SECTION 54EC WAS ALLOWED TO THE ASSESSEE, THE AMOUNT OF SUCH EXEMPTION HAD TO BE REDUCED FROM TOTAL CAPITAL GAIN. THUS, THE EX EMPTION UNDER SECTION 54F COULD HAVE BEEN CLAIMED BY THE ASSESSEE ON THE NET LONG TERM CAPITAL GAIN AVAILABLE AFTER DEDUCTING THE EXEMPTION CLAIMED OF RS.50 LAKH UNDER SECTION 54EC OUT OF THE TOTAL CAPITAL GAINS. THE AO THEREFORE WORKED THE EXEMPTION OF L ONG TERM CAPITAL GAINS AFTER REDUCING THE CLAIM OF EXEMPTION UNDER SECTION 54EC AND THE EXCESS CLAIM DISALLOWED WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 4. ON APPEAL, THE LD. CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE OBSERVING AS UNDER: 6.2 TH E APPELLANT HAS TAKEN THE GROUND THAT THE A.O. ERRED IN COMPUTING THE DEDUCTION ALLOWABLE U/S.54F OF THE ACT AFTER EXCLUDING THE AMOUNT DEDUCTIBLE U/S.54EC OF THE ACT FROM THE CAPITAL GAINS ON TRANSFER OF TENANCY RIGHTS. IN MY CONSIDERED OPINION, THE PROV ISIONS OF SEC.54EC AND 54F RUN ON A SIMILAR LANGUAGE THAT THE CAPITAL GAIN IS NOT TO BE CHARGED ON FULFILLING THE CONDITIONS LAID DOWN THEREIN EXCEPT THAT IN THE CASE OF SECTION 54F THE PROPORTION AS THE COST OF NEW ASSET' BEARS TO THE 'NET CONSIDERATION' HAS TO BE CONSIDERED, WHEREAS IN SECTION 54EC THE PROPORTION AS THE COST OF ACQUISITION OF SPECIFIED ASSET' BEARS TO THE WHOLE OF THE CAPITAL GAIN' HAS TO BE CONSIDERED FOR COMPUTING THE DEDUCTION. IN THE PRESENT CASE, THE NET CONSIDERATION AND THE LONG T ERM CAPITAL GAIN RECEIVED BY THE APPELLANT ON TRANSFER OF TENANCY RIGHTS ARE ONE AND THE SAME. FURTHER, THERE IS NO PROVISION TO ALLOW THE EXEMPTION U / S.54EC OF THE ACT AT THE FIRST INSTANCE AND TO ARRIVE AT THE NET LONG TERM CAPITAL GAIN THER EOF AND COMPU TE THE DEDUCTION U/ S.54F ON THE SAID NET LONG TERM CAPITAL GAIN SO ARRIVED. I DO NOT FIND ANY SUPPORT IN THIS REGARD FROM THE ITA NO.2754/M/2013 SHRI MUKUND T BHAMMAR 3 PROVISIONS OF SEC.48 TO 55A OF THE ACT. ON COMPUTING THE CAPITAL GAINS IF ONE PERSON IS ENTITLED FOR EXEMPTION U/S 54F AND THE OTH ER PERSON IS ENTITLED FOR EXEMPTION U/S 54EC AND 54F ALSO, THERE IS NO GOOD REASON TO DISCRIMINATE THE LAW AGAINST THE SECOND PERSON IN COMPUTING THE EXEMPTION U/S 54F AS COMPARED TO T H E FIRST PERSON ESPECIALLY WHEN BOTH THE SECTIONS ARE INDEPENDENT AND AR E SELF CONTAINED CODES BY THEMSELVES. IN MY CONSIDERED OPINION SUCH DISCRIMINATION IS AGAINST THE RIGHT TO EQUALITY. ACCORDINGLY, I ALLOW THE APPELLANT'S GROUND NO.4 AND DIRECT THE A.O. TO COMPUTE THE DEDUCTION U/S.54F ON THE WHOLE OF THE CAPITAL GAIN ARI SING ON TRANSFER OF TENANCY RIGHTS AND NOT ON THE NET LONG TERM CAPITAL GAIN ARRIVED AFTER DEDUCTING CLAIM U/S 54EC. 5. AT THE OUTSET, THE LD. AR OF THE ASSESSEE HAS SUBMITTED THAT THE ISSUE IS SQUARELY COVER E D IN FAVOUR OF THE ASSESSEE BY THE DECISION O F THE CO - ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. DEEPAK S. BHEDA, IT APPEAL NO. 5011 (MUM.) 2010 [ASSESSMENT YEAR 2007 - 08] DECIDED ON JUNE 15, 2012. THE RELEVANT PART OF THE FINDINGS OF THE TRIBUNAL, FOR THE SAKE OF CONVENIENCE, IS REPRODU CED AS UNDER: 5. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THE ASSESSING OFFICER DENIED THE BENEFIT CLAIMED BY THE ASSESSEE UNDER SECTION 54 EC TOWARDS THE INVESTMENT MADE IN REC BONDS FOR A SUM OF RS. 50 LAKH OUT O F TOTAL LONG - TERM CAPITAL GAIN OF RS. 3.40 CRORES. THE ASSESSING OFFICER WAS OF THE VIEW THAT ONCE THE EXEMPTION HAS BEEN CLAIMED UNDER SECTION 54F AND THE ENTIRE CAPITAL GAIN HAS NOT BEEN UTILISED FOR THE PURCHASE OF RESIDENTIAL HOUSE, THEN THE NET CONSID ERATION WHICH IS NOT APPROPRIATED BY THE ASSESSEE TOWARDS THE PURCHASE OF NEW ASSET AND ALSO NOT DEPOSITED IN THE BANKS OR INSTITUTION AS SPECIFIED AND NOTIFIED IN THE OFFICIAL GAZETTE BY THE CENTRAL GOVERNMENT AS PER THE PROVISIONS OF SUB SECTION (4) OF S ECTION 54F, THE ASSESSEE CANNOT AVAIL THE EXEMPTION UNDER SECTION 54 EC. IT IS TO BE NOTED THAT IT IS NOT A CASE OF AVAILING DOUBLE EXEMPTION ON THE SAME AMOUNT BUT THE ASSESSEE HAS CLAIMED EXEMPTION UNDER SECTION 54F AS WELL AS UNDER SECTION 54 EC FOR THE RESPECTIVE AMOUNT OF CAPITAL GAIN INVESTED IN PURCHASE OF NEW HOUSE AND REC BONDS. WHEREVER ANY SUCH RESTRICTION IS DEEMED FIT, THE LEGISLATURE HAS PROVIDED IN THE STATUTE A SUFFICIENT CHECK UNDER CHAPTER VI - A OF THE INCOME TAX ACT. AS FAR AS THE CLAIM OF EXEMPTION UNDER SECTION 54F AND UNDER SECTION 54 EC, THERE IS NO SUCH RESTRICTION IN THE STATUTE THAT THE ASSESSEE CANNOT CLAIM THE EXEMPTION UNDER BOTH SECTIONS, EVEN IF THE CONDITIONS PROVIDED UNDER THE RESPECTIVE SECTIONS ARE COMPLIED WITH AND THE SAME DOES NOT RESULT IN AVAILING DOUBLE EXEMPTION ON THE SAME AMOUNT. FOR READY REFERENCE BE QUOTED SECTION 54 EC AS UNDER: 54EC. (1) WHERE THE CAPITAL GAIN ARISES FROM THE TRANSFER OF A LONG - TERM CAPITAL ASSET (THE CAPITAL ASSET SO TRANSFERRED BEING HEREAF TER 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 ITA NO.2754/M/2013 SHRI MUKUND T BHAMMAR 4 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 SH ALL 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 PROPORTIO N 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 : [ 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 RUPEES.] (2) WHERE THE LONG - TERM SPECIFIED ASSET IS TRANSFERRED OR CONVERTED (OTHERWISE THAN BY TRANSFER) INTO MONEY AT ANY TIME WITHIN A PERIOD OF THREE YEARS FROM THE DATE OF ITS ACQUISITIO N, THE AMOUNT OF CAPITAL GAINS ARISING FROM THE TRANSFER OF THE ORIGINAL ASSET NOT CHARGED UNDER SECTION 45 ON THE BASIS OF THE COST OF SUCH LONG - TERM SPECIFIED ASSET AS PROVIDED IN CLAUSE (A) OR, AS THE CASE MAY BE, CLAUSE (B) OF SUB - SECTION (1) SHALL BE DEEMED TO BE THE INCOME CHARGEABLE UNDER THE HEAD CAPITAL GAINS RELATING TO LONG - TERM CAPITAL ASSET OF THE PREVIOUS YEAR IN WHICH THE LONG - TERM SPECIFIED ASSET IS TRANSFERRED OR CONVERTED (OTHERWISE THAN BY TRANSFER) INTO MONEY. EXPLANATION. - IN A CASE WHERE THE ORIGINAL ASSET IS TRANSFERRED AND THE ASSESSEE INVESTS THE WHOLE OR ANY PART OF THE CAPITAL GAIN RECEIVED OR ACCRUED AS A RESULT OF TRANSFER OF THE ORIGINAL ASSET IN ANY LONG - TERM SPECIFIED ASSET AND SUCH ASSESSEE TAKES ANY LOAN OR ADVANCE ON THE SECURITY OF SUCH SPECIFIED ASSET, HE SHALL BE DEEMED TO HAVE CONVERTED (OTHERWISE THAN BY TRANSFER) SUCH SPECIFIED ASSET INTO MONEY ON THE DATE ON WHICH SUCH LOAN OR ADVANCE IS TAKEN. [(3) WHERE THE COST OF THE LONG - TERM SPECIFIED ASSET HAS BEEN TAKEN I NTO ACCOUNT FOR THE PURPOSES OF CLAUSE (A) OR CLAUSE (B) OF SUB - SECTION (1), - (A) A DEDUCTION FROM THE AMOUNT OF INCOME - TAX WITH REFERENCE TO SUCH COST SHALL NOT BE ALLOWED UNDER SECTION 88 FOR ANY ASSESSMENT YEAR ENDING BEFORE THE 1ST DAY OF APRIL, 2006; ITA NO.2754/M/2013 SHRI MUKUND T BHAMMAR 5 (B) A DEDUCTION FROM THE INCOME WITH REFERENCE TO SUCH COST SHALL NOT BE ALLOWED UNDER SECTION 80C FOR ANY ASSESSMENT YEAR BEGINNING ON OR AFTER THE 1ST DAY OF APRIL, 2006.] EXPLANATION. FOR THE PURPOSES OF THIS SECTION, - (A) COST, IN RELATION TO ANY LONG - TERM SPECIFIED ASSET, MEANS THE AMOUNT INVESTED IN SUCH SPECIFIED ASSET OUT OF CAPITAL GAINS RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF THE ORIGINAL ASSET; [(B) LONG - TERM SPECIFIED ASSET FOR MAKING ANY INVESTMENT UNDER THIS SECTION DURIN G THE PERIOD COMMENCING FROM THE 1ST DAY OF APRIL, 2006 AND ENDING WITH THE 31ST DAY OF MARCH, 2007, MEANS ANY BOND, REDEEMABLE AFTER THREE YEARS AND ISSUED ON OR AFTER THE 1ST DAY OF APRIL, 2006, BUT ON OR BEFORE THE 31ST DAY OF MARCH, 2007, - (I) BY TH E NATIONAL HIGHWAYS AUTHORITY OF INDIA CONSTITUTED UNDER SECTION 3 OF THE NATIONAL HIGHWAYS AUTHORITY OF INDIA ACT, 1988 (68 OF 1988); OR (II) BY THE RURAL ELECTRIFICATION CORPORATION LIMITED, A COMPANY FORMED AND REGISTERED UNDER THE COMPANIES ACT, 1956 (1 OF 1956), AND NOTIFIED BY THE CENTRAL GOVERNMENT IN THE OFFICIAL GAZETTE FOR THE PURPOSES OF THIS SECTION WITH SUCH CONDITIONS (INCLUDING THE CONDITION FOR PROVIDING A LIMIT ON THE AMOUNT OF INVESTMENT BY AN ASSESSEE IN SUCH BOND) AS IT THINKS FIT:] [ PROVIDED THAT WHERE ANY BOND HAS BEEN NOTIFIED BEFORE THE 1ST DAY OF APRIL, 2007, SUBJECT TO THE CONDITIONS SPECIFIED IN THE NOTIFICATION, BY THE CENTRAL GOVERNMENT IN THE OFFICIAL GAZETTE UNDER THE PROVISIONS OF CLAUSE (B) AS THEY STOOD IMMEDIATELY BEF ORE THEIR AMENDMENT BY THE FINANCE ACT, 2007, SUCH BOND SHALL BE DEEMED TO BE A BOND NOTIFIED UNDER THIS CLAUSE;] [(BA) LONG - TERM SPECIFIED ASSET FOR MAKING ANY INVESTMENT UNDER THIS SECTION ON OR AFTER THE 1ST DAY OF APRIL, 2007 MEANS ANY BOND, REDEEM ABLE AFTER THREE YEARS AND ISSUED ON OR AFTER THE 1ST DAY OF APRIL, 2007 BY THE NATIONAL HIGHWAYS AUTHORITY OF INDIA CONSTITUTED UNDER SECTION 3 OF THE NATIONAL HIGHWAYS AUTHORITY OF INDIA ACT, 1988 (68 OF 1988) OR BY THE RURAL ELECTRIFICATION CORPORATION LIMITED, A ITA NO.2754/M/2013 SHRI MUKUND T BHAMMAR 6 COMPANY FORMED AND REGISTERED UNDER THE COMPANIES ACT, 1956 (1 OF 1956).] 5.1 THE EXPRESSION THE WHOLE OR ANY PART OF CAPITAL GAINS IN THE LONG TERM SPECIFIED ASSETS MAKES IT CLEAR THAT THE EXEMPTION UNDER SECTION 54 EC IS AVAILABLE EVEN WH EN THE PART OF CAPITAL GAIN IS INVESTED IN SPECIFIED LONG - TERM ASSET. THERE IS NO DISPUTE THAT THE ASSESSEE HAS INVESTED OUT OF THE TOTAL CAPITAL GAIN IN REC BONDS WITHIN THE PRESCRIBED PERIOD OF TIME AS PROVIDED UNDER SECTION 54 EC. THEREFORE, ONCE THE CO NDITIONS AS PRESCRIBED UNDER SECTION 54 EC ARE COMPLIED WITH, THAN THE DEDUCTION CANNOT BE DENIED ON THE GROUND THAT THE ASSESSEE HAS ALSO AVAILED THE EXEMPTION UNDER SECTION 54F AGAINST THE PART OF THE CAPITAL GAIN. 6. IN VIEW OF THE ABOVE DISCUSSION, W E FIND NO REASON TO INTERFERE WITH THE ORDER OF COMMISSIONER OF INCOME TAX(APPEALS), QUA THIS ISSUE AND THE SAME IS UPHELD. 6 . THE ISSUE UNDER CONSIDERATION IS SQUARELY COVERED WI TH THE DECISION OF THE TRIBUNAL . RESPECTFULLY FOLLOWING THE SAME, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A). 7. IN THE RESULT, T HE APPEAL OF THE R EVENUE IS THEREFORE, DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31.03. 201 5 . SD/ - SD/ - (B.R. BASKARAN ) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 31.03.2015 . * KISHORE , SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT ( A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORDER DY/AS STT. REGISTRAR, ITAT, MUMBAI.