ACIT 20(2), MUMBAI V. PREM A DEVIDAYAL, MUMBAI

ITA 3193/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8109 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 05-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Opportunity of being heard; Cost of acquisition; Benefit of exemption
• Section: 80C; 143(3); 147; 12

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, I MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER ITA NO.3184/MUM/2016 ASSESSMENT YEAR:2011-12 TULIKA DEVI DAYAL (LEGAL HEIR) LATE MR. PREM A. DEVIDAYAL, C/O-DEVIDAYAL SALES LTD. GUPTA MILLS COMPUND, DARUKHANA, REAY ROAD, MUMBAI-400010 / VS. JCIT-17(1), MUMBAI ( #$% & /ASSESSEE) ( / REVENUE) PAN. NO . AAEPD1068K ITA NO.3193/MUM/2016 ASSESSMENT YEAR:2011-12 ACIT-20(2), ROOM NO.217, 2 ND FLOOR, PIRAMAL CHAMBERS, LALBAUG, PAREL, MUMBAI-400012 / VS. TULIKA DEVI DAYAL (LEGAL HEIR) LATE PREM A. DEVIDAYAL, C/O-DEVIDAYAL SALES LTD. GUPTA MILLS COMPUND, DARUKHANA, REAY ROAD, MUMBAI-400010 ( / REVENUE) ( #$% & /ASSESSEE) PAN. NO . AAEPD1068K ITA NOS.3184 & 3193/MUM/2016 LATE MR. PREM A DEVIDAYAL 2 ' & ( / DATE OF HEARING : 14/12/2017 ' & ( / DATE OF ORDER: 14/12/2017 / O R D E R PER JOGINDER SINGH(JUDICIAL MEMBER) THE ASSESSEE AS WELL AS REVENUE IS IN APPEAL AGAINS T THE IMPUGNED ORDERS DATED 24/02/2016 OF THE LD. FIRST A PPELLATE AUTHORITY, MUMBAI. FIRST, WE SHALL TAKE UP THE APPE AL OF THE REVENUE (ITA NO.3193/MUM/2016), WHEREIN, ONLY GROUN D RAISED PERTAINS TO ALLOWING THE BENEFIT U/S 54EC OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT) IGNORING THE FACT THAT INVESTMENT MADE OF RS.50 LAKHS EACH OF DIFFERE NT TWO FINANCIAL YEARS WITHIN A PERIOD OF SIX MONTHS SHOUL D NOT BE ELIGIBLE FOR SUCH DEDUCTION U/S 54E OF THE ACT. 2. DURING HEARING, THE LD. DR, SHRI RAM KUMAR TIWARI, DEFENDED THE ADDITION MADE BY THE ASSESSING OFFICER BY CONTENDING THAT THE LEGISLATIVE INTENT WAS DIFFE RENT, THEREFORE, THE LD. COMMISSIONER OF INCOME TAX (APPE AL) ERRED IN GRANTING RELIEF TO THE ASSESSEE. ON THE OTHER HA ND, MS. VAISHALI MEHTA, LD. COUNSEL FOR THE ASSESSEE, INVIT ED OUR #$% & ! / ASSESSEE BY MS. VAISHALI MEHTA ! / REVENUE BY SHRI RAM KUMAR TIWARI-DR ITA NOS.3184 & 3193/MUM/2016 LATE MR. PREM A DEVIDAYAL 3 ATTENTION TO THE AMENDMENT MADE BY THE FINANCE ACT 2014, WHICH IS APPLICABLE TO AND FROM ASSESSMENT YEAR 200 15-16, WHEREAS, THE CASE OF THE ASSESSEE IS OF ASSESSMENT YEAR 2011-12, WHEREIN, THE LIMIT WAS RS.50 LAKHS PER FI NANCIAL YEAR. RELIANCE WAS PLACED UPON THE DECISION OF HON 'BLE MADRAS HIGH COURT IN COMMISSIONER OF INCOME-TAX V. COROMANDEL INDUSTRIES LTD. 370 ITR 586 (MAD.) AND I N COMMISSIONER OF INCOME TAX VS. C. JAICHANDER 370 ITR 579 (MAD.). 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND T HAT THE AFORESAID ISSUE IS COVERED IN FAVOUR OF THE ASSESSE E BY THE DECISION IN THE CASE OF BHARATKUMAR M JAIN (HUF) & MANEKCHAND G JAIN, (ITA NO.169 & 170/MUM/2015) ORDE R DATED 07/09/2016 OF THE MUMBAI BENCH OF THE TRIBUNA L, WHEREIN, ONE OF US (JUDICIAL MEMBER) IS SIGNATORY T O THE ORDER. THE RELEVANT PORTION FROM THE AFORESAID ORDE R IS REPRODUCED HEREUNDER FOR READY REFERENCE AND ANALYS IS:- BOTH THESE APPEALS ARE BY THE DIFFERENT ASSESSEE, CLOSELY RELATED TO EACH OTHER, HAVING COMMON GROUNDS OF APP EAL. THE ASSESSEES ARE AGGRIEVED BY THE IMPUGNED ORDERS BOTH ITA NOS.3184 & 3193/MUM/2016 LATE MR. PREM A DEVIDAYAL 4 DATED 04/09/2014 OF THE LD. FIRST APPELLATE AUTHORI TY, MUMBAI. 2. DURING HEARING, THE LD. COUNSEL FOR THE ASSESSEE, SHRI D.B. SANGHAVI, DID NOT PRESS GROUNDS NUMBER 1.1 AND 1.2 OF BOTH APPEALS WITH RESPECT TO CONFIRMING THE ACTION OF THE ASSESSING OFFICER, WHI LE FRAMING ASSESSMENT U/S 147 READ WITH SECTION 143(3) OF THE ACT, THUS, THE IMPUGNED GROUNDS NUMBER 1.1 AND 1.2 OF BO TH THE APPEALS ARE DISMISSED AS NOT PRESSED. 3. THE ONLY SURVIVING GROUND IN BOTH THE APPEALS IS WITH RESPECT TO CONFIRMING THE DEDUCTION U/S 54E C OF THE ACT, AMOUNTING TO RS.50 LAKH AS AGAINST THE CLAIMED DEDUCTION OF RS.1 CRORE, BY THE ASSESSEE. THE CRUX OF ARGUMENT ADVANCED ON BEHALF OF THE ASSESSEE IS THAT THE IMPUGNED ISSUE IS COVERED BY THE DECISION FROM HON' BLE MADRAS HIGH COURT IN THE CASE OF CIT VS C. JAICHAND AR (2015) 275 CTR 222 (MAD.); (2015) 370 ITR 579(MAD.) , CIT VS COROMANDAL INDUSTRIES LTD. (2015) 370 ITR 586 (M AD.), MS. LILAVATI M. SAYANI VS INCOME TAX OFFICER (2014) 151 ITD 659)(MUM.), DR. KUMAR M. DHAWALE VS ACIT (ITA NO.7585/MUM/2012) ORDER DATED 09/01/2015, M/S JNR SECURITIES BROKING LTD. (ITA NO.6987/MUM/2013) ORDE R DATED 08/07/2015 AND SHRI VIVEK JAIRAZBHOY VS CIT ( ITA NO.236/BANG/2012) DATED 14/12/2012. THIS FACTUAL MATRIX WAS NOT CONTROVERTED BY THE LD. DR, SHRI SUN IL KUMAR AGARWAL. 3.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND T HAT THE TRIBUNAL VIDE ORDER DATED 09/06/2016 IN THE CASE OF ACIT VS PRAKASH GUNAJI SAWARDEKAR ITA ITA NOS.3184 & 3193/MUM/2016 LATE MR. PREM A DEVIDAYAL 5 NO.6642/MUM/2014, ON IDENTICAL ISSUE HELD AS UNDER:- THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DAT ED 07/07/2014 OF THE LD. FIRST APPELLATE AUTHORITY, MU MBAI, ON THE GROUND THAT THE LD. COMMISSIONER OF INCOME TAX (APPEAL) DID NOT APPRECIATE THE FACT THAT AS PER AM ENDMENT BY THE FINANCE ACT, 2007, AS PER PROVISO TO SECTION 54EC OF THE ACT, THE INVESTMENT MADE ON OR AFTER 01/04/2007 , IN THE LONG TERM SPECIFIED ASSET, DURING ANY FINANCIAL YEA R DOES NOT EXCEED RS.50,00,000/-. 2. DURING HEARING, THE LD. DR, DR. DARSI SUMAN PATNAM, DEFENDED THE ADDITION MADE BY THE ASSESSING OFFICER, WHEREAS, NONE WAS PRESENT FOR THE ASSESSEE IN SPITE OF ISSUANCE OF NOTICE, THUS, WE HAVE NO OPTION BUT TO PROCEED EX-PARTE, QUA THE ASSESSEE, AND TEND TO DISPOSE OF THIS APPEAL ON THE BASIS OF MATERIAL AVAILABLE ON RECORD . 2.1. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD. DR AND PERUSED THE MATERIAL AVAILABLE ON RECORD. TH E FACTS, IN BRIEF, ARE THAT THE ASSESSEE IS A RETIRED SENIOR CITIZEN, WAS CONNECTED WITH MARKETING CONSULTANCY IN THE FIELD O F PHARMACEUTICAL INDUSTRY, WAS HAVING ITS OFFICE AT 1 02B ATLANATA, HIRACHANDANI ESTATE, THANE. THE LD. ASSES SING OFFICER MADE THE ADDITION OF RS.51,34,710/- WHILE F RAMING ASSESSMENT U/S 143(3) OF THE ACT ON ACCOUNT OF DECLINE OF EXEMPTION CLAIMED U/S 54E OF THE ACT AMOUNTING T O RS.50 LAKHS. ON APPEAL, BEFORE THE LD. COMMISSIONER OF I NCOME TAX (APPEAL), THE ADDITION WAS DELETED AGAINST WHIC H THE REVENUE IS IN APPEAL BEFORE THIS TRIBUNAL. 2.2. IF THE OBSERVATION MADE IN THE ASSESSMENT ORD ER, LEADING TO ADDITION MADE TO THE TOTAL INCOME, CONCL USION DRAWN IN THE IMPUGNED ORDER, MATERIAL AVAILABLE ON RECORD, ASSERTIONS MADE BY THE LD. DEPARTMENTAL COUNSEL, IF KEPT IN JUXTAPOSITION AND ANALYZED, UNDER THE FACTS DISCUSS ED HEREINABOVE, WE FIND THAT THE ASSESSEE SOLD SHARES LEADING TO CAPITAL GAINS OF RS.1,11,63,450/- AND OUT OF THI S AMOUNT RUPEES ONE CRORE WAS INVESTED IN REC BONDS ON TWO D ATES NAMELY RS.50 LAKH ON 31/03/2009 AND REMAINING RS.50 LAKH ON 31/05/2009. THE LD. ASSESSING OFFICER DISPU TED THE ALLOWABILITY OF CLAIMED EXEMPTION U/S 54EC OF THE A CT, AMOUNTING TO RUPEES ONE CRORE WHEN THE MAXIMUM LIMI T FOR MAKING INVESTMENT U/S 54EC OF THE ACT WAS RS.50 LAK HS ONLY. THE STAND OF THE ASSESSEE WAS THAT NO RESTRIC TION IS SPECIFIED FOR INVESTING RS.50 LAKH EACH IN TWO DIFF ERENT ITA NOS.3184 & 3193/MUM/2016 LATE MR. PREM A DEVIDAYAL 6 FINANCIAL YEARS, THEREFORE, THE ASSESSING OFFICER A LLOWED THE EXEMPTION ONLY UPTO RS.50 LAKH AND DISALLOWED FOR T HE REMAINING RS.50 LAKH. WHILE DOING SO, THE ASSESSING OFFICER REFERRED TO NOTIFICATION NUMBER 380 OF 2006 DATED 22/12/2006, ISSUED BY CBDT, RESTRICTING THE INVESTM ENT IN BONDS TO A SUM OF RS.50 LAKH PER PERSON. REFERENCE WAS ALSO MADE TO THE DECISION FROM HONBLE MADRAS HIGH COURT IN AREBA T & D INDIA LTD. VS ACIT 177 TAXMAN 192. T HE LD. COMMISSIONER OF INCOME TAX (APPEAL) DELETED THE ADD ITION ON THE PLEA THAT THE ASSESSEE HAS FULFILLED THE CON DITION ENSHRINED IN SECTION 54EC OF THE ACT AS THE INVESTM ENT WAS MADE ON TWO DIFFERENT FINANCIAL YEARS. BEFORE COMIN G TO ANY CONCLUSION, WE ARE REPRODUCING HEREUNDER THE RELEVA NT PROVISION OF SECTION 54EC OF THE ACT:- CAPITAL GAIN NOT TO BE CHARGED ON INVESTMENT IN CER TAIN BONDS. 54EC. (1) WHERE THE CAPITAL GAIN ARISES FROM THE TRANSFER OF A LONG-TERM CAPITAL ASSET (THE CAPITAL ASSET SO TRANSF ERRED 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 PA RT OF CAPITAL GAINS IN THE LONG-TERM SPECIFIED ASSET, THE C APITAL GAIN SHALL BE DEALT WITH IN ACCORDANCE WITH THE FOLLOWING PR OVISIONS OF THIS SECTION, THAT IS TO SAY, (A) IF THE COST OF THE LONG-TERM SPECIFIED ASSET IS N OT LESS THAN THE CAPITAL GAIN ARISING FROM THE TRANSFER OF THE ORIGINA L 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 G AIN THE SAME PROPORTION AS THE COST OF ACQUISITION OF THE LO NG-TERM SPECIFIED ASSET BEARS TO THE WHOLE OF THE CAPITAL GAI N, 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 A SSESSEE DURING ANY FINANCIAL YEAR DOES NOT EXCEED FIFTY LAK H RUPEES : [ PROVIDED FURTHER THAT THE INVESTMENT MADE BY AN ASSESSEE IN THE LONG-TERM SPECIFIED ASSET, FROM CAPITAL GAINS AR ISING FROM TRANSFER OF ONE OR MORE ORIGINAL ASSETS, DURING THE FINANCIAL YEAR IN WHICH THE ORIGINAL ASSET OR ASSETS ARE TRANSFERRED AND IN THE SUBSEQUENT FINANCIAL YEAR DOES NOT EXCEED FIFTY LAK H RUPEES.] (2) WHERE THE LONG-TERM SPECIFIED ASSET IS TRANSFERRE D OR CONVERTED (OTHERWISE THAN BY TRANSFER) INTO MONEY A T ANY TIME WITHIN A PERIOD OF THREE YEARS FROM THE DATE OF ITS AC QUISITION, THE AMOUNT OF CAPITAL GAINS ARISING FROM THE TRANSFER OF THE ORIGINAL ASSET NOT CHARGED UNDER SECTION 45 ON THE BASIS OF THE ITA NOS.3184 & 3193/MUM/2016 LATE MR. PREM A DEVIDAYAL 7 COST OF SUCH LONG-TERM SPECIFIED ASSET AS PROVIDED I N 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 'CAPI TAL GAINS' RELATING TO LONG-TERM CAPITAL ASSET OF THE P REVIOUS 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 T RANSFERRED AND THE ASSESSEE INVESTS THE WHOLE OR ANY PART OF THE C APITAL GAIN RECEIVED OR ACCRUED AS A RESULT OF TRANSFER OF THE ORIGINAL ASSET IN ANY LONG-TERM SPECIFIED ASSET AND SUCH ASSE SSEE TAKES ANY LOAN OR ADVANCE ON THE SECURITY OF SUCH SPECIFIED ASSET, HE SHALL BE DEEMED TO HAVE CONVERTED (OTHERWISE THAN BY TR ANSFER) SUCH SPECIFIED ASSET INTO MONEY ON THE DATE ON WHICH SU CH LOAN OR ADVANCE IS TAKEN. (3) WHERE THE COST OF THE LONG-TERM SPECIFIED ASSET HA S BEEN TAKEN INTO ACCOUNT FOR THE PURPOSES OF CLAUSE (A) OR CLAUSE (B) OF SUB-SECTION (1), (A) A DEDUCTION FROM THE AMOUNT OF INCOME-TAX WITH RE FERENCE TO SUCH COST SHALL NOT BE ALLOWED UNDER SECTION 88 FOR ANY ASSESSMENT YEAR ENDING BEFORE THE 1ST DAY OF APRIL, 2006; (B) A DEDUCTION FROM THE INCOME WITH REFERENCE TO SU CH 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 CAPIT AL GAINS RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF THE ORIGINAL ASSET; (B) 'LONG-TERM SPECIFIED ASSET' FOR MAKING ANY INVE STMENT UNDER THIS SECTION DURING THE PERIOD COMMENCING FROM THE 1ST DAY OF APRIL, 2006 AND ENDING WITH THE 31ST DAY OF MARCH, 20 07, 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 THE NATIONAL HIGHWAYS AUTHORITY OF INDIA CONS TITUTED UNDER SECTION 3 OF THE NATIONAL HIGHWAYS AUTHORITY OF INDI A ACT, 1988 (68 OF 1988); OR (II) BY THE RURAL ELECTRIFICATION CORPORATION LIMITE D, A COMPANY FORMED AND REGISTERED UNDER THE COMPANIES ACT, 1956 (1 OF 1956), AND NOTIFIED BY THE CENTRAL GOVERNMENT IN THE OFFIC IAL 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 SPECIF IED IN THE NOTIFICATION, BY THE CENTRAL GOVERNMENT IN THE OFFICI AL GAZETTE ITA NOS.3184 & 3193/MUM/2016 LATE MR. PREM A DEVIDAYAL 8 UNDER THE PROVISIONS OF CLAUSE (B) AS THEY STOOD IMM EDIATELY BEFORE THEIR AMENDMENT BY THE FINANCE ACT, 2007, SUC H BOND SHALL BE DEEMED TO BE A BOND NOTIFIED UNDER THIS CLAU SE; (BA) 'LONG-TERM SPECIFIED ASSET' FOR MAKING ANY INV ESTMENT UNDER THIS SECTION ON OR AFTER THE 1ST DAY OF APRIL, 2007 M EANS ANY BOND, REDEEMABLE AFTER THREE YEARS AND ISSUED ON OR AFTER THE 1ST DAY OF APRIL, 2007 BY THE NATIONAL HIGHWAYS AUTHO RITY OF INDIA CONSTITUTED UNDER SECTION 3 OF THE NATIONAL HI GHWAYS AUTHORITY OF INDIA ACT, 1988 (68 OF 1988) OR BY THE R URAL ELECTRIFICATION CORPORATION LIMITED, A COMPANY FORM ED AND REGISTERED UNDER THE COMPANIES ACT, 1956 (1 OF 1956) . 2.2. IF THE AFORESAID PROVISION IS ANALYZED, IT DE ALS WITH CAPITAL GAINS NOT TO BE CHARGED ON INVESTMENT IN CE RTAIN BONDS. SUB-SECTION (1) SPEAKS WHERE THE CAPITAL GAIN ARISE S FROM THE TRANSFER OF LONG TERM CAPITAL ASSET AND THE ASSESSE E HAS ANY TIME WITHIN A PERIOD OF SIX MONTHS, AFTER THE DATE OF SUCH TRANSFER, INVEST, THE WHOLE OR ANY PART OF THE CAPI TAL GAINS IN THE LONG TERM SPECIFIED ASSET, THE CAPITAL GAIN SHALL B E DEALT WITH IN ACCORDANCE WITH THE PROVISIONS OF THE SECTION. THE POSITION HAS BEEN CLARIFIED WITH INSERTION OF EXPLANATION WHICH SPEAKS ABOUT COST IN RELATION TO ANY LONG TERM SPECIFIED ASST, MEANS THE AMOUNT INVESTED IN SUCH SPECIFIED ASSET OUT OF THE CAPITAL GAINS RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF THE ORIGINAL ASSET, MEANING THEREBY, THE DATE OF RECEIPT OR ACCR UING ARE THE IMPORTANT DATES FOR MAKING INVESTMENT. THE IMPUGNED AMOUNT WAS INVESTED IN REC BOND BY THE ASSESSEE IN TWO DIFFERENT FINANCIAL YEARS. THE PRO VISION SECTION 54EC PROVIDES FOR EXEMPTION FROM TAX TO LONG TERM C APITAL GAIN, PROVIDED THE SAME IS INVESTED IN THE SPECIFIED BOND S, DECIDED BY THE GOVERNMENT. OUR VIEW FIND SUPPORTS FROM THE DECISION FROM HONBLE JURISDICTIONAL HIGH COURT IN CELLO PLA ST (2012) 24 TAXMAN.COM 111 (BOM.) TO THE EFFECT THAT LAW DOES N OT COMPEL A MAN TO DO THAT WHICH HE CANNOT POSSIBLY PERFORM. EV EN OTHERWISE, SECTION 54EC PRESCRIBES THAT EXEMPTION S HALL BE AVAILABLE IF THE INVESTMENT IS MADE IN THE SPECIFIE D BONDS WITHIN A PERIOD OF SIX MONTHS, THUS, THE ASSESSEE, POSSIBLY CAN MAKE THE INVESTMENT OF THE AMOUNT WITHIN THE SPECIF IED PERIOD, WHEN IT IS RECEIVED BY THE ASSESSEE. THE INTENT AND PURPOSE OF SECTION 54EC IS THE DATE, WHEN THE ASSESSEE ACTUALL Y COLLECTS/RECEIVES THE SALE CONSIDERATION AND THEREA FTER MAKES INVESTMENT WITHIN SIX MONTHS AND THAT IS THE DATE O F TRANSFER, THUS, THE SPIRIT OF THE LEGISLATION IS VERY MUCH CL EAR. THE INVESTMENT CAN ONLY BE MADE WHEN ANY AMOUNT IS ACTU ALLY RECEIVED BY THE ASSESSEE. IN FACT, DATE OF RECEIPT BY THE ASSESSEE/INVESTOR AND DATE OF DEPOSIT FOR OBTAINING THE PRESCRIBED BONDS ARE IMPORTANT DATES. SUPPOSE, THE REQUIRED BONDS ARE NOT AVAILABLE WITH A PARTICULAR BANK/INST ITUTION AND ITA NOS.3184 & 3193/MUM/2016 LATE MR. PREM A DEVIDAYAL 9 ARE ISSUED AT A LATER STAGE, THE DATE OF DEPOSIT OF THE AMOUNT IN THE BANK OR THE INSTITUTION, AS THE CASE MAY BE, AR E THE RELEVANT DATES FOR GETTING THE BENEFIT OF EXEMPTION U/S 54EC OF THE ACT. FOR THE PURPOSE OF SECTION 54EC, THE DATE OF INVEST MENT IS TO BE REGARDED AS THE DATES OF INVESTMENT/ THE PAYMENT RE CEIVED BY THE AUTHORIZED BANK. IT IS NOTED THAT SECTION 54EC OF THE ACT HAS NO RESTRICTION IF THE SPECIFIED INVESTMENT OF RS.50 LAKH IS MADE IN TWO DIFFERENT FINANCIAL YEARS. THE RATIO LAID DO WN BY THE MUMBAI BENCH OF THE TRIBUNAL IN ITO VS MR. BALDWIN D.FERNANDES (ITA NO.5229/MUM/2013) ORDER DATED 19/10/2015, THE CHENNAI BENCH OF THE TRIBUNAL IN SM T. SRIRAM INDUBAI VS ITO, (ITA NO.1950/MDS/2012), ORDER DATED 31/01/2013. THUS, WE ARE OF THE VIEW, THE EXEMPTION U/S 54EC OF THE ACT IS AVAILABLE TO AN ASSESSEE, IF THE LONG TERM CAPITAL GAINS, EARNED BY THE ASSESSEE, IS INVESTED IN THE SPECIFIED LONG TERM ASSET AND SUCH INVESTMENT IS MA DE WITHIN SIX MONTHS FROM THE DATE OF TRANSFER OF SUCH LONG T ERM ASSET. AS PER THE PROVISO TO SECTION 54EC, THE INVESTMENT IN ANY FINANCIAL YEAR IS RESTRICTED TO RS.50 LAKH AND SINCE THE ASSE SSEE HAS MADE THE INVESTMENT OF RS.50 LAKH EACH IN DIFFERENT TWO FINANCIAL YEARS BUT WITHIN SIX MONTH FROM THE DATE OF TRANSFER OF THE ASSET,. THE DECISION FROM AHMEDABAD BENCH OF THE TRIBUNAL IN ASPI GINWALA VS ACIT (2012) 044 (II) IT CL 0488; ITA NO.3226 AND 3227/AHD/2011. CONSIDERING THE TOTALIT Y OF FACTS, WE FIND NO INFIRMITY IN THE CONCLUSION DRAWN BY THE LD. COMMISSIONER OF INCOME TAX (APPEAL). FINALLY, THE APPEAL OF THE REVENUE IS DISMISSE D. 3.2. IF THE AFORESAID DECISION OF THE TRIBUNAL, WHEREIN, ONE OF US (JUDICIAL MEMBER), IS SIGNATORY TO THE ORDER, DELIBERATED UPON THE ISSUE IN LENGTH AND PLA CE RELIANCE UPON VARIOUS JUDICIAL DECISIONS AND FINALL Y DISMISSED THE APPEAL OF THE REVENUE. EVEN OTHERWISE , ON A PLAIN READING OF SECTION 54EC(1) OF THE ACT, IT R ESTRICT THE TIME LIMIT, FOR THE PERIOD OF INVESTMENT AFTER THE PROPERTY IS SOLD, TO SIX MONTHS. THERE IS NO CAP ON THE INV ESTMENT TO BE MADE IN BONDS. THE FIRST PROVISO TO SECTION 5 4EC(1) OF THE ACT SPECIFIES THE QUANTUM OF INVESTMENT AND IT STATES THAT THE INVESTMENT SO MADE ON OR AFTER 01/04/2007 IN THE LONG TERM SPECIFIED ASSET BY AN ASSESSEE DURING ANY FINANCIAL YEAR DOES NOT EXCEED FIFTY ITA NOS.3184 & 3193/MUM/2016 LATE MR. PREM A DEVIDAYAL 10 LAKH RUPEES. IN OTHER WORDS, AS PER THE MANDATE OF SECTION 54EC(1) OF THE ACT, THE TIME LIMIT FOR INVE STMENT IN SIX MONTHS AND THE BENEFIT THAT FLOWS FROM THE FIRS T PROVISO IS THAT IF THE ASSESSEE MAKES THE INVESTMEN T OF RS.50 LAKH IN ANY FINANCIAL YEAR, IT WOULD HAVE THE BENEFIT OF SECTION 54EC(1) OF THE ACT. THE LEGISLAT URE NOTICING THE AMBIGUITY IN THE PROVISION, BY FINANCE (NO.2) ACT 2014, W.E.F 01/04/2015 INSERTED AFTER THE EXIST ING PROVISO TO SUB SECTION (1) OF SECTION 54EC OF THE ACT, A SECOND PROVISO, WHICH READS AS UNDER:- PROVIDED FURTHER THAT THE INVESTMENT MADE BY AN ASS ESSEE IN THE LONG TERM SPECIFIED ASSET, FROM CAPITAL GAIN S ARISING FROM TRANSFER OF ONE OR MORE ORIGINAL ASSETS, DURIN G THE FINANCIAL YEAR IN WHICH THE ORIGINAL ASSET OR ASSET S ARE TRANSFERRED IN ANY SUBSEQUENT FINANCIAL YEAR DOES N OT EXCEED 50 LAKHS RUPEES 3.3. IN ANY EVENT, FROM A READING OF SECTION 54EC( 1) AND THE FIRST PROVISO, IT IS CLEAR THAT THE TIME LI MIT FOR INVESTMENT IS SIX MONTHS FROM THE DATE OF TRANSFER AND EVEN IF SUCH INVESTMENT FALLS UNDER TWO FINANCIAL YEAR T HE BENEFIT, CLAIMED BY THE ASSESSEE, CANNOT BE DENIED. IT WOULD HAVE MADE A DIFFERENCE, IF THE RESTRICTION ON THE INVESTMENT IN BONDS TO RS.50 LAKHS IS INCORPORATED IN SECTION 54EC(1) OF THE ACT ITSELF. HOWEVER, THE AMB IGUITY HAS BEEN REMOVED BY THIS LEGISLATURE W.E.F 01/04/20 15 IN RELATION TO ASSESSMENT YEAR 2015-16 AND THE SUBSEQU ENT YEARS. FOR BETTER UNDERSTANDING OF THE ISSUE, IT WO ULD BE APPROPRIATE TO REFER TO SECTION 54EC (1) OF THE ACT , WHICH READS AS UNDER:- 54EC. (1) WHERE THE CAPITAL GAIN ARISES FROM THE TRANSFER OF A LONG-TERM CAPITAL ASSET (THE CAPITAL ASSET SO TRANSF ERRED BEING HEREAFTER IN THIS SECTION REFERRED TO AS THE ORIGINAL ASSET) AND ITA NOS.3184 & 3193/MUM/2016 LATE MR. PREM A DEVIDAYAL 11 THE ASSESSEE HAS, AT ANY TIME WITHIN A PERIOD OF SIX MONTHS AFTER THE DATE OF SUCH TRANSFER, INVESTED THE WHOLE OR ANY PA RT OF CAPITAL GAINS IN THE LONG-TERM SPECIFIED ASSET, THE C APITAL GAIN SHALL BE DEALT WITH IN ACCORDANCE WITH THE FOLLOWING PR OVISIONS OF THIS SECTION, THAT IS TO SAY, (A) IF THE COST OF THE LONG-TERM SPECIFIED ASSET IS N OT LESS THAN THE CAPITAL GAIN ARISING FROM THE TRANSFER OF THE ORIGINA L 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 G AIN THE SAME PROPORTION AS THE COST OF ACQUISITION OF THE LO NG-TERM SPECIFIED ASSET BEARS TO THE WHOLE OF THE CAPITAL GAI N, 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 A SSESSEE DURING ANY FINANCIAL YEAR DOES NOT EXCEED FIFTY LAK H RUPEES : [ PROVIDED FURTHER THAT THE INVESTMENT MADE BY AN ASSESSEE IN THE LONG-TERM SPECIFIED ASSET, FROM CAPITAL GAINS AR ISING FROM TRANSFER OF ONE OR MORE ORIGINAL ASSETS, DURING THE FINANCIAL YEAR IN WHICH THE ORIGINAL ASSET OR ASSETS ARE TRANSFERRED AND IN THE SUBSEQUENT FINANCIAL YEAR DOES NOT EXCEED FIFTY LAK H RUPEES.] 3.4. THUS, ON PLAIN READING OF THE ABOVESAID PROVISION, WE ARE OF THE VIEW THAT SECTION 54EC(1) OF THE ACT RESTRICTS THE TIME LIMIT FOR THE PERIOD OF INVESTME NT AFTER THE PROPERTY HAS BEEN SOLD TO SIX MONTHS. THERE IS NO C AP ON THE INVESTMENT TO BE MADE IN BONDS. THE FIRST PROVISO T O SECTION 54EC(1) OF THE ACT, SPECIFIES THE QUANTUM OF INVEST MENT AND IT STATES THAT THE INVESTMENT SO MADE ON OR AFTER 01/04/2007 IN THE LONG TERM SPECIFIED ASSET, BY AN ASSESSEE, DURING ANY FINANCIAL YEAR DOES NOT EXCEED FIFTY LAKHS RUPEES. THE NOTES ON CLAUSES, FINANCIAL BILL 2014 AND THE MEMORANDUM EXPLAINING THE PROVISIONS IN FINANCE (NO.2) BILL 2014, READS AS UNDER:- CLAUSE 23 OF THE BILL SEEKS TO AMEND SECTION 54EC O F THE INCOME-TAX ACT RELATING TO CAPITAL GAIN NOT TO BE CHARGED ON I NVESTMENT IN CERTAIN BONDS. THE EXISTING PROVISIONS CONTAINED IN SUB-SECTION (1) OF ITA NOS.3184 & 3193/MUM/2016 LATE MR. PREM A DEVIDAYAL 12 SECTION 54EC PROVIDE THAT WHERE CAPITAL GAIN ARISES FROM THE TRANSFER OF A LONG-TERM CAPITAL ASSET AND THE ASSES SEE HAS WITHIN A PERIOD OF SIX MONTHS INVESTED THE WHOLE OR PART O F CAPITAL GAINS IN THE LONG-TERM SPECIFIED ASSET, THE PROPORT IONATE CAPITAL GAINS SO INVESTED IN THE LONG-TERM SPECIFIED ASSET OUT OF TOTAL CAPITAL GAIN SHALL NOT BE CHARGED TO TAX. THE PROVI SO TO THE SAID SUB-SECTION PROVIDES THAT THE INVESTMENT MADE IN TH E LONG-TERM SPECIFIED ASSET 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 MA DE BY AN ASSESSEE IN THE LONG-TERM SPECIFIED ASSET, FROM CAP ITAL GAINS ARISING FROM TRANSFER OF ONE OR MORE ORIGINAL ASSET S, DURING THE FINANCIAL YEAR IN WHICH THE ORIGINAL ASSET OR ASSET S ARE TRANSFERRED AND IN THE SUBSEQUENT FINANCIAL YEAR DO ES NOT EXCEED FIFTY LAKH RUPEES. THIS AMENDMENT WILL TAKE EFFECT FROM 1ST APRIL, 201 5 AND WILL, ACCORDINGLY, APPLY IN RELATION TO ASSESSMENT YEAR 2 015-16 AND SUBSEQUENT YEARS. MEMORANDUM: EXPLAINING THE PROVIS IONS IN THE FINANCE (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 ARI SES FROM THE TRANSFER OF A LONG-TERM CAPITAL ASSET AND THE ASSES SEE HAS, AT ANY TIME WITHIN A PERIOD OF SIX MONTHS, INVESTED TH E WHOLE OR ANY PART OF CAPITAL GAINS IN THE LONG-TERM SPECIFIE D ASSET, OUT OF THE WHOLE OF THE CAPITAL GAIN, SHALL NOT BE CHARGED TO TAX. THE PROVISO TO THE SAID SUBSECTION PROVIDES THAT THE IN VESTMENT MADE IN THE LONG-TERM SPECIFIED ASSET DURING ANY FI NANCIAL YEAR SHALL NOT EXCEED FIFTY LAKH RUPEES. HOWEVER, THE WORDINGS OF THE PROVISO HAVE CREATED A N AMBIGUITY. AS A RESULT THE CAPITAL GAINS ARISING DU RING THE YEAR AFTER THE MONTH OF SEPTEMBER WERE INVESTED IN THE S PECIFIED ASSET IN SUCH A MANNER SO AS TO SPLIT THE INVESTMEN T IN TWO YEARS I.E., ONE WITHIN THE YEAR AND SECOND IRF THE NEXT Y EAR 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 (1R SO AS TO PROVIDE THAT THE INVESTMENT MADE BY AN ASS ESSEE IN THE LONG-TERM SPECIFIED ASSET, OUT OF CAPITAL GAINS ARI SING FROM TRANSFER OF ONE OR MORE ORIGINAL ASSET, DURING THE FINANCIAL YEAR IN WHICH THE ORIGINAL ASSET OR ASSETS ARE TRANSFERR ED AND IN THE SUBSEQUENT FINANCIAL YEAR DOES NOT EXCEED FIFTY LAK H RUPEES. THIS AMENDMENT WILL TAKE EFFECT FROM 1ST APRIL, 2015 AND WILL, ACCORDINGLY, APPLY IN RELATION TO ASSESSMENT YEAR 2 015-16 AND SUBSEQUENT ASSESSMENT YEARS.' ITA NOS.3184 & 3193/MUM/2016 LATE MR. PREM A DEVIDAYAL 13 3.5. FROM THE ABOVE, IT CAN BE INFERRED THAT THE INTENTION OF THE LEGISLATURE PROBABLY APPEARS TO BE THAT THIS AMENDMENT SHOULD BE FOR THE ASSESSMENT YEAR 2015-16 TO AVOID UNWANTED LITIGATION OF THE PREVIOUS YEARS. IN ANY EVENT, FROM THE READING OF SECTION 54EC(1) AND THE FIRST PROVISO, IT IS CLEAR THAT THE TIME LIMIT FOR INVEST MENT IN SIX MONTHS FROM THE DATE OF TRANSFER AND EVEN IF SUCH INVESTMENT FALLS UNDER TWO FINANCIAL YEARS, THE BEN EFIT CLAIMED BY THE ASSESSEE CANNOT BE DENIED. OUR VIEW FIND SUPPORTS FROM THE DECISION FROM HON'BLE MADRAS HIGH COURT IN CIT VS C. JAICHANDAR (2015) 370 ITR 579 (MAD.), DECISION OF THE TRIBUNAL IN ACIT VS M/S JNR SECURITIES BROKI NG LTD. (ITA NO.6987/MUM/2013) ORDER DATED 08/07/2015 AND VARIOUS OTHER DECISIONS MENTIONED IN THE PRECEDING PARAS OF THIS ORDER. THUS, IT IS CONCLUDED THAT, PRIOR TO AM ENDMENT, THE TIME LIMIT OF RS.50 LAKHS AS PRESCRIBED U/S 54E C OF THE ACT IS PER YEAR AND IF THE ASSESSEE INVEST RS.50 LA KH EACH IN TWO DIFFERENT YEARS, OTHERWISE FULFILLING OTHER CONDITIONS OF SECTION 54EC, SUCH APPELLANT WILL BE ENTITLE TO THE BENEFIT OF RS.1 CRORE AND NOT MERELY RS. 50 LAKHS. IN THE CAS E OF THE ASSESSEE, THE CAPITAL GAINS AROSE ON ACCOUNT OF TWO DISTINCT CAPITAL ASSET, ARISING FROM TWO DISTINCT AND SEPARA TE AGREEMENTS, ONE VIDE AGREEMENT DATED 28/04/2008 AND ANOTHER VIDE AGREEMENT DATED 14/10/2008, THEREFORE, THERE ARE TWO SEPARATE COMPUTATION OF CAPITAL GAINS, FOR EACH ASSETS. THE ASSESSEE WHILE COMPUTING CAPITAL GAINS HAS SOUGHT REINVESTMENT BENEFIT BY INVESTING, IN THE BO NDS PRESCRIBE U/S 54EC OF THE ACT ON 30/09/2008 AGAINST CAPITAL GAIN ON 28/04/2008 AND ON 09/04/2009 AGAINS T ITA NOS.3184 & 3193/MUM/2016 LATE MR. PREM A DEVIDAYAL 14 CAPITAL GAIN ON 14/10/2008, THEREFORE, THE CASE OF THE ASSESSEE IS CLEAR, CONSEQUENTLY, IN VIEW OF THE FOR EGOING DECISION THIS GROUND OF THE ASSESSEE, IN BOTH APPEA LS, IS ALLOWED. FINALLY, BOTH THE APPEALS ARE PARTLY ALLOWED. 2.2. IF THE OBSERVATION MADE IN THE ASSESSMENT OR DER, LEADING TO ADDITION MADE TO THE TOTAL INCOME, CONCL USION DRAWN IN THE IMPUGNED ORDER, MATERIAL AVAILABLE ON RECORD, ASSERTIONS MADE BY THE LD. RESPECTIVE COUNSEL, AND THE AFORESAID ORDER OF THE TRIBUNAL, IF KEPT IN JUXTAPO SITION AND ANALYZED, IN THE PRESENT APPEAL BEFORE US, THE ASSE SSEE DECLARED INCOME OF RS.21,12,86,700/- IN THE RETURN FILED ON 30/07/2011, WHICH WAS REVISED TO RS.30,45,47,320/-. THE ASSESSEE CLAIMED DEDUCTION U/S 54EC OF RS.1 CRORE B Y WAY OF INVESTMENT IN REC BONDS. THE LD. ASSESSING OFFICER RESTRICTED THE DEDUCTION TO RS.50 LAKHS U/S 54EC OF THE ACT AS AGAINST RS.1 CRORE CLAIMED BY THE ASSESSEE. IT I S NOTEWORTHY THAT THE ASSESSEE MADE INVESTMENT OF RS. 1 CRORE IN REC BONDS I.E. RS.50 LAKH ON 31/03/2011 AND THE REMAINING RS.50 LAKH ON 30/04/2011. THE ASSESSEE CL AIMED THE DEDUCTION OF TOTAL INVESTMENT U/S 54EC OF THE A CT. THE LD. ASSESSING OFFICER FOLLOWING FIRST PROVISO TO SE CTION 54(1) RESTRICTED THE DEDUCTION TO RS.50 LAKH. ITA NOS.3184 & 3193/MUM/2016 LATE MR. PREM A DEVIDAYAL 15 2.3. ON APPEAL BEFORE THE LD. COMMISSIONER OF INCO ME TAX (APPEAL), THE DECISION FROM THE TRIBUNAL AND AN OTHER DECISION IN THE CASE OF CIT VS C. JAICHANDAR (SUPRA ) WAS FOLLOWED AND ALLOWED THE FULL DEDUCTION, WHICH IS U NDER CHALLENGE BEFORE THIS TRIBUNAL. WE FIND THAT MUMBAI BENCH OF THE TRIBUNAL MADE AN ELABORATE DISCUSSION INCLUDING THE AMENDMENT MADE BY THE FINANCE ACT, 2014 (APPLICABLE TO AND FROM ASSESSMENT YEAR 2015-16) AND ANALYZED THE PROVISION OF SECTION 54EC OF THE ACT AND THEREAFTER REACHED TO A PARTICULAR CONCLUSION. EVEN OTHERWISE, THE ISSUE IN HAND IS SQUARELY COVERED BY THE DECISIONS (SUPRA) FROM HON' BLE MADRAS HIGH COURT. 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 TWO FINANCIAL YEAR THE BENEFIT, CLAIMED BY THE ASSESSEE, CANNOT BE DENIED. IT WOULD HAVE MADE A DIFFERENCE, IF THE RESTRICTION ON THE INVEST MENT IN BONDS TO RS.50 LAKHS IS INCORPORATED IN SECTION 54E C(1) OF THE ACT ITSELF. HOWEVER, THE AMBIGUITY HAS BEEN REM OVED BY THE LEGISLATURE W.E.F 01/04/2015 IN RELATION TO ASS ESSMENT YEAR 2015-16 AND THE SUBSEQUENT YEARS. FOR BETTER ITA NOS.3184 & 3193/MUM/2016 LATE MR. PREM A DEVIDAYAL 16 UNDERSTANDING OF THE ISSUE, IT WOULD BE APPROPRIATE TO REFER TO SECTION 54EC (1) OF THE ACT, WHICH READS AS UNDER:- 54EC. (1) WHERE THE CAPITAL GAIN ARISES FROM THE TRANSFER OF A LONG-TERM CAPITAL ASSET (THE CAPITAL ASSET SO TRANSF ERRED 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 PA RT OF CAPITAL GAINS IN THE LONG-TERM SPECIFIED ASSET, THE C APITAL GAIN SHALL BE DEALT WITH IN ACCORDANCE WITH THE FOLLOWING PR OVISIONS OF THIS SECTION, THAT IS TO SAY, (A) IF THE COST OF THE LONG-TERM SPECIFIED ASSET IS N OT LESS THAN THE CAPITAL GAIN ARISING FROM THE TRANSFER OF THE ORIGINA L 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 G AIN THE SAME PROPORTION AS THE COST OF ACQUISITION OF THE LO NG-TERM SPECIFIED ASSET BEARS TO THE WHOLE OF THE CAPITAL GAI N, 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 A SSESSEE DURING ANY FINANCIAL YEAR DOES NOT EXCEED FIFTY LAK H RUPEES : [ PROVIDED FURTHER THAT THE INVESTMENT MADE BY AN ASSESSEE IN THE LONG-TERM SPECIFIED ASSET, FROM CAPITAL GAINS AR ISING FROM TRANSFER OF ONE OR MORE ORIGINAL ASSETS, DURING THE FINANCIAL YEAR IN WHICH THE ORIGINAL ASSET OR ASSETS ARE TRANSFERRED AND IN THE SUBSEQUENT FINANCIAL YEAR DOES NOT EXCEED FIFTY LAK H RUPEES.] 2.4. THUS, ON PLAIN READING OF THE ABOVESAID PROVI SION, WE ARE OF THE VIEW THAT SECTION 54EC(1) OF THE ACT RESTRICTS THE TIME LIMIT FOR THE PERIOD OF INVESTMENT AFTER THE P ROPERTY HAS BEEN SOLD TO SIX MONTHS. THERE IS NO CAP ON THE INV ESTMENT TO BE MADE IN BONDS. THE FIRST PROVISO TO SECTION 54EC (1) OF THE ACT, SPECIFIES THE QUANTUM OF INVESTMENT AND IT STA TES THAT ITA NOS.3184 & 3193/MUM/2016 LATE MR. PREM A DEVIDAYAL 17 THE INVESTMENT SO MADE ON OR AFTER 01/04/2007 IN TH E LONG TERM SPECIFIED ASSET, BY AN ASSESSEE, DURING ANY FI NANCIAL YEAR DOES NOT EXCEED FIFTY LAKHS RUPEES. THE NOTES ON CLAUSES, FINANCIAL BILL 2014 AND THE MEMORANDUM EXPLAINING T HE PROVISIONS IN FINANCE (NO.2) BILL 2014, READS AS UN DER:- CLAUSE 23 OF THE BILL SEEKS TO AMEND SECTION 54EC O F THE INCOME-TAX ACT RELATING TO CAPITAL GAIN NOT TO BE CHARGED ON I NVESTMENT 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 ASSES SEE HAS WITHIN A PERIOD OF SIX MONTHS INVESTED THE WHOLE OR PART O F CAPITAL GAINS IN THE LONG-TERM SPECIFIED ASSET, THE PROPORT IONATE CAPITAL GAINS SO INVESTED IN THE LONG-TERM SPECIFIED ASSET OUT OF TOTAL CAPITAL GAIN SHALL NOT BE CHARGED TO TAX. THE PROVI SO TO THE SAID SUB-SECTION PROVIDES THAT THE INVESTMENT MADE IN TH E LONG-TERM SPECIFIED ASSET 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 MA DE BY AN ASSESSEE IN THE LONG-TERM SPECIFIED ASSET, FROM CAP ITAL GAINS ARISING FROM TRANSFER OF ONE OR MORE ORIGINAL ASSET S, DURING THE FINANCIAL YEAR IN WHICH THE ORIGINAL ASSET OR ASSET S ARE TRANSFERRED AND IN THE SUBSEQUENT FINANCIAL YEAR DO ES NOT EXCEED FIFTY LAKH RUPEES. THIS AMENDMENT WILL TAKE EFFECT FROM 1ST APRIL, 201 5 AND WILL, ACCORDINGLY, APPLY IN RELATION TO ASSESSMENT YEAR 2 015-16 AND SUBSEQUENT YEARS. MEMORANDUM: EXPLAINING THE PROVIS IONS IN THE FINANCE (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 ARI SES FROM THE TRANSFER OF A LONG-TERM CAPITAL ASSET AND THE ASSES SEE HAS, AT ANY TIME WITHIN A PERIOD OF SIX MONTHS, INVESTED TH E WHOLE OR ANY PART OF CAPITAL GAINS IN THE LONG-TERM SPECIFIE D ASSET, OUT OF THE WHOLE OF THE CAPITAL GAIN, SHALL NOT BE CHARGED TO TAX. THE PROVISO TO THE SAID SUBSECTION PROVIDES THAT THE IN VESTMENT MADE IN THE LONG-TERM SPECIFIED ASSET DURING ANY FI NANCIAL YEAR SHALL NOT EXCEED FIFTY LAKH RUPEES. HOWEVER, THE WORDINGS OF THE PROVISO HAVE CREATED A N AMBIGUITY. AS A RESULT THE CAPITAL GAINS ARISING DU RING THE YEAR ITA NOS.3184 & 3193/MUM/2016 LATE MR. PREM A DEVIDAYAL 18 AFTER THE MONTH OF SEPTEMBER WERE INVESTED IN THE S PECIFIED ASSET IN SUCH A MANNER SO AS TO SPLIT THE INVESTMEN T IN TWO YEARS I.E., ONE WITHIN THE YEAR AND SECOND IRF THE NEXT Y EAR 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 (1R SO AS TO PROVIDE THAT THE INVESTMENT MADE BY AN ASS ESSEE IN THE LONG-TERM SPECIFIED ASSET, OUT OF CAPITAL GAINS ARI SING FROM TRANSFER OF ONE OR MORE ORIGINAL ASSET, DURING THE FINANCIAL YEAR IN WHICH THE ORIGINAL ASSET OR ASSETS ARE TRANSFERR ED AND IN THE SUBSEQUENT FINANCIAL YEAR DOES NOT EXCEED FIFTY LAK H RUPEES. THIS AMENDMENT WILL TAKE EFFECT FROM 1ST APRIL, 2015 AND WILL, ACCORDINGLY, APPLY IN RELATION TO ASSESSMENT YEAR 2 015-16 AND SUBSEQUENT ASSESSMENT YEARS.' 2.5. FROM THE ABOVE, IT CAN BE INFERRED THAT THE INTENTION OF THE LEGISLATURE PROBABLY APPEARS TO BE THAT THIS AMENDMENT SHOULD BE FOR THE ASSESSMENT YEAR 2015-16 TO AVOID UNWANTED LITIGATION OF THE PREVIOUS YEARS. IN ANY EVENT, FROM THE READING OF SECTION 54EC(1) AND THE FIRST P ROVISO, IT IS CLEAR THAT THE TIME LIMIT FOR INVESTMENT IN SIX MON THS FROM THE DATE OF TRANSFER AND EVEN IF SUCH INVESTMENT FA LLS UNDER TWO FINANCIAL YEARS, THE BENEFIT CLAIMED BY THE ASS ESSEE CANNOT BE DENIED. OUR VIEW FIND SUPPORTS FROM THE D ECISION FROM HON'BLE MADRAS HIGH COURT IN CIT VS C. JAICHAN DAR (2015) 370 ITR 579 (MAD.), DECISION OF THE TRIBUNAL IN ACIT VS M/S JNR SECURITIES BROKING LTD. (ITA NO.6987/MUM/2013) ORDER DATED 08/07/2015 AND VARIOU S OTHER DECISIONS MENTIONED IN THE PRECEDING PARAS OF THIS ITA NOS.3184 & 3193/MUM/2016 LATE MR. PREM A DEVIDAYAL 19 ORDER. THUS, IT IS CONCLUDED THAT, PRIOR TO AMENDME NT, THE TIME LIMIT OF RS.50 LAKHS AS PRESCRIBED U/S 54EC OF THE ACT IS PER YEAR AND IF THE ASSESSEE INVEST RS.50 LAKH EACH IN TWO DIFFERENT YEARS, OTHERWISE FULFILLING OTHER CONDITI ONS OF SECTION 54EC, THUS ASSESSEE WILL BE ENTITLE TO THE BENEFIT OF RS.1 CRORE AND NOT MERELY RS. 50 LAKHS. THUS, THE LIMIT OF RS .50 LAKH UNDER THE FIRST PROVISO IS NOT PER ASSESSEE BUT PER FINANCIAL YEAR. SO FAR AS, THE AMENDMENT MADE BY THE FINANCE ACT, 2014 IS W.E.F. 01/04/2015 I.E. ASSESSMENT YEAR 2015 -16 ONWARDS AND CANNOT BE HELD TO BE RETROSPECTIVE. THU S, WE HOLD THAT THE ASSESSEE IS ENTITLE TO DEDUCTION U/S 54EC OF THE ACT AS CLAIMED BY HIM AND DOES NOT RESTRICT THE ADD ITION AS HAS BEEN DONE BY THE LD. ASSESSING OFFICER. THE STA ND OF THE LD. COMMISSIONER OF INCOME TAX (APPEAL) IS, THEREFO RE, AFFIRMED, RESULTING INTO DISMISSAL OF THE APPEAL OF THE REVENUE. 3. NOW, WE SHALL TAKE THE APPEAL OF THE ASSESSEE ( ITA NO.3184/MUM/2016), WHEREIN, THE GROUND RAISED PERTA INS TO CONFIRMING THE DISALLOWANCE OF RS.1,27,29,172/- BY TREATING IT AS A NON-QUALIFYING EXPENDITURE U/S 48 OF THE ACT. THE CRUX OF THE ARGUMENT IS THAT THE ENTIRE EXPENSES WERE PAID BY THE ITA NOS.3184 & 3193/MUM/2016 LATE MR. PREM A DEVIDAYAL 20 ASSESSEE AND THE WHOLE PURPOSE WAS SALE OF SHARES O F EXISTING SHAREHOLDERS, FOR WHICH THE PAYMENT WAS AGREED AT 2 % OF THE VALUE. IT WAS CONTENDED THAT THE ASSESSEE MADE THE PAYMENT OF RS.1,27,29,172/- THROUGH BANKING CHANNEL WHICH S HOULD BE ALLOWED AS EXPENSES U/S 48 OF THE ACT. OUR ATTEN TION WAS INVITED TO THE CLIENT AGREEMENT DATED 27/05/2008 EX ECUTED BETWEEN DEVIDAYAL SALES LTD. AND M/S AVENDUS CAPITA L PVT. LTD. (PAGES 1 TO 5 OF THE PAPR BOOK) ALONWITH THE C OPIES OF INVOICES RAISED BY M/S AVENDUS CAPITAL PVT. LTD. (P AGE-6 & 7 OF THE PAPER BOOK) AND ALSO DETAILS OF PROFESSIONAL FEES PAID TO M/S AVENDUS CAPITAL PVT. LTD. ALONG WITH THE BANK S TATEMENT OF THE ASSESSEE EVIDENCING THE PAYMENT (PAGES 8 TO 12 OF THE PAPER BOOK). RELIANCE WAS PLACED UPON THE DECISION IN THE CASE OF MRS. USHARANI RAGHUNATHAN VS CIT (2012) 53 SOT 84 FROM THE CHENNAI BENCH OF THE TRIBUNAL, ORDER DATED 10/05/2012. 3.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS , IN BRIEF, ARE THAT THE ASSESSEE, AN INDIVIDUAL, WAS A CO-PROM OTER OF DEVIDAYAL SALES LTD. AND AS ON 1 ST APRIL, 2010 WAS HOLDING 914,543 EQUITY SHARES OF RS.10 EACH THEREIN. THE A SSESSEE ITA NOS.3184 & 3193/MUM/2016 LATE MR. PREM A DEVIDAYAL 21 SOLD 6,96,743 SHARES DURING THE YEAR UNDER ASSESSME NT TO ARYSTA LIFE SCIENCES AND EXECUTED WITH PROFESSIONAL EFFORTS OF M/S AVENDUS AND M/S KHETAN AND CO. WHO CLAIMED TO H AVE FACILITATED AND ENABLED THE ENTIRE SALE/TRANSACTION OF THE SHARES. THE ASSESSEE OFFERED THE TAX AS LONG TERM C APITAL GAIN ON SALE OF THE SHARES BY REDUCING THE COST FROM SAL E CONSIDERATION INCURRED BY HIM IN MAKING THE PAYMENT S TO M/S AVANDUS AND KHETAN & COMPANY AGGREGATING TO RS.1,74,18,575/-. THE LD. ASSESSING OFFICER HELD TH AT THESE FEES OF VARIOUS SERVICES RENDERED TO DSL AND THAT T HESE EXPENSES COULD BE CLAIMED BY DSL BUT NOT BY THE ASS ESSEE AND ACCORDINGLY HE DISALLOWED THE CLAIM OF EXPENSES . THE STAND OF THE LD. ASSESSING OFFICER WAS AFFIRMED IN APPEAL BY THE FIRST APPELLATE AUTHORITY. BEFORE THIS TRIBUNA L, CLAIMED THAT THE AMOUNT WAS PAID THROUGH BANKING CHANNEL AN D THUS SO FAR AS PAYMENT IS CONCERNED THERE IS NO DISPUTE. WE HAVE ALSO PERUSED THE OBSERVATION MADE IN PARA 5.1.1 OF THE IMPUGNED ORDER. CONSIDERING THE TOTALITY OF FACTS A ND THE ASSERTION MADE BY THE LD. COUNSEL FOR THE ASSESSEE, WE ARE OF THE VIEW THAT THE WHOLE ISSUE NEEDS REEXAMINATION B Y THE LD. ASSESSING OFFICER, AFRESH. THE LD. ASSESSING OFFICE R IS DIRECTED ITA NOS.3184 & 3193/MUM/2016 LATE MR. PREM A DEVIDAYAL 22 TO EXAMINE THE CLAIM OF THE ASSESSEE FOR WHICH DUE OPPORTUNITY OF BEING HEARD BE PROVIDED AND THE TRUE FACTS MAY BE BROUGHT ON RECORD. THE LD. ASSESSING OFFICER IS TO ALSO TO EXAMINE THE FACT AND THE CLAUSES MENTIONED IN CL IENT AGREEMENT DATED 27/05/2008 (ALONGWITH THE SCOPE OF WORK AND OTHER ATTENDANT FACTS) BETWEEN DEVIDAYAL SALES LTD. AND AVANDUS CAPITAL PVT. LTD. AND GENUINENESS OF PAYMEN T CLAIMED TO BE MADE BY THE ASSESSEE. THE ASSESSEE I S ALSO DIRECTED TO FURNISH NECESSARY EVIDENCE TO SUBSTANTI ATE THE CLAIM, THUS, THIS APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. FINALLY, THE APPEAL OF THE REVENUE IS DISMISSED AND APPEAL FO THE ASSESSEE IS ALLOWED FOR STATISTICAL P URPOSES. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF HEARING ON 14/12/2017. SD/- (MANOJ KUMAR AGGARWAL) SD/- (JOGINDER SINGH) '!# / ACCOUNTANT MEMBER $!# /JUDICIAL MEMBER MUMBAI; * DATED : 14/12 /2017 F{X~{T? P.S/. .. ITA NOS.3184 & 3193/MUM/2016 LATE MR. PREM A DEVIDAYAL 23 %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. ,-. / THE APPELLANT (RESPECTIVE ASSESSEE) 2. /0-. / THE RESPONDENT. 3. 1& ( , ) / THE CIT, MUMBAI. 4. 1& / CIT(A)- , MUMBAI, 5. 34 /&# , ,( # 5 , / DR, ITAT, MUMBAI 6. 6$ 7 / GUARD FILE. ! / BY ORDER, 03,& /& //TRUE COPY// /! (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI