Income-tax Officer, V. Smt. Bala R. Venkitachalam, Nashik

ITA 321/PUN/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1614 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 3 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 26-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: AMIT DUA
• Keywords: Capital asset
• Section: 143(3)

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC , PUNE , BEFORE MS. SUSHMA CHOWLA, JM . / ITA NO. 321 /PN/201 5 / ASSESSME NT YEAR : 20 1 0 - 11 THE INCOME TAX OFFICER, WARD - 2 ( 4 ), NASHIK . / APPELLANT VS. SMT. BALA R. VENKITACHALAM, PLOT NO.179 - C, MAHATMA NAGAR, NASHIK 422005 . / RESPONDENT PAN : A BVPV5982A / APPELLANT BY : SHRI AMIT DUA / APPELLANT BY : SHRI AMIT DUA / RESPONDENT BY : NONE / DATE OF HEARING : 27 . 0 6 .201 6 / DATE OF PRONOUNCEMENT: 30 . 0 6 .201 6 / ORDER PER SUSHMA CHOWLA, J M : TH IS APPEAL FILED BY THE REVENUE IS AGAINST T HE ORDER OF CIT (A) - 2 , NASHIK , DATED 0 2 . 0 1 .20 1 5 RELATING TO ASSESSMENT YEAR 20 1 0 - 11 AGAINST ORDER PASSED UNDER SECTION 143(3) OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . 2 . DESPITE SERVICE OF NOTICE, NONE APPEARED ON BEHALF OF THE ASSESSEE NOR ANY AP PLICATION WAS MOVED FOR ADJOURNMENT . H ENCE, IT IS PROCEED ED TO D ISPOSE OF THE PRESENT APPEAL AFTER HEARING THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE. ITA NO. 321 /PN/20 1 5 SMT. BALA R. VENKITACHALAM 2 3. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. THE LD. CIT(A) - 2, NASHIK HAS ERRED IN HOLDING THAT EXEMPTION U/S 54EC IS ALLOWABLE IN EXCESS OF RS.50 LACS IF INVESTMENT IS MADE IN TWO FINANCIAL YEARS. 2. WHETHER THE LD. CIT(A) - 2 IS CORRECT ON RELYING ON THE JUDGMENT OF MADRAS HIGH COURT IN CASE OF CIT VS JAICHANDAR & SRIRAM INDUB AL TC(A) NO.419 & 533 OF 2014 IN THE FACTS & CIRCUMSTANCES OF ASSESSEES CASE. 4. THE ONLY ISSUE RAISED IN THE PRESENT APPEAL FILED BY THE REVENUE IS AGAINST ALLOWABILITY OF DEDUCTION UNDER SECTION 54EC OF THE ACT IN EXCESS OF RS.50 LAKHS IF INVESTMENT IS MADE IN TWO FINANCIAL YEARS. 5. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE WAS AN INDIVIDUAL AND HAD FURNISHED RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION DECLARING TOTAL INCOME OF RS. 13,90,540/ - . THE ASSESSING OFFICER DURING THE COURSE OF AS SESSMENT PROCEEDINGS SHOW CAUSED THE ASSESSEE WITH REGARD TO THE CLAIM OF DEDUCTION UNDER SECTION 54EC OF THE ACT IN EXCESS OF RS.50 LAKHS. THE ASSESSEE HAD DECLARED INCOME FROM LONG TERM CAPITAL GAINS ON SALE OF ASSET AT RS.72,49,401/ - . THE ASSESSEE MAD E THE INVESTMENT OF RS.72.50 LAKHS IN SPECIFIED SECURITIES IN TWO FINANCIAL YEARS FALLING WITHIN THE STATUTORY PERIOD OF SIX MONTHS FROM THE DATE OF TRANSFER OF CAPITAL ASSET AS PROVIDED UNDER SECTION 54EC OF THE ACT. AS PER THE ASSESSEE, INVESTMENT IN EA CH OF THE FINANCIAL YEARS DID NOT EXCEED RS.50 LAKHS AND CONSEQUENTLY, THE ASSESSEE MADE THE CLAIM. THE ASSESSING OFFICER REFERRED THE MATTER TO JCIT, RANGE 2, NASHIK UNDER SECTION 144A OF THE ACT, WHO ISSUED THE INSTRUCTIONS AND THE CLAIM OF EXEMPTION UNDER SECTION 54EC OF THE ACT OF RS.72.50 LAKHS WAS RESTRICTED TO RS.50 LAKHS AND THE CLAIM OF REMAINING EXEMPTION OF RS.22,49,401/ - WAS NOT ALLOWED TO THE ASSESSEE. 6. BEFORE THE CIT(A), THE ASSESSEE FILED WRITTEN SUBMISSIONS WHICH ARE INCORPORATED UNDE R PARA 5 AT PAGES 3 TO 15 OF THE APPELLATE ORDER, WHEREIN ITA NO. 321 /PN/20 1 5 SMT. BALA R. VENKITACHALAM 3 RELIANCE WAS PLACED ON SEVERAL DECISIONS OF VARIOUS COURTS AND THE CIT(A) NOTED THAT THE ASSESSEE HAD MADE THE INVESTMENT OF RS.50 LAKHS IN FINANCIAL YEAR 2009 - 10 AND RS.22,50,000/ - IN FINANCIAL YEA R 2010 - 11. THE CIT(A) NOTED THE CLAIM OF ASSESSEE THAT WHERE THE INVESTMENT WAS MADE DURING THE SPECIFIED PERIOD OF SIX MONTHS, THEN THE LIMIT OF RS.50 LAKHS WAS APPLICABLE TO THE INVESTMENT MADE DURING THE FINANCIAL YEAR AND WHERE THE PERIOD OF SIX MONTH S COMPRISED OF TWO FINANCIAL YEARS, THEN THE TOTAL INVESTMENT OF RS.1 CRORE I.E. RS.50 LAKHS IN EACH FINANCIAL YEAR WAS PERMISSIBLE TO BE MADE. IF THE INTENTION OF LEGISLATION WAS TO ALLOW THE EXEMPTION OF RS.50 LAKHS ONLY, THEN THE SAME COULD HAVE BEEN E ASILY DONE BY PROVIDING LIMIT IN THE MAIN PROVISIONS ITSELF. WITH REGARD TO THE RELIANCE PLACED UPON BY THE ASSESSING OFFICER ON ACIT, CIRCLE - 2 VS. SHRI RAJKUMAR JAIN AND SONS (HUF) IN ITA NO.648/JP/2011 AND THE DIRECTIONS GIVEN BY THE JCIT, RANGE - 2, NASH IK, THE ASSESSEE EXPLAINED THAT THE SAME WAS NOT APPLICABLE AS THE NOTIFICATION REFERRED TO BY JAIPUR BENCH OF TRIBUNAL WAS APPLICABLE ONLY FOR INVESTMENT MADE IN A PARTICULAR FINANCIAL YEAR. TRIBUNAL WAS APPLICABLE ONLY FOR INVESTMENT MADE IN A PARTICULAR FINANCIAL YEAR. HOWEVER, THE INTENTION OF THE PARLIAMENT WAS CLARIFIED BY THE F INANCE ACT, 2007, WHEREBY THE PROVISO WAS INSERTED WHICH IN TUR N, PUT THE LIMIT OF INVESTMENT ON BONDS DURING THE FINANCIAL YEAR AND NOT FOR FINANCIAL YEAR IN WHICH TRANSFER OF CAPITAL ASSET HAD TAKEN PLACE. THE CIT(A) IN TURN, ALLOWED THE CLAIM OF THE ASSESSEE HOLDING THAT THE PROVISO WAS PU TTING A CAP OF THE MONETARY LIMIT OF RS.50 LAKHS DURING THE FINANCIAL YEAR. THE SUBSTANTIVE PROVISION ALREADY HAD SET A TIME LIMIT OF SIX MONTHS FROM THE DATE OF TRANSFER OF CAPITAL GAINS FOR INVESTMENT FOR EXEMPTIO N. FURTHER, NEWLY INSERTED PROVISION BY THE FINANCE ACT, 2007 SETS AN ADDITIONAL TIME LIMIT BY STATING DURING ANY FINANCIAL YEAR. BOTH THE TIME LIMITS WHEN INTERPRETED WOULD MAKE IT CLEAR THAT THE INVESTMENT MADE DURING ANY FINANCIAL YEAR FALLING WITHI N THE SPAN OF SIX MONTHS MAY SHELTER TO TWO FINANCIAL YEARS AND INVESTMENT COULD BE MADE UPTO RS.1 CRORE DURING THE SPAN. RELIANCE IN THIS REGARD WAS PLACED ON THE DECISION OF HONBLE HIGH COURT ITA NO. 321 /PN/20 1 5 SMT. BALA R. VENKITACHALAM 4 OF MADRAS IN CIT VS. C. JAICHANDAR (2015) 370 ITR 579 (MAD) AND RELEVANT PORTION OF THE SAID JUDGMENT IS REPRODUCED UNDER PARA 8.2 AT PAGES 21 AND 22 OF THE APPELLATE ORDER. THE CIT(A) THUS, HELD THAT THE INVESTMENT SO MADE IN REC BONDS WITHIN SIX MONTHS FROM THE DATE OF TRANSFER, THOUGH IN TWO DISTINCT FINANCIAL YEARS TO THE TUNE OF RS. 72,50,000/ - WAS ELIGIBLE FOR EXEMPTION UNDER SECTION 54EC OF THE ACT. THE CIT(A) ALSO NOTED THAT NO CONTRARY COURT DECISION OF THE HIGH COURT LEVEL HAD BEEN BROUGHT TO HIS NOTICE. 7. THE REVENUE IS IN APPEAL AGAINST THE ORDER OF CIT(A). 8. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE STRONGLY RELIED ON THE DECISION OF JAIPUR BENCH OF TRIBUNAL. HOWEVER, NO CONTRARY DECISION OF ANY OTHER HIGH COURT WAS REFERRED TO BY THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVE NUE. 9. THE ISSUE ARISING IN THE PRESENT APPEAL IS AGAINST THE CLAIM OF DEDUCTION UNDER SECTION 54EC OF THE ACT, UNDER WHICH DEDUCTION IS PROVIDED AGAINST THE INCOME FROM LONG TERM CAPITAL GAINS IN CASE THE INVESTMENT IS MADE IN SPECIFIED ASSETS WITHIN TI ME FRAME OF SIX MONTHS FROM THE DATE OF SALE OF ASSET. THE SAID SECTION ALSO PROVIDES A CAP ON THE IN VESTMENT TO BE MADE IN THE BONDS TO THE EXTENT OF RS.50 LAKHS IN ANY FINANCIAL YEAR. AS PER THE MANDATE OF THE SAID SECTION AND THE PROVISO THEREUNDER, W HERE THE ASSESSEE MAKES AN INVESTMENT OF RS.50 LAKHS IN THE SPECIFIED BONDS WITHIN TIME FRAME OF SIX MONTHS FROM THE DATE OF SALE, IN ANY FINANCIAL YEAR, THEN THE BENEFIT OF SAID SECTION IS TO BE ALLOWED TO THE ASSESSEE. IN CASE, THE PERIOD OF SIX MONTHS FALL S WITHIN TWO FINANCIAL YEARS, THEN THE QUESTION WHICH ARISES FOR ADJUDICATION IS WHETHER THE ASSESSEE CAN CLAIM THE AFORESAID DEDUCTION UNDER SECTION 54EC OF THE ACT TO THE EXTENT OF RS.50 LAKHS IN EACH OF THE FINANCIAL YEAR TOTALING RS.1 CRORE , W HERE THE INVESTMENT IS MADE IN THE AFORESAID BONDS IN TWO FINANCIAL YEARS SEPARATELY ITA NO. 321 /PN/20 1 5 SMT. BALA R. VENKITACHALAM 5 BUT WITHIN PERIOD OF SIX MONTHS FROM THE DATE OF SALE OF ASSETS. THIS ISSUE AROSE FOR CONSIDERATION BEFORE THE HONBLE HIGH COURT OF MADRAS IN CIT VS. C. JAICHANDAR (SUPRA) AN D LATER IN CIT VS. COROMANDEL INDUSTRIES LTD. (2015) 370 ITR 586 (MAD) HAVE LAID DOWN THAT THE EXEMPTION GRANTED UNDER THE PROVISO TO SECTION 54EC(1) OF THE ACT SHOULD BE CONSTRUED NOT TRANSACTIONWISE BUT FINANCIAL YEAR WISE, WHEREIN IF THE ASSESSEE WAS AB LE TO INVEST SUM OF RS.50 LAKHS EACH IN TWO DIFFERENT FINANCIAL YEARS, WITHIN PERIOD OF SIX MONTHS FROM THE DATE OF TRANSFER OF CAPITAL ASSETS, THE SAID DEDUCTION WAS ALLOWABLE TO THE ASSESSEE. THE HONBLE HIGH COURT OF MADRAS IN CIT VS. C. JAICHANDAR (SU PRA) HAS HELD THAT AS PER THE MANDATE OF SECTION 54EC(1) OF THE ACT, TIME LIMIT FOR INVESTMENT IS SIX MONTHS AND BENEFIT THAT FLOWS FROM THE FIRST PROVISO IS THAT IF THE ASSESSEE MAKES INVESTMENT OF RS.50 LAKHS IN ANY FINANCIAL YEAR, IT WOULD HAVE BENEFIT OF SECTION 54EC(1) OF THE ACT. THE HONBLE HIGH COURT FURTHER HELD THAT HOWEVER, TO REMOVE THE AMBIGUITY IN THE ABOVE SAID PROVISIONS, LEGISLAT URE BY FINANCE (NO.2) ACT , 2014 W.E.F. 01.04.2015 HAD INSERTED PROVISO AFTER BY FINANCE (NO.2) ACT , 2014 W.E.F. 01.04.2015 HAD INSERTED PROVISO AFTER EXISTING PROVISO TO SUB - SECTION (1) OF SECTION 54EC OF THE ACT. THE SECOND PROVISO, AS PER WHICH THE INVESTMENT MADE BY THE ASSESSEE IN LONG TERM CAPITAL GAINS SPECIFIED ASSETS OUT OF CAPITAL GAINS ARISING FROM TRANSFER OF ONE OR MORE ORIGINAL ASSETS, DURING THE FINANCIAL YEAR IN WHICH THE ORIGINAL ASSET OR ASSETS ARE TRANSFERRED AND IN SUBSEQUENT FINANCIAL YEARS, DOES NOT EXCEED RS.50 LAKHS. THE SAID AMENDMENT WAS HELD TO BE APPLICABLE FROM ASSESSMENT YEAR 2015 - 16 AND SUBSEQUENT ASSESSMENT YEARS. THE HONBLE HIGH COURT THUS, CATEGORICALL Y HELD THAT THE INVESTMENT MADE ON OR AFTER 01.04.2007 IN LONG TERM SPECIFIED ASSETS BY AN ASSESSEE DURING ANY FINANCIAL YEAR SHOULD NOT EXCEED RS.50 LAKHS. HOWEVER, THE BENEFIT THAT FLOWS FROM THE PROVISO WAS THAT WHERE THE ASSESSEE MAKES INVESTMENT OF R S.50 LAKHS IN ANY FINANCIAL YEAR, IT COULD HAVE THE BENEFIT OF SECTION 54EC(1) OF THE ACT . APPLYING THE AFORESAID PROPOSITION TO THE FACTS OF THE PRESENT CASE, WHERE THE ASSESSEE HAD INVESTED ITA NO. 321 /PN/20 1 5 SMT. BALA R. VENKITACHALAM 6 RS.50 LAKHS IN REC BONDS I.E. SPECIFIED ASSETS AS PROVIDED UNDE R SECTION 54EC OF THE ACT ON 28.02.2010 I.E. IN FINANCIAL YEAR 2009 - 10 AND RS.22,50,000/ - ON 30.04.2010 I.E. IN FINANCIAL YEAR 2010 - 11 AS AGAINST THE CAPITAL GAINS ARISING OF RS.72,49,401/ - ON THE TRANSFER OF LONG TERM CAPITAL GAINS I.E. SALE OF SHARES ON 21.01.2010 FALLING IN FINANCIAL YEAR 2009 - 10, THE ASSESSEE IS ENTITLED TO THE BENEFIT PROVIDED BY THE PROVISO UNDER SECTION 54EC OF THE ACT AND CONSEQUENTLY, THE ORDER OF CIT(A) MERITS TO BE UPHELD. DISMISSING THE GROUNDS OF APPEAL RAISED BY THE REVENUE, THE APPEAL OF THE REVENUE IS DISMISSED. 1 0 . IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON THIS 30 TH DAY OF JUNE , 201 6 . SD/ - (SUSHMA CHOWLA) / JUDICIAL MEMBER / PUNE ; DAT ED : 30 TH JUNE , 201 6 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT(A) - 2 , NASHIK ; 4. / THE CIT - 2 , NASHIK ; 5. 6. , , , - / DR SMC , ITAT, PUNE; / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE