Asst. Commissioner of Income Tax, Circle- 1, Margao., Margao V. Mr. Carmo Gracias., Margao

ITA 333/PAN/2014

• Counselvise Citation: 33324114 RSA 2014
• Duration Of Justice: 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 07-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B BALAKRISHNA
• Assessee Lawyers: CHINMAY S KAMAT
• Keywords: Capital asset
• Section: 54

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI P. K. BABNSAL, HONBLE ACCOUNTANT MEMBER AND SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER ITA NO. 333 /PNJ/201 4 (ASST. YEAR : 200 8 - 0 9 ) ACIT, CIRCLE - 1, MARGAO, GOA VS. MR. CARMO GRACIAS, DR. GRACIAS NURSING HOME, MARGAO, GOA. PAN NO. ACJPC 3944 Q (APPELLANT) (RESPONDENT) ITA NO. 334/PNJ/2014 (ASST. YEAR : 200 8 - 0 9 ) ACIT, CIRCLE - 1, MARGAO, GOA VS. MR S . FERNANDA GRACIAS, DR. GRACIAS NURSING HOME, MARGAO, GOA. PAN NO. A ADPF 4981 C (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI CHINMAY S. KAMAT DEPARTMENT BY : SHRI B. BALAKRISHNA - D.R. DATE OF HEARING : 10 / 0 2 /2015 . DATE OF PRONOUNCEMENT : 1 0 / 0 2 /201 5 . O R D E R PER D.T. GARASIA , J .M TH E S E TWO APPEAL S HAVE BEEN FILED BY THE DEPARTMENT AGAINST THE SEPARATE ORDER S OF LD. CIT (A), PANAJI DATED 2 8 /0 7 /201 4 FOR THE A.Y. 2 00 8 - 0 9 . THE ISSUE INVOLVED IN THESE APPEALS IS COMMON, SO THESE ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER . 2 2. IN I.T.A.NO. 334/PNJ/2014, T HE FOLLOWING GROUNDS ARE RAISED BY THE DEPARTMENT : 1. THE ORDER OF LD. CIT(A) IS OPPOSED TO LAW AND FACT OF THE CASE. 2. WHETHER ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED IN ALLOWING DEDUCTION U/S. 54EC AMOUNTING TO RS. 50,00,000/ - INVESTED IN REC BOND IN SUBSEQUENT FINANCIAL YEAR. 3. WHETHER ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED IN ALLOWING DEDUCTION U/S. 54EC EXCEEDING RS. 50,00,000/ - DURING THE RELEVANT FINANCIAL YEAR 2007 - 08, WHICH COVERED THE PERIOD OF INVESTMENT BEYOND THE FINANCIAL YEAR I.E. 2008 - 09 IN VIEW OF PROVISO INSERTED W.E.F. 01/04/2007 IN SEC. 54EC(1) WHICH READS PROVIDED THAT THE INVESTMENT MADE ON OR AFTER THE FIRST DAY OF APRIL, 2007, IN THE LONG TERM SPECIFIED ASSET BY AN ASSESSEE DURING ANY FINANCIAL YEAR DOES NOT EXCEED FIFTY LAKH RUPEES. 4. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTER ANY OF THE GROUNDS OF APPEAL EITHER BEFORE OR AT THE TIME OF HEARING. 3. SHORT FACTS OF THE CASE ARE THAT THE ASSESSEE DERIVES INCOME FROM NURSING HOM E AND ALSO HAD CAPITAL GAINS. THE ASSESSEE FILED E - RETURN DECLARING TOTAL INCOME OF RS. 24,72,234/ - ON 06/10/2008 . IT IS NOTICED THAT THE ASSESSEE AND HIS SPOUSE ARE GOVERNE D UNDER PORTUGUESE CIVIL CODE . PERUSAL OF DETAILS REVEALED THAT THE ASSESSEE HAD SHARE IN THE CONSIDERATION OF LONG TERM CAPITAL GAIN ASSET THAT WAS TRANSFERRED ON 07/03/2008 . THE ASSESSEE CLAIMED EXEMPTION FROM THE LTCG U/S. 54EC OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE 'ACT', FOR SHORT) TO THE EXTENT OF RS. 70,00,000/ - . THE BOND CERTIFICATES OF 3 RURAL ELECTRIFICATION CORPORATION LTD. AMOUNTING TO RS. 10,00,000/ - AND RS. 50,00,000/ - WERE SUBSCRIBED BY THE ASSESSEE ON 13/03/2008 AND 30/06/2008. IN VIEW OF THE PROVISO TO SEC. 54EC(1) OF THE ACT, THE ASSESSEE WAS ASKED AS TO WHY RS. 50 LAC. I NVESTMENT MADE IN THE SUCCEEDING FINANCIAL YEAR SHOULD NOT BE DISALLOWED. IN RESPONSE, THE ASSESSEE SUBMITTED IN HER WRITTEN SUBMISSION THAT PROVISO TO SEC. 54EC(1) OF THE ACT WAS TO BENEFIT THE SMALL INVESTORS BY QUOTING FROM THE FINANCE MINISTERS SPEECH IN BUDGET 2007 MANY SMALL INVESTORS COULD OBTAIN THESE BONDS. THE ASSESSEE FURTHER SUBMITTED THAT THE AMOUNT OF INVESTMENT IS ALSO QUA THE AGGREGATE IN A FINANCIAL YEAR AND NOT QUA THE AGGREGATE PER ASSESSEE IN DIFFERENT YEARS AND ALSO STATED THAT SEC. 54EC OF THE ACT IS AN EXEMPTION PROVISION AND AS SUCH IT SHOULD BE INTERPRETED LIBERALLY, REASONABLY AND IN F AVOUR OF THE ASSESSEE. ASSESSEE FURTHER SUBMITTED THAT VIEWED FROM THE MISCHIEF REMEDY RULE, IT IS VERY CLEAR THAT THE LIMIT OF RS. 50 LAC. ON INVESTMENT IS ONLY FOR ENSURING THAT NO SINGLE PERSON CAN HOARD MORE THAN RS. 50 LAC. IN A SINGLE F I N A N C I A L YEA R SO THAT MORE EQUITABLE BALANCES IS ACHIEVED IN THE DISTRIBUTION OF THE BONDS TO OTHER PERSONS. . THE ASSESSEE HAS SOLD LONG TERM CAPITAL ASSETS DURING THE YEAR AND EARNED CAPITAL GAINS AS UNDER: - ASSET SOLD CAPITAL GAIN/LOSS A) SALE OF COMBA FLAT : (1,15,807) 4 B) SALE OF ANCESTRAL PROPERTY (CARMO GRACIAS) : 7,07,625 C) SALE OF ANCESTRAL PROPERTY (FERNANDA GRACIAS) : 1,21,09,808 D) SHARE OF ANCESTRAL PROPERTY (FERNANDA GRACIAS) : 7,00,000 TOTAL CAPITAL GAIN 1,34,01,626 OUT OF THE ABOVE TOTAL CAPITAL GAIN, THE ASSESSEES SHARE IS RS. 67,00,813/ - (BEING HALF OF THE TOTAL CAPIT A L GAIN U/S. 5A) . THE INTENTION TO THE INSERTION OF NEW PROVISO TO SEC. 54EC(1) OF THE ACT AS FOLLOWS: - IT IS ALSO PROPOSED TO AMEND THE SAID SECTION SO AS TO PROVIDE FOR A CEILING ON INVESTMENT BY AN ASSESSEE IN SUCH LONG TERM SPECIFIED ASSETS. INVESTMENT IN SUCH SPECIFIED ASSETS TO AVAIL EXEMPTION U/S. 54EC, ON OR AFTER 1 ST DAY OF APRIL, 2007 WILL NOT EXCEED FIFTY LAKH RUPEES IN A FINANCIAL YEAR. THIS AMENDMENT SHALL TAKE EFFECT FROM 1 ST APRIL, 2007. IN THE INSTANT CASE, THE ASSESSEE HAS INVESTED ONLY RS. 10 LAC. IN THE LONG TERM SPECIFIED ASSET IN THE FINANCIAL YEAR 2007 - 08 . THEREFORE THE CLAIM OF THE ASSESSEE U /S. 54EC OF THE ACT IS RESTRICTED TO THE SUBSCRIPTION OPTED IN THE FINANCIAL YEAR 2007 - 08 . 4 . THE MATTER WAS CARRIED TO THE LD. CIT(A) AND THE LD. CIT(A) HAS PARTLY ALLOWED THE APPEALS BY OBSERVING AS UNDER: - 5.4. I HAVE GONE THROUGH THE ASSESSMENT ORDER AND THE SUBMISSION OF THE APPELLANT. THE APPELLANT HAS PLACED RELIANCE ON THE DECISION OF HONBLE ITAT, PANAJI IN THE CASE OF ITO VS MS. RANIA FALEIRO, REPORTED IN 5 (2013) 33 TAXMAN. CORN 611 (PANAJI. TRIB). I HAVE GONE THROUGH THIS DECISION AND FIND THAT ISSUE IS IDENTICAL TO THAT OF THE INSTANT CASE. FACTS OF THE CASE, REFERRED ABOVE, IS AS UNDER: THE ASSESSEE HAD SOLD A PROPERTY [LONG - TERM CAPITAL ASSET] ON 05.02.2008 AND COMPUT ED THE CAPITAL GAIN AT RS.1.16 C ROR ES. SHE HAD INVESTED IN THE CAPITAL GAINS BONDS (REC BONDS] A SUM OF RS. 50 LAKHS ON 31 . 03.2008 AND A SUM OF RS. 5 0 LAKHS ON 30.06.2008. IN THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2008 - 09, SHE CLAIM EXEMPTION UNDER SECTION S4EC OF THE CAPITAL GAIN AMOU N T ING TO RS. 1 CRORE. THE ASSESSING OFFICER REFERRED TO THE PROVISO INSERTED IN SECTION 54EC(1) BY THE FINAN CE ACT, 2007, WITH EFFECT FROM 0 1 - O4 - 2007, AND ON THE BASIS OF THIS PROVISO TOOK THE VIEW THAT THE ASSESSEE COULD HAVE MADE THE INVESTMENT ONLY UPT O RS.50 LAKHS. THEREFORE, SHE COULD HAVE GOT EXEMPTION UNDER SECTION 5+EC ONLY FOR A SUM OF RS.5 0 LAKHS. ACCORDINGLY, HE ALLOWED EXEMPTION FOR RS.50 LAKHS AND MADE THE ADDITION OF RS.50 LA K HS. ON APPEAL, THE COMMISSIONER (APPEALS) DELETED THE ADDITION MA DE BY THE ASSESSING OFFICER. ON FURTHER APPEAL, THE JURISDICTIONAL ITAT, HELD AS UNDER: THE PLAIN READING OF SECTION S4EC(1) AS WELL AS THE PROVISO THERETO CLEARLY SUGGESTS THAT THE LIMIT OF RS.50 LA K HS AS GIVEN UNDER THE PROVISO IS PER PERSON PER FIN ANCIAL YE. THERE IS NO AMBIGUITY IN THE INTER PR ETATION . HAD THERE BEEN AN INTENTION OF THE LEGISLATURE TO RESTRICT THE EXEMPTION TO RS.5O LAKHS, 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 CONDITION 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 FALL WITHIN TWO DIFFERE NT FINANCIAL YEARS, AS THE HAPPENED IN THE INSTANT CASE, THE TRIBUNAL CANNOT ADD THE EMBARGO THAT THE ASSESSEE CANNOT MAKE THE INVESTMENT TO AVAIL OF THE EXEMPTION UNDER SECTION S4EC IN THE DIFFERENT FINANCIAL YEARS IF HE HAD ALREADY MADE THE INVESTMENT IN THE FINANCIAL YEAR IN WHICH THE CAPITAL ASSET IS TRANSFERRED. THE LANGUAGE OF SECTION 54EC IS CLEAR AND UNAMBIGUOUS AND IT LEADS TO THE INTERPRETATION THAT THE ASSESSEE CAN MAKE THE INVESTMENT IN TWO DIFFERENT FINANCIAL YEARS 6 PROVIDED IN A FINANCIAL YEAR THE INVESTMENT MADE DID NOT EXCEED RS.50 LAKHS. F ROM THE CIRCULAR NO.3/2008, DATED 12 - 03 - 2008 ISSUED BY THE OBOT BEING AN EXPLANATORY NOTE ON THE PROVISIONS RELATING TO DIRECT TAXES IN THE FINANCE ACT, 2007, IT IS APPARENT THAT THE GOVERNMENT ON L Y INTENDED TO R ESTRICT THE INVESTMENT IN A PARTICULAR FINANCIAL YEA R AND ACCORDINGLY HAS FIXED THE LIMIT OF RS. 5 O LAKHS AS PE RM ISSIBLE LIMIT IN A PARTICULAR FINANCIAL YEAR. THE GOVERNMENT DID NOT INTEND TO RESTRICT THE MAXIMUM AMOUNT OF EXEMPTION PERMISSI BLE UNDER SECTION 54EC. LEGISLATURE HAS CONSCIOUSLY USED THE WORDS IN A FINANCIAL YEAR IN THE PROVISO TO SECTION 54EC. IF THE LEGISLATURE WANTED TO RESTRICT THE EXEMPTION ITSELF TO RS.5 0 LAKHS, IT COULD HAVE SIMPLY DISPENSED WITH USING T HE WORD IN A FIN ANCIAL YEAR. *PARA 4} ACCORDING, THE COMMISSIONER (APPEAL) HAD RIGHTLY DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. [ PARA 5 ] SINCE THE FACTS OF THE INSTANT CASE IS IDENTICAL TO THE CASE DISCUSSED ABOVE, THE AC. IS DIRECTED TO DELETE THE ADDITION AND ALLOW CREDIT FOR RS. 50 LAKHS, INVESTED IN REC BONDS ON 30.06.2008. THIS GROUND OF APPEAL OF THE APPELLANT IS ALLOWED ACCORDINGLY. 5. SINCE THE ASSESSEE IS GOVERED BY S.5A OF THE I.T. ACT AND ISSUES ARE ALSO IDENTICAL, THIS ORDER SHALL BE APPLICABLE IN THE CASE OF THE SPOUSE MR. CARMO GRACIAS AS WELL. IN THIS RESULT, THE BOTH APPEALS ARE PARTLY ALLOWED. 5. WE HAVE HEARD RIVAL CONTENTION OF BOTH THE PARTIES AND LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE ISSUE IN CONTROVERSY IS COVERED BY THE DECISION OF ITAT PANAJI BENCH IN THE CASE OF ITO VS. MS. RANIA FALEIRO REPORTED IN (2013) 33 TAXMAN.COM 611 (PANAJI TRIBUNAL). WE FIND THAT THE ASSESSING OFFICER HAS TAKEN A VIEW THAT THE ASSESSEE C AN BE INVESTED UPTO RS. 50 LAC . OUT OF CAPITAL GAIN ONLY AND IF THE ASSESSEE HAS INVESTED IN TWO DIFFERENCE ASSESSMENT 7 YEARS WITHIN SIX MONTHS, THEN HE IS NOT ENTITLED FOR DEDUCTION U/S. 54EC OF THE ACT . BUT, THIS AMENDMENT WILL COME INTO FORCE FROM A.Y. 2015 - 16 ONWARDS AND THE AMENDMENT HAS BEEN MADE IN SEC. 54 E C OF THE ACT WHEREIN IT IS AMENDED THAT INVESTMENT MADE BY AN ASSESSEE IN THE LONG - TERM SPECIFIED ASSET, FROM 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 THE SUBSEQUENT FINANCIAL YEAR DOES NOT EXCEED FIFTY LAKH RUPEES . WE FIND THAT TH IS AMENDMENT IS NOT APPLICABLE IN THIS ASSESSME NT YEAR I.E. A.Y . 2008 - 09 , THEREFORE , L D. CIT(A) IS JUSTIFIED IN PASSING THE IMPUGNED ORDER . H ENCE, OUR INTERFERENCE IS NOT REQUIRED , SO WE DISMISS THE APPEAL. 6. THE FACTS IN I.T.A.NO. 334/PNJ/2014 ARE SIMILAR TO THE FACTS INVOLVED IN I.T.A.NO. 333/PNJ/2014. SO , OUR FINDINGS GIVEN IN FORMER PART OF THIS ORDER SHALL APPLY MUTATIS MUTANDIS TO I.T.A.NO. 334/PNJ/2014. 7. IN THE RESULT, BOTH THE APPEAL S OF THE DEPARTMENT ARE DISMISSED. ( ORDER PRONOUNCED IN THE OPEN COURT ON 1 0 T H FEBRUARY , 201 5 ). S D / - S D / - (P.K. BANSAL) (D.T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 1 0 T H FEBRUARY , 201 5 . 8 VR/ - COPY TO: 1 . THE APPELLANT 2 . THE RESPONDENT 3 . THE LD. CIT 4 . THE CIT(A) 5 . THE D.R 6 . GUARD FILE. BY ORDER ASSISTANT REGISTRAR I.T.A.T., PANAJI