Anil Shankar Palewar, Nagpur V. INCOME TAX OFFICER, WARD-5(1), NAGPUR

ITA 36/NAG/2022

• Counselvise Citation: [2023] 102 COUNSELVISE.COM (IT) 0272 (ITAT-NAGPUR)
• Duration Of Justice: 1 year(s) 7 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 25-10-2023
• Assessment Year: 2015-2016
• Appeal Filed On: 09-03-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RASHMI MATHUR
• Keywords: Capital asset converted into stock in trade; Capital asset; Date of conversion; Benefit of exemption
• Section: 45(2); 54F; 250; 54EC

Judgement Text

।आयकरअपीलीय अिधकरण Ɋायपीठ नागपुर मŐ। IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH : : NAGPUR [VIRTUAL HEARING AT PUNE] BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER AND DR. DIPAK P. RIPOTE, ACCOUNTANT MEMBER आयकर अपील सं. / ITA No.36/NAG/2022 िनधाᭅरण वषᭅ / Assessment Year : 2015-16 Anil Shankar Palewar, Plot No.219, Suyog Nagar, Nagpur – 440015. PAN: ABZPP 8221 A V s The Income Tax Officer, Ward-5(1), Nagpur. Appellant / Assessee Respondent / Revenue Assessee by Shri Kapil Hirani – AR Revenue by Smt. Rashmi Mathur – Sr.DR Date of hearing 26/10/2023 Date of pronouncement 31/10/2023 आदेश/ ORDER PER DR. DIPAK P. RIPOTE, AM: This appeal is filed against the order of ld. Commissioner of Income Tax[NFAC], Delhi dated 26.12.2021under section 250 of the Act, 1961 for the Assessment Year 2015-16. The assessee has raised following grounds of appeal : “1) On the facts and circumstances of the case and in law, the Ld. AO grossly erred in disallowing and the Ld. CIT(A) NFAC, Delhi grossly erred in confirming the denial of benefit of exemption under section 54EC of the Income Tax Act, 1961 as claimed by the Appellant in his return of income. The exemption under section 54EC ITA No.36/NAG/2022 Anil Shankar Palewar [A] 2 as claimed deserves to be allowed as per law and in the interest of natural justice. 2) The Appellant craves leave to add, amend, alter, vary and / or withdraw the above ground of appeal with the kind permission of the Hon’ble Tribunal.” Submission of ld.AR : 2 The ld.Authorised Representative(ld.AR) of the assessee submitted as under : “1) That the Appellant entered into an agreement of Development dated 26.06.2014 vide which the Appellant transferred / assigned all his rights in immovable property being piece and parcel of land containing the admeasurement 486.00 Sq. Mrs. being the East - West and North - South portion of the land bearing Plot No. 29, out of containing by admeasurement 644.00 Sq. Mtrs. being the portion of land bearing Kh. No. 48/1 of Mouza - Jattarodi bearing Corporation House No. 302, Ward No. 10, City Survey No. 915, Sheet No. 33. situated at Wanjari Nagar, Nagpur, within the limits of Nagpur Municipal Corporation, Ward No. 10 in Tah and Dist. Nagpur for a valuable consideration of Rs. 80,20,000 plus a residential house property value of which was determined at Rs.19,75,388 making total consideration for sale of property to be Rs.99,95,388.” 2) The consideration of Rs.80,20,000 received is as under : Sr.No Date Amount 1 6.11.2013 15,00,000 2 6.11.2013 10,00,000 3 21.12.2013 5,00,000 4 13.03.2015 25,00,000 5 15.05.2015 20,00,000 6 11.06.2015 5,20,000 TOTAL 80,20,000 ITA No.36/NAG/2022 Anil Shankar Palewar [A] 3 3) The sale of impugned property resulted in Long Term Capital Gain of Rs.71,15,365. 4) The Appellant claimed exemption under section 54F for an amount of Rs.24,78,917 which is accepted by the AO and is undisputed. 5) The Appellant invested an amount of Rs. 45,00,000 under section 54EC Bonds and claimed exemption under section 54EC of the Act. The amount invested is as under: Sr.No Date Amount 1 18.03.2015 25,00,000 2 22.05.2015 20,00,000 TOTAL 45,00,000 6) The benefit of exemption of section 54EC has been denied by the AO on the grounds that the same is beyond the period of six months from the date of agreement being 26.06.2014 ignoring the fact that the same has been made within statutory period of six months from date of receipt of consideration. 7) Your honour will appreciate that the Appellant received tranches of consideration amount of Rs. 25,00,000 on 13.03.2015 and Rs. 20,00,000 on 15.05.2015 against which investments in 54EC bonds was made on 18.03.2015 and 22.05.2015 respectively. Submission of ld.DR : 3. TheLd.DR relied on the orders of the lower authorities. Findings & Analysis : 4. In this case, it has been claimed by the assessee that assessee had received consideration on following dates: ITA No.36/NAG/2022 Anil Shankar Palewar [A] 4 Sr.No Date Amount 1 6.11.2013 15,00,000 2 6.11.2013 10,00,000 3 21.12.2013 5,00,000 4 13.03.2015 25,00,000 5 15.05.2015 20,00,000 6 11.06.2015 5,20,000 TOTAL 80,20,000 4.1 These facts were submitted by the Assessee during the Assessment proceedings and the AO has reproduced the same in the Assessment Order in para 4.2. The same is reproduced here as under for ready reference: “Mr. Anil Palewar has executed an Agreement for development with the builder to construct a residential apartment on the plot at Wanjari Nagar on 26/06/2014. The agreement to sale/Development does not construe Sale of property. The right in the property will be transferred only on the execution of sale deed or on receipt of full consideration. Therefore, the period of investment should not be reckoned from the date of Agreement but from the date of receipt of payment. The assessee has received the consideration as per the manner of payment mentioned in the agreement for development and he has invested the funds in as soon as the he received the amount from the builder. It is clearly mentioned in the manner of payment that balance amount will be paid after sanctioning of building Plan from the competent Authority. The building plan was approved on 24/02/2015(Copy of same is enclosed) and the amount of Rs.25 lacs was received on 13/03/2015 & Rs.20 lacs was received on 16/05/2015. Both the ITA No.36/NAG/2022 Anil Shankar Palewar [A] 5 amount of Rs.25 Lacs & Rs.20 lacs were invested in the Tax Free Bonds of National Highway Authority of India on 18/03/2015 & 22/05/2015 respectively.” 4.2. The AO in the Assessment Order at para 5 has admitted that the full and Final consideration was received on 16/05/2015. 4.3 Thus there is no dispute in the facts that the Assessee had received the consideration on 13/03/2015 of Rs.25,00,000/- and on 16/05/2015 of Rs.20,00,000/-. There is no dispute that these amounts were invested in Tax Free Bonds of NHAI on 18/03/2015 and 22/05/2015 respectively. When we calculate the date of investment with reference to date of actual receipt of the amounts mentioned above, the investment in the NHAI bonds is within six months of actual receipts of the amounts. 5. We agree with the ld.AR that the time limit of six months shall be calculated from the date of receipt of actual consideration. In this context, we find support from the order of ITAT Pune in the case Mahesh NemichandraGaneshwade147 TTJ 0488 [2012], the ITAT in para 16,17,18has held as under : “16. We have carefully considered the rival submissions. In this case, the dispute before us is with respect to the claim of exemption of long term capital gain on sale of land with respect to investments of Rs 12,50,000/- and Rs 37,50,000/- made on 3.8.2007 and 27.10.2007 respectively. Section 54EC prescribes that the exemption ITA No.36/NAG/2022 Anil Shankar Palewar [A] 6 shall be available if the investment in specified Bonds is made within a period of six months after the date of transfer of the capital asset which, in the present case, is 12.7.2005. The assessee has explained that he could not make the investments within six months from the date of transfer, i.e. 12.7.2005 because the aforestated consideration was received on subsequent dates, namely, 12.12.2007, 14.5.2007, 19.6.2007 and 3.7.2007. A technical interpretation of section 54EC in this regard would imply that the exemption from tax on capital gains is not available qua the impugned investment of Rs 50 lakhs. So, however, the plea set-up by the assessee is on account of the purpose and spirit of the section and on account of the fact that the right to collect such sale consideration arose after the period of six months from the date of transfer. It is pleaded that the requirement of section 54EC stipulating investment in six months from the date of transfer has to be appropriately understood and applied so as to further the purpose and spirit of the section. 17. In a somewhat similar situation, the requirement of section 54EC to the effect that investment in specified assets is to be made within a period of six months from the date of transfer, was put to some clarification by the CBDT in Circular No 791 (supra). The question arose before the CBDT regarding exemption of a long term capital asset which had arisen on conversion of a capital asset into stock-in- trade. Such capital gain would arise in the year of conversion, so however, in terms of section 45(2) of the Act, its taxability is postponed to the year in which such stock-in-trade is actually sold or otherwise transferred by the assessee. The question arose as to whether the date of transfer as referred to in section 54E of the Act is the date of conversion of capital asset into stock-in-trade or the date on which the stock-in-trade is sold or otherwise transferred by the assessee. As per the phraseology of sections 54EA, 54EB and 54EC the date of transfer in such cases is the date on which the capital asset is converted by the assessee into stock-in-trade and not the date on which such stock-in-trade is sold or otherwise transferred by the assessee. Thus, as per the aforesaid understanding it may not be ITA No.36/NAG/2022 Anil Shankar Palewar [A] 7 possible for an assessee to make the required investment under the aforesaid sections at the point of conversion of capital into stock-in- trade because right to collect sale consideration in such cases arises only at the point of sale or transfer otherwise of stock-in-trade. The CBDT in consultation with the Ministry of Law decided that the period of six months for making investment in specified assets for the purpose of sections 54EA, 54EB and 54EC of the Act should be taken from the date such stock-in-trade is sold or otherwise transferred in terms of section 45(2) of the Act, though the taxability of capital gain was on the basis of 'transfer' as understood in section 45(2) of the Act. Therefore, having regard to the impossibility of performance to invest the amount in specified assets within six months from the date of transfer (i.e. the date of conversion of capital asset into stock-in- trade) the CBDT appreciated and has clarified that the period of six months for making investment in specified assets has to be reckoned from the date of the sale of such stock-in-trade when the right to collect sale consideration in such cases arose, which was much after the date of transfer as contemplated for the purpose of taxation. 18. In our considered opinion, the interpretation placed by the CBDT in consultation with the Ministry of Law to the condition of making investment within six months from the date of transfer in section 54EC would support the claim of the assessee in this case also for exemption from capital gain with respect to the impugned sum of Rs 50 lakhs invested in specified assets on 3.8.2007 and 27.10.2007. In the present case, admittedly the impugned amount of sale proceeds have been received by the assessee much after the date of transfer i.e. 12.7.2005, so however, it is also emerging from the record that the investments of Rs 12,50,000/- and Rs 37,50,000/- made on 3.8.2007 and 27.10.2007 respectively have been made within six months of receipt of such consideration. Therefore, having regard to the interpretation placed by the CBDT to understand the requirement of making investment within six months from the date of transfer in section 54EC of the Act we are inclined to uphold the plea of the assessee for exemption from tax on capital ITA No.36/NAG/2022 Anil Shankar Palewar [A] 8 gains qua impugned amount of Rs 50 lakhs. Therefore on this aspect, assessee has to succeed. Thus, this Ground of appeal is allowed.” 6. In the case under consideration also, assessee has claimed that assessee has received the consideration after the Development Agreement dated 26.06.2014. We have already reproduced all the dates. There is no denial of the fact that the Assessee has invested the amounts in the NHAI Bonds within six months of receipts of the amounts. Therefore, we are of the considerate view that the assessee is eligible for deduction u/s 54EC on an amount of Rs.45,00,000/- invested in Tax Free Bonds issued by NHAI. Accordingly, the Ground Number 1 of the assessee is allowed. 6.1 Ground Number 2 is general in nature and does not need any adjudication. 7. In the result, appeal of the assessee is allowed. Order pronounced in the open Court on 31 st October, 2023. Sd/- Sd/- (S.S.GODARA) (DR. DIPAK P. RIPOTE) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; ᳰदनांक / Dated : 31 st Oct, 2023/ SGR* ITA No.36/NAG/2022 Anil Shankar Palewar [A] 9 आदेशकᳱᮧितिलिपअᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The CIT(A), concerned. 4. The Pr. CIT, concerned. 5. िवभागीयᮧितिनिध, आयकर अपीलीय अिधकरण, नागपुर बᱶच, नागपुर / DR, ITAT, Bench, Nagpur. 6. गाडᭅ फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // TRUE COPY // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे/ITAT, Pune.