The Assistant Commissioner of Wealth Tax, Circle-2, RAJKOT-GUJARAT V. M/s. Gurudev Builders, RAJKOT-GUJARAT

ITA 440/RJT/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8568 (ITAT-RAJKOT)
• Duration Of Justice: 2 year(s) 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-12-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 04-12-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 23-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AVINASH KUMAR
• Assessee Lawyers: J C RANPURA
• Keywords: Capital asset; Benefit of exemption

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBULAL, RAJKOT BENCH: RAJKOT , !' # $ , # % BEFORE SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER &./ I.T.A. NO.440/RJT/2012 ( / ASSESSMENT YEAR : 2008-09) THE ACIT CIRCLE-2 RAJKOT / VS. M/S.GURUDEV BUILDERS DHEBAR ROAD OPP.JIVAN BANK RAJKOT #) !' & ./ * & ./ PAN/GIR NO. : AADFG 0102 E ( )+ / APPELLANT ) .. ( ,-)+ / RESPONDENT ) )+ . ! / APPELLANT BY : SHRI AVINASH KUMAR, SR.DR ,-)+ / . ! / RESPONDENT BY : SHRI J.C. RANPURA, C.A. 0 / ' / DATE OF HEARING 04/12/2014 12 / ' / DATE OF PRONOUNCEMENT 05/12/2014 !3 / O R D E R PER SHRI KUL BHARAT, JUDICIAL MEMBER : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE LD.COMMISSIONER OF INCOME TAX(APPEALS)-III, RAJKOT (CIT(A) IN SHORT) DATED 16/05/2012 PERTAINING TO ASSESSMENT Y EAR (AY) 2008-09. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF AP PEAL:- 1. THE LD.CIT(A)-III RAJKOT HAS ERRED IN LAW AS AND ON FACTS IN DIRECTING THE ASSESSING OFFICER TO ALLOW THE EXEMPTION U/S.54EC OF RS.1 CRORE INSTEAD OF RS.50 LAKHS. 2. THE LD.CIT(A)-III RAJKOT HAS ERRED IN LAW AS WELL AS IN FACTS IN DIRECTING THE ASSESSING OFFICER TO ALLOW THE DEDUCTION OF RS.81,48,754/- FROM LTCG AND OF RS.18,51,246/- FROM THE STCG ITA NO.440 /RJT/2012 ACIT VS. M/S.GURUDEV BUILDERS ASST.YEAR 2008-09 - 2 - AND TAX THE BALANCE LTCG OF RS.23,97,146/- AND STCG OF RS.5,44,587/-. 3. THE LD.CIT(A)-III RAJKOT HAS ERRED IN LAW AND ON IN FACTS IN DIRECTING THE AO TO ALLOW EXPENSES AMOUNTING TO RS.6,09,870/- DEBITED IN P&L ACCOUNT. 4. ON THE FACT OF THE CASE, THE LD.CIT(A)-III, RAJKOT OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 5. IT IS, THEREFORE PRAYED THAT THE ORDER OF THE LD.CIT(A)-III RAJK OT MAY KINDLY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER MAY KINDLY BE RESTORED BACK TO THE EXTENT. 2. BRIEFLY STATED FACTS ARE THAT THE CASE OF THE AS SESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT U/S.143( 3) OF THE INCOME TAX ACT,1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS FRAMED VIDE ORDER DATED 29/12/2010, THEREBY THE ASSESSING OFFICER (AO IN SHORT) RESTRIC TED THE EXEMPTION TO THE LIMIT OF RS.50 LACS OUT OF TOT AL INVESTMENT OF RS.1 CRORE. THE AO HAS ALSO DISALLOWED THE EXEMPTI ON ON SHORT TERM CAPITAL GAIN (STCG). FURTHER, THE AO MADE ADDITION S ON ACCOUNT OF THE INCOME FROM HOUSE PROPERTY AND INCOME FROM OTHER SO URCES. AGAINST THIS, THE ASSESSEE FILE AN APPEAL BEFORE THE LD.CIT (A), WHO AFTER CONSIDERING THE SUBMISSIONS PARTLY ALLOWED THE APPE AL. NOW, THE REVENUE IS IN APPEAL BEFORE US. 3. APROPOS TO GROUND NO.1, THE LD.SR.DR SUPPORTED T HE ORDER OF THE AO AND SUBMITTED THAT THE LD.CIT(A) WAS NOT JUSTIFI ED IN ALLOWING THE EXEMPTION OF RS.1 CRORE. HE SUBMITTED THAT THERE I S AN AMENDMENT IN THE ACT, WHEREBY THE LIMIT OF INVESTMENT IS RESTRICTED TO THE EXTENT OF RS.50 LACS. ITA NO.440 /RJT/2012 ACIT VS. M/S.GURUDEV BUILDERS ASST.YEAR 2008-09 - 3 - 4. ON THE CONTRARY, LD.COUNSEL FOR THE ASSESSEE SUP PORTED THE ORDER OF THE LD.CIT(A) AND REITERATED THE SUBMISSIONS MADE I N THE SYNOPSIS FILED ON 30/08/2013. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE LD.CIT(A) HAS DECIDED THIS ISSUE V IDE PARA-4 OF HIS ORDER (AT PAGE NO.19) BY HOLDING AS UNDER:- 4. I HAVE GONE THROUGH THE ASSESSMENT ORDER AND S UBMISSIONS OF APPELLANT. THE ISSUE BEFORE HBLE MADRAS HIGH COUR T, IN CASE OF AREVA T&D INDIA LTD. VS. ACIT 326 ITR 540(MAD) WAS THE VALIDITY OF NOTIFICATION NO.380/2006, [F.NO.142 OF 2006-TPL], DATED 22-12-2006 BY WHICH CENTRAL GOVERNMENT HAD RE STRICTED AMOUNT OF INVESTMENT IN NOTIFIED BONDS TO AVAIL OF BENEFIT OF EXEMPTION UNDER SECTION 54EC TO A SUM OF RS.50 LAKH S PER PERSON. HOWEVER, THE WRIT PETITION BEFORE HBLE MADRAS HIGH COURT BECAME INFRUCTUOUS BECAUSE THE POWER TO LIMIT ON TH E AMOUNT OF INVESTMENT BY AN ASSESSEE IN BONDS WAS BY THEN INCO RPORATED IN THE SECTION ITSELF. BY THE PROVISO TO EXPLANATION (B), THE BOND NOTIFIED BEFORE 1-4-2007 WITH A CONDITION, WAS ALSO DEEMED TO BE A BOND NOTIFIED UNDER THE AMENDED PROVISION. THEREFO RE THE ISSUE BEFORE HBLE MADRAS HIGH COURT WAS NOT WHETHER THE CLAIM OF EXEMPTION UNDER SECTION 54EC MAY EXCEED RS.50 LAKH IF THE INVESTMENTS ARE MADE IN TWO CONSECUTIVE FINANCIAL Y EARS BUT WITHIN 6 MONTHS OF TRANSFER RESULTING IN CAPITAL GA IN. THERE IS NO DOUBT ABOUT THE FACT THAT THE PROVISIONS OF SECTION 54EC DO NOT ALLOW INVESTMENT ELIGIBLE FOR EXEMPTION TO BE MORE THAN RS.50 LAKH IN ONE FINANCIAL YEAR. HOWEVER, THE INVESTMENTS EL IGIBLE FOR EXEMPTION IN TWO CONSECUTIVE FINANCIAL YEARS MAY BE RS.50 LAKH EACH. THE QUESTION IS WHETHER BOTH THE INVESTMENTS MAY BE RELATABLE TO TRANSFER IN ONE FINANCIAL YEAR RESULTI NG IN CAPITAL GAIN OF RS.1 CRORE OR ONLY THE FIRST INVESTMENT OF RS.50 LAKH CAN BE ASSOCIATED WITH THE TRANSFER WITHIN A FINANCIAL YEA R RESULTING IN CAPITAL GAIN AND THE SECOND INVESTMENT OF RS.50 LAK H IS TO BE IGNORED. THERE ARE DIVERSE OPINIONS OF DIFFERENT T RIBUNALS ON THE ITA NO.440 /RJT/2012 ACIT VS. M/S.GURUDEV BUILDERS ASST.YEAR 2008-09 - 4 - ISSUE OF ALLOW ABILITY OF MAXIMUM DEDUCTION OF RS.5 0 LAKH OR RS.1 CRORE. HBLE ITAT-JAIPUR IN CASE OF ACIT, CIR-2, A JMER VS SHRI RAJ KUMAR JAIN & SONS (HUF) IN IT APPEAL NO.648 (JP .) OF 2011, VIDE ORDER DATED 31-12-2012, HELD THAT THE MA XIMUM BENEFIT OF DEDUCTION UNDER SECTION 54EC BY WAY OF SUBSCRIPT ION TO ELIGIBLE BONDS CANNOT EXCEED RS.50 LAKHS. HBLE ITAT-JAIPUR HELD THAT THE TIME PERIOD OF SIX MONTHS EVEN IF IT FALLS IN THE N EXT FINANCIAL YEAR, FOR THE PURPOSE OF EXEMPTION, TAXPAYERS CANNOT TAKE BENEFIT OF BIFURCATING THE INVESTMENT INTO TWO FINANCIAL YEARS TO DERIVE EXCESS BENEFIT THAN WHAT IS CONTEMPLATED UNDER THE LAW I.E . RS.50 LACS. ON THE OTHER HAND, HBLE ITAT-AHMEDABAD IN CASE OF SHRI ASPI GINWALA V/S. ACIT IN ITA NO.3226/AHD/2011, IN ORDER DATED 30- 03-2012 HELD THAT SINCE THE WORDING OF THE PROVISO TO SECTION 54EC IS CLEAR, THE BENEFITS WHICH ARE AVAILABLE TO THE A SSESSEE CANNOT BE DENIED AND HELD THAT THE ASSESSEE IS ENTITLED FOR E XEMPTION OF RS.1 CRORE AS SIX MONTHS, PERIOD FOR INVESTMENT IN ELIGI BLE INVESTMENTS INVOLVED IS TWO FINANCIAL YEARS. HBLE SUPREME COU RT IN CASE OF VEGETABLE PRODUCTS (88 ITR 192) HELD THAT- IF TWO REASONABLE CONSTRUCTION OF A TAXING PROVISION ARE POSSIBLE, TH AT CONSTRUCTION WHICH FAVOURS THE ASSESSEE MUST BE ADOPTED. THEREF ORE, I DIRECT THE ASSESSING OFFICER TO ALLOW DEDUCTION OF RS.1 CR ORE U/S.54EC TO THE APPELLANT. 5.1. THE LD.COUNSEL FOR THE ASSESSEE PLACED RELIANC E ON THE DECISION OF COORDINATE BENCH (ITAT BENCH C AHMEDABAD) RENDER ED IN THE CASE OF SHRI ASPI GINWALA & ORS. VS. ASST.CIT & ORS (52 SOT 16)[AHD]. THE LD.COUNSEL FOR THE ASSESSEE ALSO PALCED RELIANC E ON THE DECISION OF COORDINATE BENCH (ITAT BENCH D CHENNAI) RENDERED IN THE CASE OF SMT.SRIRAM INDUBAL VS. ITO REPORTED AT (2013) 32 T AXMANN.COM 118 (CHENNAI TRIB.). WE FIND THAT THE COORDINATE B ENCH IN THE CASE OF SMT.SRIRAM INDUBAL VS. ITO(SUPRA) HAS HELD AS UNDER :- 8. THE FIRST CONDITION MENTIONED IN SECTION 54EC (1) IS THAT THE INVESTMENT HAS TO BE MADE WITHIN A PERIOD OF SIX MO NTHS FROM THE DATE OF TRANSFER OF CAPITAL ASSET. SINCE THE DATE OF TRANSFER IN THE ITA NO.440 /RJT/2012 ACIT VS. M/S.GURUDEV BUILDERS ASST.YEAR 2008-09 - 5 - GIVEN IS 18.2.2008, SIX MONTHS PERIOD WILL ELAPSE O N 17.8.2008. ASSESSEE HAD PURCHASED REC BONDS WORTH OF RS.50 LAK HS ON 27.2.2008 AND BONDS OF NHAI FOR RS.50 LAKHS ON 30.6 .2008. BOTH THESE PURCHASES WERE WITHIN THE SIX MONTHS PERIOD. ONLY QUESTION THAT ARISES IS WHETHER PROVISO TO SECTION 54EC(1) W OULD LIMIT THE CLAIM OF EXEMPTION TO RS.50 LAKHS. SAID PROVISO ME NTIONS THAT INVESTMENT ON WHICH AN ASSESSEE COULD CLAIM EXEMPTI ON UNDER SECTION 54EC(1) SHALL NOT EXCEED RS.50 LAKHS DURING A FINANCIAL YEAR. SO, THE EXEMPTION PROVISION HAS TO BE CONSTR UED NOT TRANSACTION-WISE BUT, FINANCIAL YEAR-WISE. NO DOU BT, EXPLANATORY MEMORANDUM DOES SAY THAT LIMITATION HAS BEEN PLACED WITH A VIEW TO ENSURE EQUITABLE DISTRIBUTION OF BENEFITS AMONG THE PROSPECTIVE INVESTORS. RELEVANT EXPLANATORY MEMORANDUM IS REPR ODUCED FOR BREVITY:- THE QUANTUM OF INVESTIBLE BONDS ISSUED BY HNAI AND REC BEING LIMITED, IT WAS FELT NECESSARY TO ENSURE THAT THE BENEFIT WAS AVAILABLE TO ALL THE INVESTORS. FOR THIS PURPOSE, IT WAS NECESSARY TO ENSURE THAT THE LIMITED NUMBER OF BONDS AVAILABLE FOR SUBSCRIPTION IS ALSO AVAILABLE FOR SMALL INVESTORS. THEREFORE, WITH A VIEW TO ENSURE EQUITABLE DISTRIBUTION OF BENEFITS AMONGST PROSPECTIVE INVESTORS, THE GOVERNMENT DECIDED TO IMPOSE A CEILING ON THE QUANTUM OF INVESTMENT THAT COULD BE MADE IN SUCH BONDS. ACCORDINGLY, THE SAID SECTION HAS BEEN AMENDED SO AS TO PROVIDE FOR A CEILING ON INVESTMENT BY AN ASSESSEE IN SUCH LONG - TERM SPECIFIED ASSETS. INVESTMENTS IN SUCH SPECIFIED ASSETS TO AVAIL EXEMPTION UNDER SECTION 54EC, ON OR AFTER THE 1 ST DAY OF APRIL, 2007 WILL NOT EXCEED FIFTY LAKH RUPEES IN A FINANCIAL YEAR. LAST SENTENCE OF THE EXPLANATORY MEMORANDUM CLEARLY STATES THAT THE EXEMPTION FOR INVESTMENT CANNOT EXCEED RS.50 LA KHS IN A FINANCIAL YEAR. THEREFORE, IF THE ASSESSEE IS ABL E TO KEEP THE SIX MONTHS LIMIT FROM THE DATE OF TRANSFER OF CAPITAL ASSET, BUT, STILL ABLE TO PLACE INVESTMENT OF RS.50 LAKHS EACH IN TWO DIFFERENT FINANCIAL YEARS, WE CANNOT SAY THAT THE RESTRICTIVE PROVISO WILL LIMIT THE CLAIM TO RS.50 LAKHS ONLY. SINCE ASSESSEE HERE HAD PLACED RS.50 LAKHS IN TWO DIFFERENT FINANCIAL YEARS BUT WI THIN SIX MONTHS PERIOD FROM THE DATE OF TRANSFER OF CAPITAL ASSETS, ASSESSEE WAS DEFINITELY ELIGIBLE TO CLAIM EXEMPTION UPTO RS.1 CR ORE. THE SAME VIEW HAS BEEN TAKEN BY AHMEDABAD BENCH OF THIS TRIB UNAL IN THE ITA NO.440 /RJT/2012 ACIT VS. M/S.GURUDEV BUILDERS ASST.YEAR 2008-09 - 6 - CASE OF ASPI GINWALA & OTHERS (SUPRA). WE ARE, THE REFORE, OF THE OPINION THAT THE ASSESSEE HAS TO SUCCEED IN THIS AP PEAL. CLAIM OF THE ASSESSEE FOR EXEMPTION UPTO RS.1 CRORE HAS TO B E ALLOWED IN ACCORDANCE WITH SECTION 54EC OF THE ACT. 5.2. SINCE THE REVENUE HAS NOT PLACED ANY CONTRARY MATERIAL ON RECORD TAKING A DIFFERENT VIEW THAN TAKEN BY THE COORDINAT E BENCH, THEREFORE WE DO NOT HAVE ANY REASON TO INTERFERE WITH THE ORDER OF THE LD.CIT(A), SAME IS HEREBY UPHELD. THUS, GROUND NO.1 OF REVENUES A PPEAL IS DISMISSED. 6. APROPOS TO GROUND NO.2, THE LD.SR.DR SUPPORTED T HE ORDER OF THE AO, WHEREAS THE LD.COUNSEL FOR THE ASSESSEE SUPPORT ED THE ORDER OF THE LD.CIT(A). THE LD.COUNSEL FOR THE ASSESSEE HAS PLA CED RELIANCE ON THE JUDGEMENT OF HONBLE JURISDICTIONAL HIGH COURT REND ERED IN THE CASE OF DCIT VS. HIMALAYA MACHINERY (P.) LTD. REPORTED AT ( 2013) 29 TAXMANN.COM 380 (GUJ.) AND ALSO THE JUDGEMENT OF HO NBLE JURISDICTIONAL HIGH COURT RENDERED IN THE CASE OF C IT VS. POLESTAR INDUSTRIES IN TAX APPEAL NO.747 OF 2013 :: (2013) 2 21 TAXMAN 423 (GUJARAT), WHEREIN THE ISSUE HAS BEEN DECIDED BY TH E HONBLE JURISDICTIONAL HIGH COURT IN FAVOUR OF ASSESSEE. T HEREFORE, RESPECTFULLY FOLLOWING THE RATIO LAID DOWN BY THE HONBLE GUJARA T HIGH COURT IN THE CASE OF CIT VS. POLESTAR INDUSTRIES(SUPRA), THIS GR OUND OF REVENUES APPEAL IS REJECTED. 7. APROPOS TO GROUND NO.3, THE LD.SR.DR SUPPORTED T HE ORDER OF THE AO, WHEREAS LD.COUNSEL FOR THE ASSESSEE SUPPORTED T HE ORDER OF THE LD.CIT(A). THE LD.COUNSEL FOR THE ASSESSEE SUBMITT ED THAT THE LD.CIT(A) ITA NO.440 /RJT/2012 ACIT VS. M/S.GURUDEV BUILDERS ASST.YEAR 2008-09 - 7 - HAS GIVEN A WELL-REASONED ORDER AND RESTRICTED THE DISALLOWANCE TO THE EXTENT OF RS.10,90,223/- AS AGAINST THE CLAIM OF RS .17,00,093/-. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. WE FIND THAT THE LD.CIT(A) HAS GIVEN A DETAILED FINDING ON FACT IN PARAGRAPH NOS.4.1 TO 4.2.8 OF HIS ORDER. THE FINDING OF TH E LD.CIT(A) HAS NOT BEEN CONTROVERTED BY THE LD.SR.DR BY PLACING ANY CONTRAR Y MATERIAL ON RECORD, THEREFORE WE DO NOT FIND ANY REASON TO INTERFERE WI TH THE ORDER OF THE LD.CIT(A), SAME IS HEREBY UPHELD. THUS, GROUND NO. 3 OF REVENUES APPEAL IS REJECTED. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE COURT ON FRIDAY, THE 05TH DAY OF DECEMBER, 2014 AT RAJKOT. SD/- SD/- ( ) ( $ ) !' # # ( ANIL CHATURVEDI ) ( KUL BHARAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER RAJKOT; DATED 05 / 12 /2014 .. , .../ T.C. NAIR, SR. PS ITA NO.440 /RJT/2012 ACIT VS. M/S.GURUDEV BUILDERS ASST.YEAR 2008-09 - 8 - / COPY OF THE ORDER FORWARDED TO : 1. )+ / THE APPELLANT 2. ,-)+ / THE RESPONDENT. 3. &6& 7 / CONCERNED CIT 4. 7 ( ) / THE CIT(A)-III, RAJKOT 5. 9$ : , , , /DR,ITAT, RAJKOT 6. : EF G 0 / GUARD FILE. / BY ORDER, - 9 , //TRUE COPY// !/ '# $% ( DY./ASSTT.REGISTRAR) # %&# ' , / ITAT, RAJKOT 1. DATE OF D ICTATION .. 04.12.2014(DICTATION-PAD 8-PAGES ATTACHED AT THE END OF THIS FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 5.12.14 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BAC K TO THE SR.P.S./P.S. 5/12/2014 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 5/12/2014 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER