M P Jain, Rewari V. ACIT, Rewari

ITA 4755/DEL/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4004 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-05-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 12-05-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 01-11-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SRUJANI MOHANTY
• Assessee Lawyers: RANO JAIN CAS
• Keywords: Capital asset; Gift; Difference of opinion
• Section: 54B; 54F; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: E NEW DELHI BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA ACCOUNTANT MEMBER I.T.A NO. 4754/DEL/10 ASSTT. YEAR 2007-08 SITA JAIN MAHABIR BHAWAN, JHAJJAR CHOWK, REWARI AASPJO895N VS. ACIT, RANGE REWARI AND I.T.A NO. 4755/DEL/10 ASSTT. YEAR 2007-08 M.P. JAIN MAHABIR BHAWAN, JHAJJAR CHOWK, REWARI VS. ACIT, CIRCLE, REWARI AND I.T.A NO. 5036/DEL/10 ASSTT. YEAR 2007-08 ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE, REWARI VS. SHRI MAHAVIR PRASAD JAIN, MAHAVIR BHAWAN, JHAJJAR ROAD, REWARI. (APPELLANT) (RESPONDENT) ITA NO. 4754,4755,5036/DEL/10 ASSTT. YEAR 2007-08 2 APPELLANT BY: SHRI VED JAIN & MS. RANO JAIN, CAS RESPONDENT BY: SMT. SRUJANI MOHANTY, SR. DR ORDER PER RAJPAL YADAV, JM: ITA NO. 4755/DEL/10 AND ITA NO. 5036/DEL/10, ARE T HE CROSS APPEALS AT THE INSTANCE OF RESPECTIVE PARTIES AGAIN ST THE ORDER OF LD. CIT(A) DATED 15 TH SEPTEMBER, 2010 PASSED IN ASSTT. YEAR 2007-08 WHEREAS ITA NO. 4754/DEL/10 IS DIRECTED AT THE INST ANCE OF ASSESSEE AGAINST THE SEPARATE ORDER OF LD. CIT(A) DATED 15 TH SEPTEMBER, 2010 IN ASSTT. YEAR 2007-08. THE ISSUES AGITATED IN ALL THE APPEALS ARE INTERCONNECTED TO EACH OTHER, THEREFORE, WE HEARD T HEM TOGETHER AND DEEM IT APPROPRIATE TO DISPOSE OFF TO THEM BY THIS COMMON ORDER. LD. REPRESENTATIVES HAVE ARGUED THE APPEAL OF SMT. SITA JAIN SUBSTANTIALLY. THEREFORE, FOR THE FACILITY OF REFERENCE, WE ARE TA KING UP THE FACTS MAINLY FROM THIS APPEAL I.E. 4754/DEL/10. 2. IN GROUND NO. 1 , ASSESSEE HAS PLEADED THAT ORDE R PASSED BY THE LD. CIT(A) IS NOT SUSTAINABLE IN THE EYES OF LAW. I T IS GENERAL GROUND OF APPEAL AND NO ARGUMENTS WERE ADVANCED BY THE LD. CO UNSEL FOR THE ASSESSEE. HENCE, IT IS REJECTED. ITA NO. 4754,4755,5036/DEL/10 ASSTT. YEAR 2007-08 3 3. IN GROUND NO. 2, THE ASSESSEE HAS PLEADED THAT N OTICE U/S 143(2) HAS BEEN SERVED AFTER A PERIOD OF ONE YEAR FROM THE END OF THE MONTH IN WHICH THE RETURN WAS FILED. THEREFORE, ASSTT. ORDER IS NOT SUSTAINABLE IN LAW. LD. COUNSEL FOR THE ASSESSEE, HOWEVER, DID NOT PRESS THIS GROUND OF APPEAL AND IT IS REJECTED. 4. IN GROUND NO. 3 THE APPEAL ASSESSEE HAS PLEADED THAT LD. CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF ` 13,75,000/- WHICH WAS DISALLOWED BY THE AO OUT OF THE CLAIM MADE U/S 54B OF THE INCOME TAX ACT. 5. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS A SENIOR CITIZEN AND HAS SHOWN INCOME FORM THE INTEREST DERIVATIVES AND AGRICULTURAL LAND. SHE HAS FILED HER RETURN OF INCOME ON 28.7.2007 DEC LARING AN INCOME OF ` 55,40,225/- WHICH INCLUDE AGRICULTURAL INCOME OF ` 2,21,936/-. ON SCRUTINY OF THE ACCOUNTS, IT REVEALED TO THE AO THA T ASSESSEE HAD PURCHASED AGRICULTURAL LAND FOR A CONSIDERATION OF ` 1,30,840/- ON 7 TH APRIL, 1994 AT INDORE. SHE HAS SOLD THIS LAND VIDE REGISTERED SALE DEED BEARING NO. 8438, EXECUTED ON 19 TH MARCH, 2007, FOR A CONSIDERATION OF ` 81,50,000/- THE ASSESSEE HAS DECLARED CAPITAL GAIN OF ` 78,87,887/-. SHE HAD CLAIMED EXEMPTION U/S 54B AND 54F OF THE IN COME TAX. WHILE MAKING THE CLAIM U/S 54B OF THE INCOME TAX ACT, SHE CONTENDED THAT AN ITA NO. 4754,4755,5036/DEL/10 ASSTT. YEAR 2007-08 4 AGRICULTURAL LAND FOR A CONSIDERATION OF ` 31,84,845/- HAS BEEN PURCHASED AT INDORE VIDE PURCHASE DEED NO. 6590 DATED 20 TH MARCH, 2007. 6. LD. AO HAD NOTICED PAYMENTS RECEIVED BY THE ASSE SSEE TOWARDS SALE OF AGRICULTURAL LAND AND PAID BY ASSESSEE TOWA RDS PURCHASE OF AGRICULTURAL LAND, WHICH READ AS UNDER :- SALE OF AGRICULTURE LANDS PURCHASE OF AGRICULTURE L AND SHORTFALL DATE AMOUNT DATE AMOUNT 26.07.2006 1,25,000 14.08.2006 5,00,000 17.10.2006 20,00,000 13,75,000 02.11.2006 10,00,000 03.03.2007 35,00,000 07.03.2007 9,46,000 12.03.2007 30,25,000 7. ACCORDING TO THE AO, AS ON 17.10.2006, ASSESSEE HAD PAID AN ADVANCE OF ` 20 LAC TOWARDS PURCHASE OF THE AGRICULTURAL LAND. S HE HAD RECEIVED ONLY ` 6,25,000/- WHICH INDICATE THAT SUM OF ` 13,75,000/- PAID BY THE ASSESSEE TO THE VENDORS DID NOT COME FROM TH E SALE PROCEEDS OF THE EARLIER AGRICULTURAL LAND. HENCE, IT CANNOT BE CONSTRUED THAT ASSESSEE HAD MADE INVESTMENT IN THE PURCHASE OF NEW AGRICUL TURAL LAND OUT OF THE SALE PROCEEDS OF THE OLD AGRICULTURAL LAND TO THIS EXTENT. HE, THEREAFTER DISCUSSED WHAT SECTION 54B CONTEMPLATES AND HOW IT HAS BEEN EXPLAINED THAT EXEMPTION U/S 54B WOULD NOT BE AVAIL ABLE TO THE ASSESSEE ON THE UTILIZATION OF PRE EXISTING FUNDS. HE DISALLOWED THE CLAIM OF ASSESSEE. ITA NO. 4754,4755,5036/DEL/10 ASSTT. YEAR 2007-08 5 8. APPEAL TO THE LD. CIT(A) DID NOT BRING ANY RELIE F TO THE ASSESSEE. 9. WITH THE ASSISTANCE OF LD. REPRESENTATIVE, WE H AVE GONE THROUGH THE RECORD CAREFULLY. THERE IS NO DISPUTE WITH REGA RD TO THE FACTS ON RECORD. IN OUR OPINION, LD. REVENUE AUTHORITIES HAV E FAILED TO CONSTRUE THE TRANSACTION. THE ACTUAL DATE WHICH GIVES RISE A CAPITA GAIN TO THE ASSESSEE IS THE DATE WHEN SHE SOLD THE AGRICULTURAL LAND I.E THE DAY WHEN SHE TRANSFERRED THE CAPITAL ASSETS WITHIN THE MEANING OF SECTION 2(47) OF THE INCOME TAX ACT. SIMILARLY, UTILIZATION OF SALE PROCEED WOULD BE CONSIDERED ON THE DAY WHEN ASSESSEE HAS MADE INV ESTMENT FROM THE SALE PROCEEDS. THE AO INTERPRETED THE TRANSACTION A S IF THE CURRENCY NOTES WHICH RECEIVED BY THE ASSESSEE SHOULD BE GIVE N TO THE VENDOR FOR THE PURCHASE OF THE LAND. THE CRUCIAL DATE IS THE D ATE I.E. 19 TH MARCH, 2007 WHEN ASSESSEE SOLD THE LAND AND 20 TH MARCH, 2007 WHEN ASSESSEE PURCHASED THE LAND. PRIOR TO THESE TWO DATES, ANY ADVANCE RECEIVED BY THE ASSESSEE OR PAID BY THE ASSESSEE ARE MEANINGLES S. SHE IS NOT SUPPOSED TO RECONCILE THE AMOUNT TAKEN AND PAID. TH E AO AT THE MOST COULD HAVE ASKED THE ASSESSEE TO EXPLAIN THE SOURCE OF ` 13,75,000/- PAID AS AN ADVANCE TO HER VENDOR. THE SITUATION CAN BE ANALYZED WITH A DIFFERENT ANGLE ALSO. IN THE HANDS OF THE VENDOR, C APITAL GAIN WOULD ACCRUE ON 20 TH MARCH 2007, WHEN ASSESSEE PURCHASED THE LAND FROM THE VENDOR. CAN THE AO ARGUE THAT A SUM OF ` 20 LACS WAS RECEIVED BY THE ITA NO. 4754,4755,5036/DEL/10 ASSTT. YEAR 2007-08 6 VENDOR OF THE ASSESSEE ON 17.10.2006. THEREFORE, CA PITAL GAIN HAS ACCRUED TO HIM ON THIS DATE. IT WAS MERELY AN ADVAN CE, THE CAPITAL ASSET WAS NOT TRANSFERRED WITHIN THE MEANING OF 2 (47) OF THE INCOME TAX ACT. THEREFORE, IN OUR OPINION, LD. REVENUE AUTHORITIES HAVE GIVEN UNNECESSARY WEIGHTAGE TO THE ALLEGED ADVANCE GIVEN BY THE ASSESSEE, WHILE COMPUTING HER CLAIM OF EXEMPTION. THE TOTAL A MOUNT OTHERWISE PAID BY THE ASSESSEE HAS BEEN FINANCED FROM THE SA LE PROCEEDS OF HER AGRICULTURAL LAND. IN VIEW OF THE ABOVE DISCUSSION, WE ALLOW THIS GROUND OF APPEAL AND DELETE THE DISALLOWANCE MADE BY THE AO. WE DIRECT THE LD. AO TO GRANT EXEMPTION U/S 54B OF THE INCOME TAX ACT FOR A SUM OF ` 13,75,000/-. 10. IN THE NEXT GROUND OF APPEAL, GRIEVANCE OF THE ASSESSEE IS THAT LD. CIT (A) HAS EARNED IN CONFIRMING THE DISALLOWANCE O F ` 17,40,318/-. THE BRIEF FACTS OF THE CASE ARE THAT OUT OF THE TOTAL C APITAL GAIN OF ` . 78,87,887/-, A SUM OF ` 31,84,845/- WAS ALLOCATED TOWARDS PURCHASE OF AGRICULTURAL LAND AND A DEDUCTION U/S 54B WAS CLAIM ED WHICH WE HAVE DISCUSSED IN THE PRECEDING PARAGRAPH. THE BALANCE ` 47,03,042/- HAS BEEN CLAIMED ON THE GROUND THAT ASSESSEE HAS PURCHA SED A RESIDENTIAL HOUSE FOR SUM OF ` 23,80,985/- AND RAISED THE CONSTRUCTION OVER THAT BY INCURRING A SUM OF ` 29,62,724/-. THE AO HAS ACCEPTED THE CONTENTION OF ASSESSEE WITH REGARD TO THE EXPENDITURE INCURRED ON CONSTRUCTION ITA NO. 4754,4755,5036/DEL/10 ASSTT. YEAR 2007-08 7 AMOUNTING TO ` 29,62,724/-. HOWEVER, HE REJECTED THE CONTENTIONS OF THE ASSESSEE WITH REGARD TO THE COST OF LAND AMOUNTING TO ` 23,80,985/-. HE ALLOWED THE EXEMPTION U/S 54F TO THE EXTENT OF ` 29,62,724/- AND THE BALANCE AMOUNT OF ` 17,40,318/- HAS BEEN ADDED IN THE INCOME OF THE ASSESSEE. THE BRIEF FACTS ON THIS ISSUE ARE THAT A SSESSEE HAD PURCHASED HALF SHARE OF PLOT 9A, MODEL TOWN, REWARI ON 23 RD MAY, 1998 AT A TOTAL COST OF ` 1,03,600/-. THE OTHER HALF SHARE WAS PURCHASED BY HER HUSBAND. THE ASSESSEE HAD PURCHASED HALF SHARE OF H ER HUSBAND ON 25 TH SEPTEMBER, 2006 AT A COST OF ` 22,77,385/-. THERE IS NO DISPUTE ABOUT THESE FACTS. IT IS ALSO NOT IN DISPUTE THAT E XEMPTION U/S 54F WILL BE AVAILABLE TO AN ASSESSEE, IF HE HAS PURCHASED A RES IDENTIAL HOUSE WITHIN A PERIOD OF ONE YEAR BEFORE OR TWO YEARS AFTER THE DATE ON WHICH THE TRANSFER OF CAPITAL HAS TAKEN PLACE OR WITHIN A PER IOD OF 3 YEARS AFTER THAT DATE CONSTRUCTED A RESIDENTIAL HOUSE. MEANING THERE BY, IF AN ASSESSEE HAS PURCHASED A HOUSE WITHIN ONE YEAR BEFORE THE TR ANSFER OF A CAPITAL ASSET GIVING RISE TO CAPITAL GAIN, THEN THAT ASSESS EE CAN CLAIM EXEMPTION U/S 54F ON ACCOUNT OF UTILIZATION OF CAPITAL GAIN P URCHASE OF A RESIDENTIAL HOUSE. THE PURCHASE OF THE PLOT 9A MODEL TOWN REWAR I IS WITHIN ONE YEAR FROM THE TRANSFER OF AN AGRICULTURAL LAND BY T HE ASSESSEE. THE AO HAS ALSO NOT DISPUTED THIS ASPECT. RATHER WHILE REF ERRING TO THE CIRCULAR NO. 667 HE MADE THE FOLLOWING OBSERVATIONS :- ITA NO. 4754,4755,5036/DEL/10 ASSTT. YEAR 2007-08 8 3.3. ON BEING CONFRONTED, THE ASSESSEE HAS REFERRED TO CIRCULAR NO. 667 DATED 18.10.1993 TO CONTEND THAT THE COST OF LA ND IS AN INTEGRAL PART OF THE COST OF RESIDENTIAL HOUSE. HOWEVER, THIS OFF ICE HAS NO DIFFERENCE OF OPINION WITH THE ASSESSEE THAT THE COST OF LAND IS TO BE INCLUDED IN THE COST OF RESIDENTIAL HOUSE. WHAT THIS OFFICE HAS OBJ ECTIONS TO IS THE ADJUSTMENT OR APPLICATION OF THE COST OF AN OLD OR PRE-EXISTING LAND TOWARDS THE QUALIFYING INVESTMENT U/S 54F. ON THIS ISSUE, THE QUOTED CIRCULAR OF THE BOARD DOES NOT HELP THE ASSESSEE. O N THE OTHER HAND, THE LATER PART OF THE CIRCULAR SUPPORTS THE CONTENT ION OF THE UNDERSIGNED THAT THE SALES CONSIDERATION OF THE ORIGINAL ASSET SHOULD HAVE BEEN UTILIZED FOR CONSTRUCTING THE HOUSE, INCLUDING PURC HASE OF THE LAND FOR SUCH PURPOSES, WHEN THE CIRCULAR CLARIFIES AS UNDER :- ACCORDINGLY, IF THE AMOUNT OF CAPITAL GAIN FOR THE PURPOSE OF SECTION 54F, IS APPROPRIATED TOWARDS PURCHASE OF A PLOT AND ALSO TOWARDS CONSTRUCTION OF A RESIDENTIAL HOUSE THEREON , THE AGGREGATE COST SHOULD BE CONSIDERED FOR DETERMINING THE QUANTUM OF DEDUCTION UNDER SECTION 54/54F, PROVIDED THAT THE ACQUISITION OF P LOT AND ALSO THE CONSTRUCTION THEREON ARE COMPLETED WITHIN THE PERIO D SPECIFIED IN THESE SECTIONS. 11. LD. CIT(A) CONCUR WITH THIS VIEW OF THE AO. 12. WITH THE ASSISTANCE OF LD. REPRESENTATIVE, WE H AVE GONE THROUGH THE RECORD CAREFULLY. IT APPEARS THAT LD. AO FAILED TO APPRECIATE THE TRUE CONTROVERSY. HE HAS INTERMINGLED THE ASSESSEE AND H ER HUSBAND, WHEREAS FOR THE PURPOSE OF INCOME TAX ACT, BOTH OF THEM ARE INDEPENDENT IDENTITY. THE OBSERVATION OF THE AO IS THAT ASSESSEE HAS BEEN TRYING TO ADJUST THE CAPITAL GAIN AGAINST THE COST OF OLD OR PRE EXISTING LAND TOWARDS THE QUALIFYING INVESTMENT U/ S 54F, WHILE MAKING THIS OBSERVATION HE LOST SIGHT THAT PRIOR TO 25 TH SEPTEMBER, 2006 ASSESSEE WAS OWNER TO THE EXTENT OF HALF SHARE OF P LOT NO. 9A, MODEL TOWN, REWARI. THE OTHER HALF SHARE HAS BEEN ACQUIRE D THROUGH ITA NO. 4754,4755,5036/DEL/10 ASSTT. YEAR 2007-08 9 REGISTERED SALE DEED ON 25 TH SEPTEMBER, 2006. IF THAT BE SO, THEN HOW THE AO CAN SAY THAT CAPITAL GAIN IS BEING ADJUSTED TOWARDS THE COST OF OLD AND PRE EXISTING ASSETS. ASSESSEE AND HER HUSBAND ARE SEPARATE INCOMES TAX ASSESSES. SHE HAS PURCHASED THE PLOT FR OM HER HUSBAND. THIS STAND OF THE ASSESSEE CAN BE TESTED WITH A DIF FERENT ANGLE ALSO. HER HUSBAND RECEIVED SALE PROCEED OF ` 22,77,385/- AND MADE INVESTMENT IN THE REC BOND . HE CLAIMED EXEMPTION U/S 54EC. ME ANING THEREBY, A CAPITAL GAIN ON SALE OF THE PLOT HAD ARISEN TO HIM. HE HAS OFFERED CAPITAL GAIN FOR TAX BUT CLAIMED EXEMPTION U/S 54EC ON THE GROUND THAT HE HAS MADE INVESTMENT IN THE REC BOND. IN THE HANDS OF HE R HUSBAND ,DEPARTMENT IS TAXING CAPITAL GAIN ARISEN ON SALE O F THE PLOT. THEREFORE, THE REVENUE IS ACCEPTING THEIR INDEPENDENT IDENTIT Y. IN VIEW OF THE ABOVE DISCUSSION, WE ALLOW THIS GROUND OF APPEAL AND DIRE CT THE AO TO ALLOW DEDUCTION U/S 54F ON THE COST OF PURCHASE OF THE PL OT NO. 9A UPON WHICH ASSESSEE HAS RAISED THE CONSTRUCTION AND THE COST O F CONSTRUCTION HAD ALREADY BEEN ALLOWED HER FOR CLAIMING EXEMPTION U/S 54F OF THE ACT. 13. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTL Y ALLOWED. ITA 4755/DEL/10 14. THE ASSESSEE HAS PRESSED ONLY GROUND NO. 3 WHI CH RELATES TO DISALLOWANCE OF ` 13,75,000/- FROM GRANT OF EXEMPTION U/S 54B. THE FACTS AND CIRCUMSTANCES ARE IDENTICAL TO THE CASE O F SMT. SITA JAIN WHICH ITA NO. 4754,4755,5036/DEL/10 ASSTT. YEAR 2007-08 10 WE HAVE DISCUSSED WHILE DISPOSING OFF HER GROUND NO . 3. THE 50% SHARE WAS CLAIMED IN THE HANDS OF SMT. SITA JAIN AND THE REST IN THE HANDS OF HER HUSBAND. IN VIEW OF OUR DISCUSSION MADE IN THE CASE OF SMT, SITA JAIN, THIS GROUND OF APPEAL IS ALLOWED AND AO IS DI RECTED TO GRANT THE EXEMPTION U/S 54B OF THE INCOME TAX ACT TO THE ASSE SSEE. APPEAL OF THE ASSESSEE IS ALLOWED. ITA NO. 5036/DEL/10 15. IN THIS APPEAL OF REVENUE ,IT HAS BEEN PLEADED THAT LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF ` 11,93,488/- WHICH WAS DISALLOWED BY THE AO FROM AN EXEMPTION U/S 54 EC. THE FACTS HAVE BEEN DISCUSSED IN THE CASE OF SMT. SITA JAIN. ASSESSEE HAD SOLD PL OT OF LAND BEARING 9A ,MODEL TOWN, REWARI FOR A CONSIDERATION OF ` 22,50,500/-. HE HAS SHOWN CAPITAL GAIN ON THIS SALE AT ` 18,05,154/-. THE CAPITAL GAIN HAS BEEN CLAIMED EXEMPT U/S 54EC OF THE INCOME TAX ACT BY RE INVESTIGATING THE CAPITAL GAIN IN THE PURCHASE OF REC BONDS AMOUNTING TO ` 50,000/- AND ` 17,60,000/-. ACCORDING TO THE AO, ON PERUSAL OF THE REC BOND IT REVEALS THAT THE BOND OF ` 50,000/- IS IN THE JOINT NAME OF SHRI MAHAVIR PRAS AD JAIN AND RAJIV JAIN. ANOTHER REC BOND IS OF RS. 17, 60,000/- ( 176 X 10000) IS IN THE JOINT NAME OF SH. MAHAVIR PRASAD JAIN, SITA JAIN AND PREETI JAIN. THE AO HAS OBSERVED THAT THE BONDS ARE IN THE JOINT NAMES AND NO IDENTIFIABLE SHARES OF CO-OWNER IS DISCERNAB LE. HE INVITED THE ITA NO. 4754,4755,5036/DEL/10 ASSTT. YEAR 2007-08 11 EXPLANATION OF ASSESSEE AS TO WHY EXEMPTION OF BOND SHOULD NOT BE RESTRICTED TO ONE THIRD OR HALF OF THE VALUE OF THE BOND AS THE CASE MAY BE. BECAUSE ONE BOND WAS IN THE NAME OF TWO PERSONS NAMELY SHRI MAHAVIR PRASAD JAIN AND SHRI RAJIV JAIN. THE OTHE R WAS IN THE NAME OF THREE PERSONS. IN RESPONSE TO THE QUERY OF AO, IT W AS CONTENDED BY THE ASSESSEE THAT HE IS 72 YEARS OF AGE. IN ORDER TO SA FEGUARD THE FUTURE COMPLICATION, THE OTHER NAMES HAVE BEEN ADDED TO TH E BONDS AS NOMINEE. THE BONDS ARE ABSOLUTE PROPERTY OF THE ASS ESSEE AND THE OTHER NAMED PERSONS HAVE NO RIGHT OR CLAIM ON THE B ONDS. THE AO DID NOT ACCEPT THIS CONTENTION. HE OBSERVED THAT BY IN TRODUCTION OF THE OTHER CO OWNERS IN THE BONDS, THE ASSESSEE HAS DILUTED HI S OWNERSHIP TO HALF OR ONE THIRD OF THE BONDS AND ACCORDINGLY EXEMPTION ALSO OUGHT TO BE RESTRICTED TO THE EXTENT OF HIS OWNERSHIP IN THE BO NDS SO ACQUIRED. THE AO ALSO OBSERVED THAT BY ADDING NAMES OF OTHER FAMI LY MEMBER AS CO- OWNERS, THE ASSESSEE HAS IN FACT GIVEN A GIFT WITHO UT CONSIDERATION TO THE OTHER CO-OWNERS, WHICH CANNOT BE THE INTENTION OF L AW, WHEN IT ALLOWED THE ASSESSEE, BENEFIT OF SECTION 54EC . THE AO IN T HIS WAY DISALLOWED THE EXEMPTION OF CAPITAL GAIN OF ` 11,93,488/-. 16. DISSATISFIED WITH THE ACTION OF AO, ASSESSEE CA RRIED THE MATTER IN APPEAL BEFORE LD. CIT(A). LD. CIT(A) HAS ACCEPTED T HE CLAIM OF ITA NO. 4754,4755,5036/DEL/10 ASSTT. YEAR 2007-08 12 ASSESSEE ON THE STRENGTH OF ITAT ORDER PASSED IN TH E CASE OF ITO VS. SMT. SARASWATI SWAMINATHAN REPORTED IN 116 ITD 234 . 17. LD. DR WHILE IMPUGNING THE ORDER OF LD. CIT(A), SUBMITTED THAT IN THE CASE OF SMT. SARASWATI SWAMINATHAN RELIED UPON BY THE LD. CIT(A), IT WAS FOUND THAT THE SON DID NOT CONTRIBUTE ANYTH ING TO THE INVESTMENT AND THIS FINDING IS NOT IN DISPUTE. THE TRIBUNAL HA S UPHELD THE ORDER OF THE LD. CIT(A) FOR ALLOWANCE OF EXEMPTION U/S 54EC ON THE GROUND THAT SALE PROCEEDS OF THE CAPITAL ASSET WERE FOUND TO BE INVESTED IN THE BONDS SPECIFIED BY THE ACT. ACCORDING TO THE TRIBU NAL, THE ONLY CONDITION FOR GRANT OF EXEMPTION U/S 54EC IS THAT THE FUNDS U SED FOR THE INVESTMENT MUST BE TRACEABLE TO THE SALE PROCEEDS. SHE POINTED OUT THAT SECTION 54EC CONTEMPLATE THAT CAPITAL GAIN ARISEN TO THE AS SESSEE FROM THE TRANSFER OF A LONG TERM CAPITAL ASSET SHOULD BE INV ESTED BY THE ASSESSEE, AS WHOLE OR ANY PART IN THE BONDS. THE EMPHASIS IS ON THE EXPRESSION OF ASSESSEE AND THE ASSESSEE DOES NOT INCLUDE OTHER NAMES, NAMELY SONS, WIFE AND DAUGHTER. SHE IN THIS WAY, CONTENDED THAT EXEMPTION U/S 54EC CAN BE ALLOWED TO THE ASSESSEE TO THE EXTENT O F IN RELATION TO ONE BOND AND TO THE EXTENT OF HALF SHARE IN RELATIO N TO THE OTHER BOND. ON THE OTHER HAND, LD. COUNSEL FOR THE ASSESSEE RELIE D UPON THE ORDER OF LD. CIT(A). WE HAVE CONFRONTED THE LD. COUNSEL WIT H REGARD TO THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT RE NDERED IN THE CASE ITA NO. 4754,4755,5036/DEL/10 ASSTT. YEAR 2007-08 13 OF JAI NARAYAN VS. INCOME TAX OFFICER REPORTED IN 3 06 ITR 335. IN THIS CASE, AN ASSESSEE HAS CLAIMED EXEMPTION U/S 54B. HE HAS CAPITAL GAIN ARISEN ON TRANSFER OF LONG TERM CAPITAL ASSET. HE I NVESTED THE CAPITAL GAIN AND PURCHASED THE LAND IN THE NAME OF HIS SON AND C LAIMED DEDUCTION U/S 54B. THE DISPUTE TRAVELED UPTO THE HONBLE HIGH COURT AND THE HONBLE HIGH COURT HAS UPHELD THE DISALLOWANCE OF S UCH EXEMPTION. THE OBSERVATION MADE BY THE HONBLE HIGH COURT IN PARAG RAPH NO. 10 ARE WORTH TO NOTE IN THIS CONNECTION :- 10. IN INTERPRETING THE WORDS CONTAINED IN A STATU TE, THE COURT HAS NOT ONLY TO LOOK AT THE WORDS BUT ALSO TO LOOK AT THE CONTEX T AND THE OBJECT OF SUCH WORDS RELATING TO SUCH MATTER AND INTERPRET TH E MEANING INTENDED TO BE CONVEYED BY THE USE OF THE WORDS UNDER THE C IRCUMSTANCES. THE WORD ASSESSEE OCCURRING IN S. 54BMUST BE INTERPRE TED IN SUCH A MANNER AS TO ACCORD WITH THE CONTEXT AND SUBJECT OF ITS USAGE. A READING OF S. 54B OF THE ACT NOWHERE SUGGESTS THAT THE LEGISLATURE INTENDED TO ADVANCE THE BENEFIT OF THE SAID SECTION TO AN ASSESSEE WHO PURCHASED THE AGRICULTURAL LAND EVEN IN THE NAME OF A THIRD PERSON. WHEREEVER THE LEGISLATURE INTENDED IT TO BE SO, IT HAD SPECIFICALLY PROVIDED UNDER THE PROVISION. THE TERM ASSESSEE I S QUALIFIED BY THE EXPRESSION PURCHASED ANY OTHER LAND FOR BEING USED FOR AGRICULTURAL PURPOSES, WHICH NECESSARILY MEANS THAT THE NEW ASS ET WHICH IS PURCHASED HAS TO BE IN THE NAME OF THE ASSESSEE HIM SELF FOR SEEKING EXEMPTION UNDER S. 54B OF THE ACT. THE PURCHASE OF AGRICULTURAL LAND BY THE ASSESSEE IN HIS SON OR GRANDSONS NAME, THEREFO RE, CANNOT BE HELD ENTITLED TO EXEMPTION UNDER S. 54B OF THE ACT. 18. LD. COUNSEL FOR THE ASSESSEE POINTED OUT THAT A SIMILAR ISSUE AROSE IN THE CASE OF CIT VS. GURNAM SINGH REPORTED IN 327 ITR 278. THE ASSESSEE HAS INVESTED THE GAIN ARISEN ON TRANSFER O F A LONG TERM CAPITAL ASSET IN AGRICULTURAL LAND. THE LAND WAS PURCHASED IN THE JOINT NAME. THE EXEMPTION U/S 54B WAS ALLOWED TO THE ASSESSEE BY TH E ITAT AND THE ITA NO. 4754,4755,5036/DEL/10 ASSTT. YEAR 2007-08 14 HONBLE HIGH COURT HAS UPHELD THE ALLOWANCE OF SUCH EXEMPTION. THIS DECISION HAS BEEN RENDERED ON 1 ST APRIL 2008 WHEREAS THE EARLIER DECISION WAS DELIVERED ON 13 TH AUGUST, 2007. THE SUBSEQUENT DECISION IS IN FAVOUR OF THE ASSESSEE. THOUGH BOTH THE DECISION S ARE FROM THE JURISDICTIONAL HIGH COURT, THE DECISION WHICH IS IN FAVOUR OF THE ASSESSEE DESERVES TO BE FOLLOWED. THE LANGUAGE SECTION 54B A ND 54EC FOR THE PURPOSE OF IDENTIFYING THE ASSESSEE WHO MADE INVEST MENT OF CAPITAL GAIN ARE IDENTICAL. APART FROM THIS, HE ALSO POINTED OU T THAT ASSESSEE HAD WRITTEN A LETTER TO RURAL ELECTRIFICATION CORPORATI ON LTD. AND ENQUIRED WHAT IS THE STATUS OF SECOND AND THIRD NAME AVAILAB LE IN THE BONDS. CORPORATION HAS INTIMATED TO THE ASSESSEE THAT THE PURPOSE OF MENTIONING SECOND AND THIRD HOLDER ONLY FOR SUCCESS ION IN CASE OF DEATH OF FIRST HOLDER. HE ALSO BROUGHT IT TO OUR NOTICE T HE GUIDELINES ISSUED BY THE CORPORATION WHILE INVITING INVESTMENT, AND UNDE R THE HEAD TRANSMISSION /SUCCESSION, IT HAS BEEN POINTED OUT THAT ONLY FIRST NAME IS TO BE RECOGNIZED AS HOLDER OF THE BOND. 19. WE HAVE DULY CONSIDERED THE RIVAL CONTENTION AN D GONE THROUGH THE RECORD CAREFULLY. THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE SUBSEQUENT DECISION HAS UPHELD GRANT OF EXEMPTION U /S 54B IN A CASE WHERE LAND WAS PURCHASED IN THE JOINT NAME. THE IT AT HAD DISCUSSED THIS ISSUE IN THE CASE OF SMT. SARASWATI SWAMINATHA N REPORTED IN 116 ITA NO. 4754,4755,5036/DEL/10 ASSTT. YEAR 2007-08 15 ITD 234 AND HAS OBSERVED THAT THE OBJECT OF SECTION 54EC IS TO UTILIZE THE SALE PROCEED OF LONG TERM CAPITAL GAIN IN THE P URCHASE OF SPECIFIED BONDS. THE TRIBUNAL HAS CONSIDERED THE SCHEME OF S UCH INVESTMENT IN PARAGRAPH 3 AND THEREAFTER UPHELD THE ALLOWANCE OF EXEMPTION U/S 54EC. THE THIRD CIRCUMSTANCE WHICH GOAD US NOT TO I NTERFERE IN THE ORDER OF LD. CIT(A) IS THE LETTER DATED 11 TH MAY, 2011 WHEREBY REC LTD. HAD GIVEN A CLARIFICATION REGARDING JOINT HOLDING OF RE C BONDS. THE CORPORATION HAS POINTED OUT THAT SECOND AND THIRD H OLDER IS ONLY FOR SUCCESSION PURPOSE IN CASE OF DEATH OF FIRST HOLDER . THE CUMULATIVE SETTING OF ALL THESE THREE FACTORS PERSUADE US NOT TO TAKE A DIFFERENT OPINION THAN THE ONE TAKEN BY THE LD. CIT(A). IN VI EW OF THE ABOVE DISCUSSION, WE DO NOT FIND ANY MERIT IN THIS APPEAL OF THE REVENUE. 20. IN THE RESULT, BOTH THE APPEALS OF ASSESSEE ARE PARTLY ALLOWED WHEREAS APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 20.5.2011. SD/- SD/- [SHAMIM YAHYA] [RAJPAL YADAV] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 20.5.2011 VEENA ITA NO. 4754,4755,5036/DEL/10 ASSTT. YEAR 2007-08 16 COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT