ACIT, 23(3), MUMBAI V. RICHARD DUGGAN COOPER, MUMBAI

ITA 4782/MUM/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 9903 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-03-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 15-07-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITTAL
• Assessee Lawyers: M SUBRAMANIAM
• Keywords: Capital asset; Cost of acquisition
• Section: 142(1); 54

Judgement Text

1 ITA 4782/MUM/2016 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D, MUMBAI BEFORE SHRI JOGINDER SINGH (JUDICIAL MEMBER) AND SHRI G MANJUNATHA (ACCOUNTANT MEMBER) I.T.A NO.4782 /MUM/2016 (ASSESSMENT YEAR: 2012-13) ACIT 25(3), MUMBAI VS MR. RICHARD DUGGAN COOPER 12A, SEEMA APARTMENT, BANDRA (W), MUMBAI-400 050 PAN : AHLPC4158M APPELLANT RESPONDENT APPELLANT BY SHRI RAJAT MITTAL RESPONDENT BY SHRI M SUBRAMANIAM DATE OF HEARING 07-02-2018 DATE OF PRONOUNCEMENT 14-03-2018 O R D E R PER G MANJUNATHA, AM : THIS APPEAL FILED BY THE REVNUE IS DIRECTED AGAINST ORDER OF THE CIT(A)- 34, MUMBAI DATED 02-05-2016 AND IT PERTAINS TO AY 2 012-13. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. ON FACTS AND IN LAW AND IN THE CIRCUMSTA NCES OF THE CASE IN LAW, THE LD. CIT(A)-34, MUMBAI ERRED IN DISALLOWING THE INVESTME NT MADE IN CAPITAL GAINS BONDS U/S. 54EC TO THE EXTENT OF RS. 1,00,00,0007- IN TWO FINANCIAL YEAR ON THE BASIS OF SERIES OF JUDGMENTS, IGNORING THE FACTS.' 2. 'ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD. GIT (A)-34, MUMBAI HAS ERRED IN DIRECTING TO DE LETE THE ADDITION OF RS. 92,85,7417- MADE BY THE ASSESSING OFFICER ON ACCOUN T OF INVESTMENT MADE IN CAPITAL GAIN ACCOUNT FOR THE SUBSEQUENT YEA R, WHICH IS INCORRECT AND IS AGAINST THE PROVISION OF THE INCOME TAX ACT SOLELY RELYING ON THE SERIES OF JUDGMENTS, IGNORING THE FACTS.' 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E HAS FILED HIS RETURN 2 ITA 4782/MUM/2016 OF INCOME FOR THE ASSESSMENT YEAR 2012-13 ON 30-07 -2012 DECLARING TOTAL INCOME OF RS.1,07,85,377. THE CASE HAS BEEN SELECTED FOR SCRUTINY AND STATUTORY NOTICES U/S 143(2) AND 142(1) OF THE ACT WERE ISSUED. IN RESPONSE TO NOTICES, THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE APPEARED FROM TIME TO TIME AND PRODUCED DETAILS CAL LED FOR. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED TH AT THE ASSESSEE HAD SOLD ONE PROPERTY DURING THE YEAR UNDER CONSIDE RATION FOR RS.13 CRORES WHICH WAS JOINTLY HELD BY ASSESSEE AND BINIT A COOPER. THE SAID PROPERTY WAS PURCHASED ON 15-05-2006. THE ASSESSEE HAS COMPUTED LONG TERM CAPITAL GAIN OF RS.1,01,00,270 AFTER DEDU CTING INDEXED COST OF ACQUISITION OF THE PROPERTY AT RS.3,50,01,370 AND E XEMPTION U/S 54 FOR RS.1.50 CRORES AND U/S 54EC FOR RS.1 CRORE. THE AO CALLED UPON THE ASSESSEE TO FURNISH DETAILS OF COMPUTATION OF LONG TERM CAPITAL GAIN FROM SALE OF PROPERTY AND ALSO TO JUSTIFY DEDUCTION CLAI MED U/S 54 & 54EC OF THE ACT, WITH NECESSARY EVIDENCES. THE AO, CONSIDE RING RELEVANT SUBMISSIONS OF THE ASSESSEE AND ALSO ON ANALYSIS OF PROVISIONS OF SECTION 54EC, OBSERVED THAT THE MAXIMUM DEDUCTION A LLOWED AGAINST CAPITAL GAIN IS RS.50 LAKHS AS AGAINST WHICH THE AS SESSEE HAD CLAIMED DEDUCTION OF RS.1 CRORE BEING INVESTMENT MADE IN CA PITAL GAIN BONDS IN TWO DIFFERENT FINANCIAL YEARS OF RS.50 LAKHS EACH. THE AO FURTHER OBSERVED THAT AS PER CLAUSE (B) OF SECTION 54EC, IF THE COST OF LONG TERM SPECIFIED ASSET IS LESS THAN CAPITAL GAIN, PROPORTI ONATE DEDUCTION IS TO BE 3 ITA 4782/MUM/2016 ALLOWED AND ACCORDINGLY WORKED OUT PROPORTIONATE DE DUCTION OF RS.7,14,259 AND DISALLOWED BALANCE AMOUNT OF RS.92, 85,741 OUT OF TOTAL DEDUCTION CLAIMED BY THE ASSESSEE OF RS.1 CRORE U/S 54EC OF THE ACT. 3. AGGRIEVED BY THE ASSESSMENT ORDER, ASSESSEE PREF ERRED APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE ASSESSEE HAS FILED ELABORATE WRITTEN SUBMISSIONS WHICH HAS BEEN REPRODUCED BY TH E LD.CIT(A) IN HIS ORDER AT PARA 4 ON PAGES 3 TO 6. THE ASSESSEE ALSO RELIED UPON CERTAIN JUDICIAL PRECEDENTS, INCLUDING THE DECISION OF AHME DABAD ITAT IN THE CASE OF SHRI ASPI GUNWALA IN ITA NO.326/AHD/2011. THE SUM AND SUBSTANCE OF THE ARGUMENTS OF THE ASSESSEE IS THAT AS PER THE PROVISIONS OF SECTION 54EC, ASSESSEE IS ELIGIBLE FOR EXEMPTION UPTO RS.50 LAKHS IN EACH FINANCIAL YEAR, PROVIDED SUCH INVESTMENT IS WI THIN SIX MONTHS FROM THE DATE OF TRANSFER OF ASSET. 4. THE CIT(A), AFTER CONSIDERING RELEVANT SUBMISSIO NS OF THE ASSESSEE AND ALSO RELYING UPON VARIOUS JUDICIAL PRECEDENTS, INCLUDING THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS CORAMANDAL INDUSTRIES LTD 370 ITR 386 (MAD), OBSERVED THAT PLA IN READING OF PROVISIONS OF SECTION 54EC(1) AND ALSO THE CBDT CIR CULAR DATED 12-02- 2008 CREATES A PRIMARY IMPRESSION THAT THE STATUTE IS MAINLY REFERRING TO INVESTMENT AND NOT DEDUCTION WHILE ELABORATING ABOU T THE CEILING LIMIT OF RS.50 LAKHS. IT ALSO CREATES AN IMPRESSION THAT TH E REFERENCE TO THE FINANCIAL YEAR IS WITHOUT FURTHER SPECIFICATION ABO UT THE SITUATIONS IN WHICH 4 ITA 4782/MUM/2016 THERE CAN BE OPPORTUNITIES FOR ANY ASSESSEE TO MAKE INVESTMENT IN 2 DIFFERENT FINANCIAL YEARS. WITH THESE OBSERVATION, THE CIT(A) DELETED ADDITION MADE BY THE AO TOWARDS DISALLOWANCE OF INV ESTMENT IN CAPITAL GAIN BONDS U/S 54EC OF THE INCOME-TAX ACT, 1961. A GGRIEVED BY THE ORDER OF CIT(A), THE REVENUE IS IN APPEAL BEFORE US . 5. THE LD.DR SUBMITTED THAT THE LD.CIT(A) ERRED IN DELETING ADDITIONS MADE BY THE AO TOWARDS DISALLOWANCE OF INVESTMENT M ADE IN CAPITAL GAIN BONDS U/S 54EC WITHOUT APPRECIATING THE FACT T HAT THE UPPER LIMIT PRESCRIBED FOR INVESTMENT IN CAPITAL GAIN BONDS IS RS.50 LAKHS IN ANY FINANCIAL YEAR WHICH IS CLEAR FROM THE PROVISO PROV IDED TO SECTION 54EC AND ALSO WHICH WAS FURTHER CLARIFIED BY THE SECOND PROVISO INSERTED BY THE FINANCE ACT 2014 W.E.F. 01-04-2015 WHEREIN IT W AS CLARIFIED THAT INVESTMENT MADE BY AN ASSESSEE IN THE LONG TERM SPE CIFIED ASSET FROM CAPITAL GAINS ARISING FROM TRANSFER OF ONE OR MORE ORIGINAL ASSETS DURING THE FINANCIAL YEAR IN WHICH THE ORIGINAL ASSET OR A SSETS ARE TRANSFERRED AND IN THE SUBSEQUENT FINANCIAL YEAR DOES NOT EXCEE D 50 LAKHS RUPEES. THE LD.DR ALSO REFERRED TO CLAUSE (B) OF SECTION 54 EC TO ARGUE THAT THE LD.CIT(A) FAILED TO GIVE ANY FINDING ON PROPORTIONA TE DEDUCTION ALLOWED BY THE AO AS PER THE PROVISIONS OF SUB CLAUSE (B) A S PER WHICH THE ASSESSEE IS ELIGIBLE FOR PROPORTIONATE DEDUCTIONS I F THE COST OF THE LONG TERM SPECIFIED ASSET IS LESS THAN THE CAPITAL GAIN ARISING FROM THE TRANSFER OF ORIGINAL ASSET. 5 ITA 4782/MUM/2016 6. THE LD.AR FOR THE ASSESSEE, ON THE OTHER HAND, S TRONGLY SUPPORTING THE ORDER OF THE CIT(A) SUBMITTED THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF ITAT, MUMBAI A-BENCH IN THE CASE OF LILAVATI M SAYANI VS ITO (2014) 32 ITR (TRIB) 174 (MUM), WHEREIN IT W AS CATEGORICALLY HELD THAT WHERE THE ASSESSEE TRANSFERS ITS ASSET AFTER 3 1 ST SEPTEMBER OF THE FINANCIAL YEAR HE GETS AN OPPORTUNITY TO MAKE AN IN VESTMENT OF RS.50 LAKHS EACH IN TWO DIFFERENT FINANCIAL YEARS AND IS ABLE TO CLAIM EXEMPTION UPTO RS.1 CRORE U/S 54EC OF THE ACT. THE LD.AR FUR THER REFERRING TO THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE O F CIT VS C JAICHANDAR (2015) 370 ITR 579 (MAD), SUBMITTED THAT THE HONBLE MADRAS HIGH COURT CLARIFIED THE POSITION OF LAW INS OFAR AS QUANTUM OF DEDUCTION AVAILABLE U/S 54EC AND HELD THAT IF THE A SSESSEE MAKES INVESTMENT OF RS.50 LAKHS IN ANY FINANCIAL YEAR IT WOULD HAVE THE BENEFIT OF SECTION 54EC(1) AND SUCH INVESTMENTS FALLS UNDER TWO FINANCIAL YEARS, THE BENEFIT CLAIMED BY THE ASSESSEE CANNOT BE DENIE D. THE CIT(A), AFTER CONSIDERING RELEVANT PROVISIONS, HAS RIGHTLY DELETE D ADDITION MADE BY THE AO AND HIS ORDER SHOULD BE UPHELD. 7. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES B ELOW. THE ONLY ISSUE INVOLVED IN THE APPEAL OF THE REVENUE IS WHETHER DE DUCTION CONTEMPLATED U/S 54EC(1) IS RESTRICTED TO RS.50 LAKHS OR RS.1 CR ORE IF SUCH INVESTMENT IS MADE WITHIN THE PRESCRIBED TIME LIMIT PROVIDED U NDER THE ACT. THE 6 ITA 4782/MUM/2016 ISSUE IS NO LONGER RES INTEGRA. THE ITAT, MUMBAI B ENCH A IN THE CASE OF MR. LILAVATI M SAYANI (SUPRA) HAS CONSIDERED A S IMILAR ISSUE IN THE LIGHT OF PROVISIONS OF SECTION 54EC AND AFTER CONSI DERING CERTAIN CASE LAWS HELD THAT THE PROVISIONS OF SECTION 54EC MAKES IT CLEAR THAT WHERE THE ASSESSEE TRANSFERRED A CAPITAL ASSET AFTER 30 TH SEPTEMBER OF THE FINANCIAL YEAR, HE GETS AN OPPORTUNITY TO MAKE AN I NVESTMENT OF RS.50 LAKHS EACH IN TWO DIFFERENT FINANCIAL YEARS AND IS ABLE TO CLAIM EXEMPTION UPTO RS.1 CRORE, THEN SAID BENEFIT CANNOT BE DENIED IF SUCH INVESTMENT IS WITHIN THE PRESCRIBED TIME LIMIT PROVIDED UNDER THE ACT. THIS LEGAL PROPOSITION IS FURTHER STRENGTHENED BY THE DECISION OF HONBLE MADRES HIGH COURT, IN THE CASE OF CIT VS C JAICHANDAR (SUP RA) WHEREIN IT WAS HELD THAT IF AN ASSESSEE WAS ABLE TO INVEST RS.50 L AKHS EACH IN TWO DIFFERENT FINANCIAL YEARS WITHIN A PERIOD OF SIX MO NTHS FROM THE DATE OF TRANSFER OF THE CAPITAL ASSET, IT COULD NOT BE SAID TO BE INADMISSIBLE. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE A SSESSEE IS ELIGIBLE FOR EXEMPTION U/S 54EC OF RS.1 CRORE EVEN THOUGH SUCH I NVESTMENT EXCEEDS THE MAXIMUM LIMIT PRESCRIBED UNDER THE ACT, AS THE ASSESSEE HAS MADE INVESTMENT IN TWO DIFFERENT FINANCIAL YEAR S WITHIN THE TIME PRESCRIBED UNDER THE PROVISIONS OF SECTION 54EC OF THE ACT. THE CIT(A), AFTER CONSIDERING RELEVANT SUBMISSIONS OF THE ASSES SEE HAS RIGHTLY DELETED ADDITION MADE BY THE AO. WE DO NOT FIND AN Y ERROR IN THE ORDER OF THE CIT(A); HENCE, WE ARE INCLINED TO UPHOLD TH E FINDINGS OF THE 7 ITA 4782/MUM/2016 CIT(A) AND DISMISS APPEAL FILED BY THE REVENUE. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH MARCH, 2018. SD/- SD/- (JOGINDER SINGH) (G MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT : 14 TH MARCH, 2018 PK/- COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR /TRUE COPY/ BY ORDER SR.PS, ITAT, MUMBAI