The ACIT, Circle-2(1) Now DCIT, Circle-1(2), Baroda V. M/s. Gujarat Concrete Product, Baroda

ITA 485/AHD/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 6202 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 10 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 01-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Cost of acquisition
• Section: 143(3)

Judgement Text

ITA NO. 485/AHD/2016 DCIT VS GUJARAT CONCRETE PRODUCT A.Y. 2011-12 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH, AHMEDABAD [CORAM: PRAMOD KUMAR AM AND MAHAVIR PRASAD JM] I.T.A. NO.485/AHD/2016 ASSESSMENT YEAR : 2011-12 ASSTT. COMMISSIONER OF INCOME-TAX .....APPELLANT CIRCLE-2(1), BARODA VS. GUJARAT CONCRETE PRODUCTS .RESPONDENT 11, SEVAK NAGAR, RACE COURSE CIRCLE BARODA 390 005 [PAN : AABFG 7520 Q] APPEARANCES BY: MUDIT NAGPAL FOR THE APPELLANT MUKUND BAKSHI FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : 22.01.2018 DATE OF PRONOUNCING THE ORDER : 30.01.2018 O R D E R PER PRAMOD KUMAR, AM: 1. BY WAY OF THIS APPEAL, THE ASSESSING OFFICER HAS CHALLENGED CORRECTNESS OF THE LEARNED CIT(A)S ORDER DATED 20 TH NOVEMBER 2015, IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2011-12. 2. GRIEVANCE OF THE APPELLANT IS AS FOLLOWS:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN LAW BY ALLOWING EXEMPTION U/S 54EC OF THE INCOME-TAX ACT, 1961 THUS WRONGLY ALLOWING DOUBLE BENEFIT OF RS.50 LACS EACH SPREAD IN TWO FINANCIAL YEARS AND DELETING THE DISALLOWANCE TO THE TUNE OF RS.50, 00,000/- WITHOUT CONSIDERING THE FINDINGS OF AO ON RECORD AND MERITS OF THE CASE . 3. LEARNED REPRESENTATIVES FAIRLY AGREE THAT THE IS SUE IN APPEAL IS NOW SQUARELY COVERED, IN FAVOUR OF THE ASSESSEE, BY HONBLE MADR AS HIGH COURTS JUDGMENT IN THE CASE OF CIT VS. C. JAICHANDER & ANOTHER [(2015) 370 ITR 579 (MAD)] AND THERE IS NOTHING CONTRARY THERETO BY HONBLE JURISDICTIONAL HIGH COURT. IN THE SAID CASE, HONBLE MADRAS HIGH COURT HAS, INTER ALIA, OBSERVED AS FOLLOWS:- 5. THE KEY ISSUE THAT ARISES FOR CONSIDERATION IS WHETHER THE FIRST PROVISO TO SECTION 54EC(1) OF THE ACT WOULD RESTRICT THE BENEF IT OF INVESTMENT OF CAPITAL GAINS IN BONDS TO THAT FINANCIAL YEAR DURING WHICH THE PROPERTY WAS SOLD OR IT APPLIES TO ANY FINANCIAL YEAR DURING THE SIX MONTHS PERIOD. ITA NO. 485/AHD/2016 DCIT VS GUJARAT CONCRETE PRODUCT A.Y. 2011-12 PAGE 2 OF 4 6. FOR BETTER UNDERSTANDING OF THE ISSUE, IT WOULD BE APPOSITE TO REFER TO SECTION 54EC(1) OF THE ACT, WHICH READS AS UNDER: 'SECTION 54EC. CAPITAL GAIN NOT TO BE CHARGED ON IN VESTMENT IN CERTAIN BONDS. (1) WHERE THE CAPITAL GAIN ARISES FROM THE TRANSFER OF A LONG-TERM CAPITAL ASSET (THE CAPITAL ASSET SO TRANSFERRED BEI NG HEREAFTER IN THIS SECTION REFERRED TO AS THE ORIGINAL ASSET) AND THE ASSESSEE HAS, AT ANY TIME WITHIN A PERIOD OF SIX MONTHS AFTER THE DATE OF SUCH TRANSFE R, INVESTED THE WHOLE OR ANY PART OF CAPITAL GAINS IN THE LONG-TERM SPECIFIE D ASSET, THE CAPITAL GAIN SHALL BE DEALT WITH IN ACCORDANCE WITH THE FOLLOWIN G PROVISIONS OF THIS SECTION, THAT IS TO SAY,- (A) IF THE COST OF THE LONG- TERM SPECIFIED ASSET IS NOT LESS THAN THE CAPITAL GAIN ARISING FROM THE TRANSFER OF THE ORIGI NAL ASSET, THE WHOLE OF SUCH CAPITAL GAIN SHALL NOT BE CHARGED UNDER SEC TION 45 ; (B) IF THE COST OF THE LONG- TERM SPECIFIED ASSET IS LESS THAN THE CAPITAL GAIN ARISING FROM THE TRANSFER OF THE ORIGINAL ASSE T, SO MUCH OF THE CAPITAL GAIN AS BEARS TO THE WHOLE OF THE CAPITAL G AIN THE SAME PROPORTION AS THE COST OF ACQUISITION OF THE LONG- TERM SPECIFIED ASSET BEARS TO THE WHOLE OF THE CAPITAL GAIN, SHALL NOT BE CHARGED UNDER SECTION 45. PROVIDED THAT THE INVESTMENT MADE ON OR AFTER THE 1 ST DAY OF APRIL, 2007 IN THE LONG-TERM SPECIFIED ASSET BY AN ASSESSEE DURING ANY FINANCIAL YEAR DOES NOT EXCEED FIFTY LAKH RUPEES.' 7. ON A PLAIN READING OF THE ABOVE SAID PROVISION, WE ARE OF THE VIEW THAT SECTION 54EC(1) OF THE ACT RESTRICTS THE TIME LIMIT FOR THE PERIOD OF INVESTMENT AFTER THE PROPERTY HAS BEEN SOLD TO SIX MONTHS. THERE IS NO C AP ON THE INVESTMENT TO BE MADE IN BONDS. THE FIRST PROVISO TO SECTION 54EC(1) OF THE ACT SPECIFIES THE QUANTUM OF INVESTMENT AND IT STATES THAT THE INVEST MENT SO MADE ON OR AFTER 1.4.2007 IN THE LONG-TERM SPECIFIED ASSET BY AN ASS ESSEE DURING ANY FINANCIAL YEAR DOES NOT EXCEED FIFTY LAKH RUPEES. IN OTHER WO RDS, AS PER THE MANDATE OF SECTION 54EC(1) OF THE ACT, THE TIME LIMIT FOR INVE STMENT IS SIX MONTHS AND THE BENEFIT THAT FLOWS FROM THE FIRST PROVISO IS THAT I F THE ASSESSEE MAKES THE INVESTMENT OF RS.50,00,000/- IN ANY FINANCIAL YEAR, IT WOULD HAVE THE BENEFIT OF SECTION 54EC(1) OF THE ACT. 8. THE LEGISLATURE NOTICING THE AMBIGUITY IN THE AB OVE SAID PROVISION, BY FINANCE (NO.2) ACT, 2014, WITH EFFECT FROM 1.4.2015, INSERT ED AFTER THE EXISTING PROVISO TO SUB-SECTION (1) OF SECTION 54EC OF THE ACT, A SECON D PROVISO, WHICH READS AS UNDER: 'PROVIDED FURTHER THAT THE INVESTMENT MADE BY AN AS SESSEE IN THE LONG-TERM SPECIFIED ASSET, FROM CAPITAL GAINS ARISING FROM TR ANSFER OF ONE OR MORE ORIGINAL ASSETS, DURING THE FINANCIAL YEAR IN WHICH THE ORIGINAL ASSET OR ASSETS ARE TRANSFERRED AND IN THE SUBSEQUENT FINANCIAL YEA R DOES NOT EXCEED FIFTY LAKH RUPEES.' ITA NO. 485/AHD/2016 DCIT VS GUJARAT CONCRETE PRODUCT A.Y. 2011-12 PAGE 3 OF 4 9. AT THIS JUNCTURE, FOR BETTER CLARITY, IT WOULD B E APPROPRIATE TO REFER TO THE NOTES ON CLAUSES - FINANCE BILL 2014 AND THE MEMORANDUM E XPLAINING THE PROVISIONS IN THE FINANCE (NO.2) BILL, 2014, WHICH READ AS UNDER: 'NOTES ON CLAUSES - FINANCE BILL 2014: CLAUSE 23 OF THE BILL SEEKS TO AMEND SECTION 54EC O F THE INCOME-TAX ACT RELATING TO CAPITAL GAIN NOT TO BE CHARGED ON INVES TMENT IN CERTAIN BONDS. THE EXISTING PROVISIONS CONTAINED IN SUB-SECTION (1) OF SECTION 54EC PROVIDE THAT WHERE CAPITAL GAIN ARISES FROM THE TRANSFER OF A LO NG-TERM CAPITAL ASSET AND THE ASSESSEE HAS WITHIN A PERIOD OF SIX MONTHS INVE STED THE WHOLE OR PART OF CAPITAL GAINS IN THE LONG-TERM SPECIFIED ASSET, THE PROPORTIONATE CAPITAL GAINS SO INVESTED IN THE LONG-TERM SPECIFIED ASSET OUT OF TOTAL CAPITAL GAIN SHALL NOT BE CHARGED TO TAX. THE PROVISO TO THE SAID SUB-SECT ION PROVIDES THAT THE INVESTMENT MADE IN THE LONG-TERM SPECIFIED ASSET DU RING ANY FINANCIAL YEAR SHALL NOT EXCEED FIFTY LAKH RUPEES. IT IS PROPOSED TO INSERT A PROVISO BELOW FIRST PROV ISO IN SAID SUB-SECTION (1) SO AS TO PROVIDE THAT THE INVESTMENT MADE BY AN ASSESS EE IN THE LONG-TERM SPECIFIED ASSET, FROM CAPITAL GAINS ARISING FROM TR ANSFER OF ONE OR MORE ORIGINAL ASSETS, DURING THE FINANCIAL YEAR IN WHICH THE ORIGINAL ASSET OR ASSETS ARE TRANSFERRED AND IN THE SUBSEQUENT FINANCIAL YEA R DOES NOT EXCEED FIFTY LAKH RUPEES. THIS AMENDMENT WILL TAKE EFFECT FROM 1ST APRIL, 201 5 AND WILL, ACCORDINGLY, APPLY IN RELATION TO ASSESSMENT YEAR 2015-16 AND SU BSEQUENT YEARS. MEMORANDUM: EXPLAINING THE PROVISIONS IN THE FINANC E (NO.2) BILL, 2014: CAPITAL GAINS EXEMPTION ON INVESTMENT IN SPECIFIED BONDS. THE EXISTING PROVISIONS CONTAINED IN SUB-SECTION (1 ) OF SECTION 54EC OF THE ACT PROVIDE THAT WHERE CAPITAL GAIN ARISES FROM THE TRANSFER OF A LONG-TERM CAPITAL ASSET AND THE ASSESSEE HAS, AT ANY TIME WIT HIN A PERIOD OF SIX MONTHS, INVESTED THE WHOLE OR ANY PART OF CAPITAL G AINS IN THE LONG-TERM SPECIFIED ASSET, OUT OF THE WHOLE OF THE CAPITAL GA IN, SHALL NOT BE CHARGED TO TAX. THE PROVISO TO THE SAID SUB-SECTION PROVIDES T HAT THE INVESTMENT MADE IN THE LONG-TERM SPECIFIED ASSET DURING ANY FINANCIAL YEAR SHALL NOT EXCEED FIFTY LAKH RUPEES. HOWEVER, THE WORDINGS OF THE PROVISO HAVE CREATED A N AMBIGUITY. AS A RESULT THE CAPITAL GAINS ARISING DURING THE YEAR AFTER THE MONTH OF SEPTEMBER WERE INVESTED IN THE SPECIFIED ASSET IN SUCH A MANNER SO AS TO SPLIT THE INVESTMENT IN TWO YEARS I.E., ONE WITHIN THE YEAR AND SECOND I N THE NEXT YEAR BUT BEFORE THE EXPIRY OF SIX MONTHS. THIS RESULTED IN THE CLAI M FOR RELIEF OF ONE CRORE RUPEES AS AGAINST THE INTENDED LIMIT FOR RELIEF OF FIFTY LAKHS RUPEES. ACCORDINGLY, IT IS PROPOSED TO INSERT A PROVISO IN SUB-SECTION (1) SO AS TO PROVIDE THAT THE INVESTMENT MADE BY AN ASSESSEE IN THE LONG-TERM SPECIFIED ASSET, OUT OF CAPITAL GAINS ARISING FROM TRANSFER O F ONE OR MORE ORIGINAL ASSET, DURING THE FINANCIAL YEAR IN WHICH THE ORIGINAL ASS ET OR ASSETS ARE TRANSFERRED AND IN THE SUBSEQUENT FINANCIAL YEAR DOES NOT EXCEE D FIFTY LAKH RUPEES. ITA NO. 485/AHD/2016 DCIT VS GUJARAT CONCRETE PRODUCT A.Y. 2011-12 PAGE 4 OF 4 THIS AMENDMENT WILL TAKE EFFECT FROM 1ST APRIL, 201 5 AND WILL, ACCORDINGLY, APPLY IN RELATION TO ASSESSMENT YEAR 2015-16 AND SU BSEQUENT ASSESSMENT YEARS.' 10. THE LEGISLATURE HAS CHOSEN TO REMOVE THE AMBIGU ITY IN THE PROVISO TO SECTION 54EC(1) OF THE ACT BY INSERTING A SECOND PROVISO WI TH EFFECT FROM 1.4.2015. THE MEMORANDUM EXPLAINING THE PROVISIONS IN THE FINANCE (NO.2) BILL, 2014 ALSO STATES THAT THE SAME WILL BE APPLICABLE FROM 1.4.20 15 IN RELATION TO ASSESSMENT YEAR 2015-16 AND THE SUBSEQUENT YEARS. THE INTENTIO N OF THE LEGISLATURE PROBABLY APPEARS TO BE THAT THIS AMENDMENT SHOULD BE FOR THE ASSESSMENT YEAR 2015- 2016 TO AVOID UNWANTED LITIGATIONS OF THE PREVIOUS YEARS. EVEN OTHERWISE, WE DO NOT WISH TO READ ANYTHING MORE INTO THE FIRST PROVI SO TO SECTION 54EC(1) OF THE ACT, AS IT STOOD IN RELATION TO THE ASSESSEES. 11. IN ANY EVENT, FROM A READING OF SECTION 54EC(1) AND THE FIRST PROVISO, IT IS CLEAR THAT THE TIME LIMIT FOR INVESTMENT IS SIX MON THS FROM THE DATE OF TRANSFER AND EVEN IF SUCH INVESTMENT FALLS UNDER TWO FINANCIAL Y EARS, THE BENEFIT CLAIMED BY THE ASSESSEE CANNOT BE DENIED. IT WOULD HAVE MADE A DIF FERENCE, IF THE RESTRICTION ON THE INVESTMENT IN BONDS TO RS.50,00,000/- IS INCORP ORATED IN SECTION 54EC(1) OF THE ACT ITSELF. HOWEVER, THE AMBIGUITY HAS BEEN REM OVED BY THE LEGISLATURE WITH EFFECT FROM 1.4.2015 IN RELATION TO THE ASSESSMENT YEAR 2015-16 AND THE SUBSEQUENT YEARS. 4. RESPECTFULLY FOLLOWING THE VIEWS SO EXPRESSED BY HONBLE MADRAS HIGH COURT, WE UPHOLD THE CONCLUSIONS ARRIVED AT BY THE LEARNED CI T(A) AND DECLINE TO INTERFERE IN THE MATTER. 5. IN THE RESULT, THE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 30 TH DAY OF JANUARY, 2018. SD/- SD/- MAHAVIR PRASAD PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) AHMEDABAD, THE 30 TH DAY OF JANUARY, 2018 **BT* COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER TRUE COPY ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD