ACIT, Jaipur V. SH. RAJKUMAR JAIN & SONS, Alwar

ITA 648/JPR/2011

• Counselvise Citation: 64823114 RSA 2011
• Duration Of Justice: 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 30-06-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VINOD JOHRI
• Keywords: Capital asset; Retrospective amendment; Cost of acquisition
• Section: 54F; 80HHC; 54

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH A JAIPUR (BEFORE SHRI R.K.GUPTA AND SHRI N.L.KALRA) ITA NO.648/ JP/2011 ASSESSMENT YEAR : 2008-09 PAN: AABHJ 7300 R THE ACIT VS. SHRI RAJ KUMAR JAIN & SONS (HUF ) CIRCLE- 2, AJMER 47, ANAND NAGAR, AJMER (APPELLANT ) (RESPONDENT) DEPARTMENT BY : SHRI VINOD JOHRI ASSESSEE BY : SHRI MAHENDRA GARGIEYA DATE OF HEARING: 24-01-2012 DATE OF PRONOUNCEMENT: 31-01-2012 ORDER PER N.L. KALRA, AM:- THE REVENUE HAS FILED AN APPEAL AGAINST THE ORDER OF THE LD. CIT(A), ALJMER DATED 20-04-2011 FOR THE ASSESSMENT YEAR 2008-09. 2.1 THE GROUND OF APPEAL RAISED BY THE REVENUE IS A S UNDER:- IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) AJMER HAS ERRED IN DIRECTING THE AO TO ALLOW THE CLAIM OF DEDUCTION U/ S 54EC FROM RS.50,00,000/- TO RS.1,00,00,000/- AS THE LD. CIT(A) HAS NOT APPRECIATED THE FACTS THAT THE DEEMED DATE OF ALLOT MENT OF BOND IS 30.6.2008 WHICH IS BEYOND THE TIME LIMIT OF 6 MONTH S AS PER SECTION 54EC FROM THE DATE OF TRANSFER I.E. 13.12.2 007. THE DATE OF MATURITY IS ALSO 30.6.2011 WHICH IS EVIDENT FROM BO ND CERTIFICATE. 2.2 THE ASSESSEE IS AN HUF, FILED RETURN OF INCOME ON 29.07.2008 DECLARING INCOME OF RS. 17,12,693/-. DURING THE YEAR UNDER CONSIDERATIO N, THE ASSESSEE SOLD THE PROPERTY FOR RS. `2.47 CRORES ON 13.12.2007 AND DISCLOSED CAPI TAL GAIN OF RS. 1,14,09,880/-. THE 2 ASSESSEE CLAIMED DEDUCTION U/S 54EC IN RESPECT OF L ONG TERM CAPITAL GAIN AMOUNTING TO RS. 1.00 CRORE I.E. INVESTED IN SPECIFIED CAPITAL G AIN BOND (RS. 50.00 LACS ON 31.03.2008 + RS. 50.00 LACS WAS MADE ON 10.06.2008). THE ONLY DISPUTE IS WITH REGARD TO THE NEXT INVESTMENT OF RS. 50 LACS MADE ON 10.06.2008 , WHICH WAS NOT CONSIDERED BY THE AO BY RELYING UPON THE PROVISO BELOW SEC.54EC WHICH PROVI DED THAT INVESTMENT IN ANY FINANCIAL YEAR CANNOT EXCEED RS. 50 LACS. HENCE, TH E AO WAS OF THE VIEW THAT THE ASSESSEE HAVING MADE A CLAIM OF RS. 1.00 CRORE, EXC EEDED THE INVESTMENT LIMIT PRESCRIBED IN THE PROVISO AND THEREFORE, RESTRICTED THE DEDUCT ION UPTO RS. 50 LACS ACCORDINGLY. 2.3 IN THE FIRST APPEAL, THE LD. CIT(A) HELD AS UND ER: 3.3 FACTS OF THE CASE AND ARGUMENT OF THE APPELLAN T HAVE BEEN CAREFULLY CONSIDERED. THE PROVISO TO SECTION 54EC(1 ) READS AS FOLLOWS: 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 RS. 50,00 ,000/-. 3.4 IT IS CLEAR FROM THE LANGUAGE OF PROVISO THAT T HE MAXIMUM LIMIT FOR INVESTMENT IN SPECIFIED ASSET IS RS. 50,00,000/ - FOR A FINANCIAL YEAR ONLY. IN THIS CASE THE APPELLANT INVESTED RS. 50,00 ,000/- ON 31.03.2008 AND ANOTHER SUM OF RS. 50,00,000/- ON 10.06.2008. THUS INVESTMENT OF RS. 50,00,000/- EACH HAS BEEN MADE DURING TWO FINANCIAL YEARS I.E. F.Y.2007- 08 & 2008-09. IN EITHER OF THE TWO CASES, INVESTMEN T IS MADE WITHIN THE TIME LIMIT OF SIX MONTHS FROM THE DATE OF TRANSFER. I THEREFORE HOLD THAT APPELLANT IS ENTITLED TO DEDUCTION OF RS. 1,00,00,0 00/- U/S 54EC. AO IS NOT JUSTIFIED TO RESTRICT THE DEDUCTION TO RS. 50,00,00 0/-. HE IS DIRECTED TO ALLOW DEDUCTION OF RS. 1,00,00,000/- AS CLAIMED BY APPELL ANT. GROUND NO.1 OF THE APPEAL IS THUS ALLOWED. 2.4 DURING THE COURSE OF PROCEEDINGS BEFORE US, THE LD. DR DREW OUR ATTENTION TO THE FINDINGS OF THE AO RECORDED AT PAGE 2 OF THE ASSESS MENT ORDER. THE DEDUCTION U/S 54EC SHOULD NOT EXCEED RS. 50.00 LACS. THE WORD ANY FIN ANCIAL YEAR MENTIONED IN PROVISO TO SECTION 54EC REFERS TO THE INVESTMENT TO BE MADE FO R THE PURPOSE OF CLAIMING DEDUCTION 3 FROM CAPITAL GAIN. THE LD. DR FURTHER SUBMITTED THA T PROVISO CANNOT GIVE UNDUE BENEFIT TO ONE SECTION OF THE TAX PAYERS. IF AN ASSESSEE TRANS FERS CERTAIN PROPERTY IN THE MONTH OF APRIL OF THE FINANCIAL YEAR THEN HE HAS TO MAKE INV ESTMENT WITHIN 06 MONTHS I.E. WITHIN THE SAME FINANCIAL YEAR. THE EXEMPTION FROM CAPITAL GAIN WILL BE ONLY TO THE EXTENT OF RS. 50.00 LACS. IN THE CASE OF ANOTHER TAX PAYER WHO TR ANSFERS HIS ASSETS IN THE MONTH OF OCT. THEN HE CANNOT CLAIM EXEMPTION U/S 54EC BY PURCHASI NG RS. 50.00 LACS BONDS IN THE FINANCIAL YEAR IN WHICH THE TRANSFER HAS TAKEN PLAC E AND ANOTHER RS. 50.00 LACS IN THE SUBSEQUENT FINANCIAL YEAR BECAUSE THE PERIOD OF SIX MONTHS WILL INCLUDE SOME PART OF THE SUBSEQUENT FINANCIAL YEAR. THUS TWO ASSESSEES WHO HAVE EARNED THE CAPITAL GAIN FOR THE SAME ASSESSMENT YEAR CANNOT BE TREATED DIFFERENTLY. IT WAS THEREFORE, SUBMITTED THAT INTERPRETATION OF PROVISO SHOULD NOT LEAD TO DISCRI MINATION AGAINST VARIOUS TAX PAYERS. THE LD. DR DREW OUR ATTENTION TO THE RECENT JUDGMENT OF HON'BLE APEX COURT IN THE CASE OF ESSAR OIL LTD. REPORTED ON TAX INDIAONLINE. COM. IN THIS CASE, THE ESSAR OIL COMMENCED PRODUCTION FROM 26-11-2006 WHILE SALES TAX INCENTIV E WAS TO BE AVAILABLE TO A UNDERTAKING WHICH HAS COMMENCED PRODUCTION BEFORE 1 5-08-2003. THE DELAY IN COMMENCEMENT OF PRODUCTION WAS ON ACCOUNT OF LITIG ATION PENDING IN THE COURT. THERE WAS AN INJUNCTION OF HON'BLE HIGH COURT. THE HON'BL E APEX COURT OBSERVED THAT MERE MISTAKE OR ERROR COMMITTED BY THE COURT CANNOT BE A GROUND FOR RESTITUTION. THE HON'BLE APEX COURT ALSO HELD AS UNDER:- IN THE CASE, ESSAR CASE WAS CATEGORICALLY TOLD BY LETTER DATED 28- 05-2002, WHICH IS MUCH PRIOR TO THE EXPIRY OF THE P ERIOD THAT TIME FOR AVAILING THE EXEMPTION CANNOT BE EXTENDED. ADMITTED LY, ESSAR FAILED TO MEET THE DEADLINE. IN THAT FACTUAL SCENARIO, THE EX ERCISE UNDERTAKEN BY THE HIGH COURT IN THE IMPUGNED JUDGEMENT BY DIRECTING V ARIOUS ADJUSTMENTS WHICH VIRTUALLY RE-WROTE THE STATES EXEMPTION SCHE ME, IS AN EXERCISE 4 WHICH IS, WITH GREAT RESPECT, NEITHER WARRANTED IN LAW NOR SUPPORTED BY PRECEDENTS. THERE IS NO QUESTION OF EQUITY HERE, AN EXEMPTION IS A STAND ALONE PROCESS. EITHER ANY INDUSTRY CLAIMING EXEMPTI ON COMES WITHIN IT OR IT DOES NOT. 2.5 BEFORE US, THE LD. AR HAS FILED THE FOLLOWING S UBMISSIONS. 1. FOR BETTER APPRECIATION SEC. 54EC(1) IS REPROD UCED HEREUNDER: [CAPITAL GAIN NOT TO BE CHARGED ON INVESTMENT IN C ERTAIN BONDS. 54EC. (1) WHERE THE CAPITAL GAIN ARISES FROM THE TR ANSFER OF A LONG-TERM CAPITAL ASSET (THE CAPITAL ASSET SO TRANS FERRED BEING 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 O F SUCH TRANSFER, INVESTED THE WHOLE OR ANY PART OF CAPITAL GAINS IN THE LONG- TERM SPECIFIED ASSET, THE CAPITAL GAIN SHALL BE DEALT WITH IN ACCORDANCE WITH THE FOLLOWING 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 O RIGINAL ASSET, THE WHOLE OF SUCH CAPITAL GAIN SHALL NOT BE CHARGED UNDER SECTION 45 ; (B) IF THE COST OF THE LONG-TERM SPECIFIED ASSET IS LESS THAN THE CAPITAL GAIN ARISING FROM THE TRANSFER OF THE ORIGI NAL ASSET, 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 SPECIFI ED ASSET BEARS TO THE WHOLE OF THE CAPITAL GAIN, SHALL NOT BE CHARGED UND ER SECTION 45 : [PROVIDED THAT THE INVESTMENT MADE ON OR AFTER THE 1ST DAY OF APRIL, 2007 IN THE LONG-TERM SPECIFIED ASSET BY AN ASSESSE E DURING ANY FINANCIAL YEAR DOES NOT EXCEED FIFTY LAKH RUPEES.] 2. THE ONLY DISPUTE BETWEEN THE PARTIES WAS THE CAS E MADE OUT BY THE AO ORIGINALLY WITH REGARD TO THE INVOKING OF TH E PROVISO TO SEC. 54EC AND THE AO DENIED THE CLAIM BY SAYING THAT THE ASSE SSEE EXCEEDED THE LIMIT OF `50 LACS IN THE GIVEN FINANCIAL YEAR. THE LD. CI T(A) HOWEVER, NEGATED SUCH CONTENTION HOLDING THAT IN TWO DIFFERENT FINAN CIAL YEARS, THE ASSESSEE, HAVING MADE `50 LACS EACH, NEVER EXCEEDED THE LIMIT AS PRESCRIBED IN THE PROVISO. IN HIS VIEW, THE PRESCRIBED LIMIT WAS TO B E RECKONED FOR EACH FINANCIAL YEAR SEPARATELY . REVENUE NOT TAKEN ANY GROUND, HERE , IS NO DISPUTE ANY MORE. 5 SO FAR AS THIS ASPECT IS CONCERNED, THE ADMITTED FA CTS ARE THAT THE ASSESSEE DID MAKE INVESTMENT I.E. `50 LACS ON 10.06 .2008 WHICH FALLS WITHIN 6 MONTHS (12.06.2008) FROM THE DATE OF TRANS FER (I.E. 13.12.2007). AS PER RECEIPT OF PAYMENT THE DATE IS 10.06.2008 (P B 1). AS PER PROVISO, THE LIMIT OF INVESTMENT TO BE MADE BY THE ASSESSEE IN A GIVEN FINANCIAL YEAR SHOULD NOT EXCEED `50 LACS. ACCORDINGLY HERE IN F.Y .2007-08 & 2008-09 EACH, THE ASSESSEE MADE INVESTMENT NOT EXCEEDING `5 0 LACS. HENCE, THE BAR OF THE PROVISO DOES NOT APPLY. THUS, THE LD. CI T(A) RIGHTLY GRANTED RELIEF UP TO THIS STAGE. 3. GROUND TAKEN BY THE REVENUE DO NOT ARISES FROM T HE ORDER THE LD. CIT(A): A BARE READING OF THE GROUND SUGGESTS T HAT THIS ISSUE WAS NEVER RAISED OUT BY THE AO NOR THEREFORE, CONSIDERED BY T HE LD. CIT(A). IN FACT, THIS IS AN ALTOGETHER NEW PLEA OR NEW GROUND TAKEN BY THE REVENUE AT THIS STAGE NOW, WHICH IS NOT PERMISSIBLE. IT HAS BEEN HE LD IN INDIAN STEEL & WIRE PRODUCTS LTD. V/S CIT (1994) 208 ITR 740 (CAL. ) (DPB 17-20) THAT AN ADDITIONAL PLEA BY THE APPELLANT, WHICH ALTOGETH ER CHANGES THE COMPLEXION OF THE CASE AS ORIGINALLY BROUGHT BEFORE THE COMMISSIONER (APPEALS) AND THE TRIBUNAL IN SECOND APPEAL, IS NOT PERMISSIBLE TO BE RAISED AT THE STAGE OF HEARING. THE RESPONDENT CANN OT BE MET WITH A SURPRISE AT THIS STAGE. 4. ON MERITS, ALSO HOWEVER, THE REVENUE HAS GOT NO CASE IN AS MUCH AS A CAREFUL READING OF THE PROVISION CONTAINE D U/S 54EC(1) REQUIRES THE ASSESSEE ONLY TO INVEST THE WHOLE OR ANY PART OF CAPITAL GAINS WITHIN A PERIOD OF SIX MONTHS. IT IS NOT DENIED THAT THE EN TIRE INVESTMENT OF `1 CRORE WAS INVESTED WITHIN THE PERIOD OF SIX MONTHS I.E. `50 LACS ON 31.03.2008 AND THE NEXT `50 LACS WAS MADE ON 10.06. 2008. THIS IS CLEARLY EVIDENT FROM THE APPLICATION NO.105463 WHICH BEARS THE DATE OF RECEIPT AS 10.06.2008 (PB 1). EVEN THE CHEQUE ENCLOSED WITH TH E APPLICATION BEARING NO.580003 OF THE STATE BANK OF INDIA, AJMER WAS ALS O DATED 10.06.2008. THE BANK STATEMENT ALSO CLEARLY REFLECTS THAT THE A MOUNT OF `50 LACS WAS DEBITED FROM ASSESSEES BANK ACCOUNT ON DATED 11.06 .2008 (PB 5-6). THE LAW DOES NOT REQUIRE THAT THE ALLOTMENT OF THE ASSE T WHEREIN INVESTMENT WAS MADE, SHOULD HAVE ALSO BE DONE WITHIN THE PERIO D OF SIX MONTHS. THIS IS SOMETHING BEYOND THE CONTROL OF THE ASSESSEE AND IMPOSSIBLE. KINDLY REFER MODERN FIBOTEX INDIA LTD. AND ANOTHER V/S DCIT 212 ITR 496 (CAL) HELD THAT THE ASSESSEE CANNOT BE CONS IDER A DEFAULTER ON ACCOUNT OF RETROSPECTIVE AMENDMENT FOR TREATING THE CASH COMPENSATORY SUPPORT AS TAXABLE AS THE ASSESSEE HAS ALREADY PAID THE SALARY BEFORE THE AMENDMENT. APPROVED IN CIT V/S HINDUSTAN ELECTRO GR APHITES LTD. 243 ITR 48. THE MAXIM OF LAW LEX NON COGIT AD IMPOSIBILIA MEANS THAT A MAN CANNOT BE COMPELLED BY LAW TO DO WHAT HE CANNOT POSSIBLY PERFORM. RELIANCE IS PLACED ON THE FOLLOWING DECISIONS:- 6 1. ACIT V/S JINDAL IRRIGATION SYSTEMS LTD. 56 ITD 1 64 (HYD). 2. CANARA BANK V/S ITO 121 ITD 1 (NAG) 3. INDER PRASAD MATHURA LAL IN ITA NO.1068/JP/2010 FOR A.Y.2005-06 VIDE ORDER DATED 27.05.2011 (2011) 43-A BCAJ 709 (J P) (DPB 1-7). 5. SUPPORTING CASE LAWS: KINDLY REFER HINDUSTAN UNI LEVER LTD. V/S DCIT (2010) 325 ITR 102 (BOM) (DPB 8-15) HELD AT PAGE 10 4 THAT (III) THAT IN ORDER TO AVAIL OF THE BENEFIT OF SEC TION 54EC, THE CAPITAL GAINS HAVE TO BE INVESTED IN A LONG-TERM SP ECIFIED ASSET WITHIN A PERIOD OF SIX MONTHS FROM THE DATE OF TRANSFER. IN THE PRESENT CASE, THE PERIOD OF SIX MONTHS WAS DUE TO EXPIRE ON MARCH 28, 2004. THE ASSESSEE INVESTED ON AMOUNT OF RS.3.07 CRORES ON MARCH 19, 2 004. A RECEIPT WAS ISSUED ON THAT DATE BY THE NATIONAL HOUSING BANK. A DEBIT WAS REFLECTED IN THE BANK ACCOUNT OF THE ASSESSEE TO THE EXTENT OF T HE SUM INVESTED ON MARCH 19, 2004. THE CERTIFICATE OF BOND WAS ISSUED BY THE NATIONAL HOUSING BANK ON JUNE 9, 2004, WHICH REFERRED TO THE DATE OF ALLOTMENT AS MARCH 31, 2004. FOR THE PURPOSE OF THE PROVISIONS O F SECTION 54EC, THE DATE OF THE INVESTMENT BY THE ASSESSEE MUST E REGAR DED AS THE DATE ON WHICH PAYMENT WAS MADE AND RECEIVED BY THE NATIONAL HOUSING BANK. THIS WAS WITHIN A PERIOD OF SIX MONTHS FROM THE DAT E OF TRANSFER OF THE ASSET. CONSEQUENTLY, THE PROVISIONS OF SECTION 54EC WERE COMPLIED WITH BY THE ASSESSEE. ALSO REFER CIT V/S SMT. BEENA K. JAIN (1995) 217 IT R 363 (BOM.) (DPB 16) HELD THAT THE RELEVANT DATE FOR THE PURPOS ES OF SECTION 54F IS WHEN THE PETITIONER PAID THE FULL CONSIDERATION AMO UNT ON THE FLAT BECOMING READY FOR OCCUPATION AND OBTAINED POSSESSI ON OF THE FLAT, AND NOT THE DATE OF REGISTRATION OF THE AGREEMENT OF PURCHA SE. IN CIT V/S AJIT SINGH KHAJANCHI (2007) 211 CTR 403 (MP) HELD THAT CAPITAL GAINS EXEMPTION UNDER S.54F ABSENCE OF REGISTERED DEED PURCHASE OF HOUSE NOT EVIDENCED BY REGISTERE D DEED EXEMPTION UNDER S.54F CANNOT BE DENIED IN ORDER TO CLAIM BE NEFIT OF PROVISION OF S.54F, IT IS NOT NECESSARY THAT THE ASSESSEE SHOULD HAVE BECOME THE OWNER OF THE HOUSE SEC.54F SPEAKS OF PURCHASE OF HOUSE REGISTRATION IS NOT IMPERATIVE BALRAJ VS. CIT (2002) 173 CTR (DEL) 45 2: (2002) 254 ITR 22 (DEL) RELIED ON. 6. THE CONTENTION OF THE REVENUE THAT THE DEEMED DA TE OF ALLOTMENT IS 30.06.2008 FIRSTLY, IS OF NO USE AND SECONDLY, EVEN OTHERWISE IS CONTRADICTORY IN AS MUCH AS THE PERIOD FOR WHICH INTEREST WAS PAID BY N ATIONAL HIGHWAYS AUTHORITY OF INDIA WAS FROM 12.06.2008 AND NOT FROM 30.06.200 8 (PB 2). AGAIN THERE IS A CONTRADICTION IN AS MUCH AS THE BOND CERTIFICATE (P B 4A-4B) RELIED UPON BY THE 7 REVENUE HAS BEEN SIGNED ON 26.05.2008 WHICH FALLS W ITHIN THE PERIOD OF SIX MONTHS. THUS, EVEN ON MERITS THE NEW GROUND TAKEN B Y THE REVENUE IS A MISCONCEPTION OF LAW. THE ASSESSEE MAY KINDLY BE HE LD AS ENTITLED TO THE EXEMPTION AS CLAIMED. 7. INCENTIVE PROVISION TO BE CONSTRUED LIBERALLY: W E MAY ALSO MENTION THAT SEC.54EC IS AN INCENTIVE PROVISION WITH A VIEW TO E NCOURAGE THE INVESTMENTS AND SAVINGS IN THE INFRASTRUCTURE. IT HAS BEEN HELD THA T AN INCENTIVE PROVISION HAS TO BE CONSTRUED LIBERALLY. KINDLY REFER BAJAJ TEMPO LTD. V/S CIT 188 ITR 196 (SC), CIT V/S KRISHNA COPPER AND STEEL ROLLING MILLS 193 ITR 281 (SC), WHICH HAS HELD FOR A LIBERAL AND BROADER INTERPRETATION OF AN INCENTIVE PROVISION U/S 80I AND CIT V/S BABY MARINE EXPORTS 160 TAXMAN 160 (SC), TH E COURT STRONGLY ADVOCATED FOR A LIBERAL INTERPRETATION AT PG 168 & 169 VIDE P ARAS 26 & 27. IT WAS HELD THAT 26 S. 80HHC WAS INCORPORATED WITH THE OBJECT OF GRANTING INCENTIVE TO EARNERS OF FOREIGN EXCHANGE. THIS COURT IS SEA PEARL INDUST RIES VS CIT (2001)2 SCC 33 ALSO OBSERVED THAT THE OBJECT OF SELECTION 80HHC IS TO GRANT INCENTIVE TO EARNERS OF FOREIGN EXCHANGE. IN IPCA LABORATORY LTD VS DY. CIT(2004) 12 SCC 742 THIS COURT HAS TAKEN THE SAME VIEW. THIS COURT IN THE SA ID JUDGMENT OBSERVED THAT S. 80 HHC HAS BEEN INCORPORATED WITH A VIEW TO PROVIDE IN CENTIVE TO EXPORT HOUSE AND THIS SECTION MUST RECEIVE LIBERAL INTERPRETATION. 8. ISSUE DEBATABLE: ALTERNATIVELY AN WITHOUT PREJUD ICE TO ABOVE SUBMISSIONS AND CASE LAWS, STILL IF THERE ARE CERTA IN DOUBTS, THE VIEW FAVOURABLE TO THE ASSESSEE HAS TO BE ADOPTED, AS HELD IN THE CASE OF CIT V/S VEGETABLES PRODUCT LTD 88 ITR 192 (SC) FOLLOWED IN CIT V/S MULTI METAL S LTD.188 ITR 151 (RAJ), CIT, DELHI (CENTRAL) V/S BHARAT NIDHI LTD.141 ITR 7 40 (DEL.) AND CIT, BOMBAY V/S INTERNATIONAL COMPUTERS 131 ITR 1 (BOMBAY HC) 2.6 THE LD. AR FURTHER SUBMITTED THE ADDITIONAL WRI TTEN SUBMISSIONS WHICH ARE REPRODUCED AS UNDER:- 1. AT THE OUTSET, IT IS SUBMITTED THAT THE PROVIS O BELOW SEC.54EC SIMPLY REQUIRES THE ASSESSEE NOT TO MAKE ANY INVEST MENT MORE THAN RS.50 LACS INTO ONE FINANCIAL YEAR THOUGH THE MAIN PROVIS ION CONTAINED U/S 54EC(1) PERMITS AND RATHER PUT A CONDITION FOR THE ASSESSEE TO BE ELIGIBLE FOR THE EXEMPTION TO INVEST THE SUBJECTED AMOUNT AT ANY TIME WITHIN A PERIOD OF SIX MONTHS AFTER THE DATE OF SUCH TRANSFE R . FROM THE READING OF THE MAIN PROVISION AND THE PROVISO THERETO TOGETHER , IT IS CRYSTAL CLEAR THAT THE ASSESSEE HAS TO MAKE INVESTMENT WITHIN THE PERI OD OF SIX MONTHS TO AVAIL THE EXEMPTION, WHETHER FALLING IN ONE OR EVEN MORE FINANCIAL YEAR/S. 2. FURTHER THE WORDS USED IN THE PROVISO IS ANY AND NOT RELEVANT FINANCIAL YEAR WHICH IMPLIES THAT SUCH A LIMIT OF RS.50 LACS IS F OR EACH 8 FINANCIAL YEAR. THE ASSESSEE HAVING MADE INVESTMENT NOT EXCEEDING RS.50 LACS IN EACH FINANCIAL YEAR 2007-08 & 2008-09, WAS THUS ELIGIBLE FOR THE EXEMPTION. THE PLAIN, LITERAL AND UNAMBIGUOUS INTER PRETATION OF THE PROVISO ALSO MAKE IT CLEAR THAT THE AMOUNT OF INVES TMENT SHOULD NOT EXCEED RS.50 LACS DURING ANY FINANCIAL YEAR WHICH IMPLIES THAT THE ASSESSEE IS FREE TO MAKE INVESTMENT WITHIN A PERIOD OF SIX MONT HS WITHIN WHICH IF MORE THAN ONE FINANCIAL YEAR FALL, THE INVESTMENT M AY EXCEED RS.50 LACS. IT IS SETTLED THAT THE COURT CANNOT READ SOMETHING WHICH IS MISSING IN THE STATUTE. THEREFORE, THE WORD ANY CANNOT BE INTERPRE TED DIFFERENTLY. 3.1 THE LAW IS WELL SETTLED THAT THE ROLE AND SCOPE OF PROVISO IS NOT TO ENLARGE OR TO RUN CONTRARY TO WHAT HAS BEEN PROV IDED IN THE MAIN PROVISION. THE PROVISO SIMPLY CARVES OUT A EXCEPTIO N OUT OF THE MAIN PROVISION HOWEVER, IT CANNOT CREATE A NEW LAW WHICH IS FOREIGN TO MAIN PROVISION. 3.2 A PROVISO QUALIFIES THE GENERALITY OF THE MAIN ENACTMENT BY PROVIDING AN EXCEPTION AND TAKING OUT FROM THE MAIN PROVISION, A PORTION, WHICH, BUT FOR THE PROVISO WOULD BE PART OF THE MAI N PROVISION. A PROVISO, MUST, THEREFORE, BE CONSIDERED IN RELATION TO THE P RINCIPAL MATTER TO WHICH STANDS AS A PROVISO. A PROVISO SHOULD NOT BE READ A S IF PROVIDING BY WAY OF ADDITION TO THE MAIN PROVISION WHICH IS FOREIGN TO THE MAIN PROVISION ITSELF. INDEED, IN SOME CASES, A PROVISO MAY BE AN EXCEPTION TO THE MAIN PROVISION THOUGH IT CANNOT BE INCONSISTENT WITH WHA T IS EXPRESSED IN THE MAIN PROVISION AND, IF IT IS, IT WOULD BE ULTRA VIR ES THE MAIN PROVISION AND LIABLE TO BE STRUCK DOWN. AS A GENERAL RULE, IN CON STRUING AN ENACTMENT CONTAINING A PROVISO, IT IS PROPER TO CONSTRUE THE PROVISION TOGETHER WITHOUT MAKING EITHER OF THEM REDUNDANT OR OTIOSE. 3.3 KINDLY REFER CIT V/S SOUTH INDIA CORPORATION LT D. (1999) 157 CTR 422 (KER) HELD AT PAGE 423 THAT IT IS TRUE, PROVISO CANNOT PROVIDE ANYTHING REPUGN ANT TO THE MAIN PROVISION. IT IS IN THE NATURE OF AN EXCEPTION TO WHAT HAS BEEN PROVIDED IN THE MAIN PROVISION. THE NORMAL FUNCTION OF A PROVISO IS TO EXCEPT SOMETHING ENACTED OR TO QUALIFY SOMETHING ENACTED THEREIN BUT FOR THE PROVISO WOULD BE WITHIN THE PUR VIEW OF THE ENACTMENT. AS A GENERAL RULE, A PROVISO IS ADDED TO AN ENACTMENT TO QUALIFY OR CREATE AN EXCEPTION TO WHAT IS IN THE EN ACTMENT, AND ORDINARILY, A PROVISO IS NOT INTERPRETED AS STATING A GENERAL RULE MULLINS VS. TREASURE OF SURVEY (1880) 5 QBD 170, MA DRAS & SOUTHERN MAHARATTA RLY CO. LTD. VS. BEZWADA MUNCIPA LTIY AIR 1944 PC 71 AND LOCAL GOVT. BOARD VS. SOUTH STONEHAM UNION (1909) AC 57 (HL), APPLIED. ALSO 284 ITR 515 (GAH), 274 ITR 429 (RAJ), 201 ITR 567 (SC). 9 THEREFORE, IF WHAT THE REVENUE INTERPRETS IS TAKEN AS CORRECT, IT WILL RENDER THE MAIN PROVISION AS NUGATORY OR OTIOSE. 4. THE INTENTION OF THE LEGISLATION IS ALSO CLEAR F ROM SEC.54EC(1) WHERE UNDER CLAUSE (A) THE EXEMPTION OF THE ENTIRE AMOUNT OF THE LONG TERM CAPITAL GAIN IS ENSURED IF THE FULL AMOUNT OF CAPITAL GAIN IS INVESTED IN LONG TERM SPECIFIED ASSETS. AN ASSESSEE DESPITE HAVING INVESTED ENTIRE AMOUNT OF GAIN, WITHIN THE PRESCRIBED PERIOD OF SIX MONTHS, CANNOT BE DENIED THE EXEMPTION BY MISREADING THE PROVISO. THE LAW NOWHERE SPECIFICALLY BAR INVESTMENT MORE THAN RS.50 LACS IN ANY CASE. 5. THE LEGISLATURE IN VARIOUS EXEMPTION PROVISIONS CONTAINED U/S 54, 54B, 54F, 54G ETC., HAS GIVEN THE ASSESSEE A LI BERTY TO INVEST IN THE PURCHASE/CONSTRUCTION OF HOUSE PROPERTY ETC. WITHIN A PERIOD OF 2/3 YEARS AFTER THE DATE OF TRANSFER. THUS, THE ACTIVITIES OF INVESTMENT CAN EXTEND BEYOND THE RELEVANT FINANCIAL YEAR. THE INTERPRETAT ION OF THE REVENUE THAT THE INVESTMENT CAN BE MADE ONCE ONLY AND IN THE FIN ANCIAL YEAR RELATING OF THE SUBJECTED ASSESSMENT YEAR AND NOT BEYOND THAT, IS COMPLETELY IGNORING THE ENTIRE SCHEME OF THE CAPITAL GAIN. 2.7 WE HAVE HEARD BOTH THE PARTIES. SECTION 54EC WA S INTRODUCED BY THE FINANCE ACT 2001 W.E.F. 01-04-201. IT WAS PROVIDED IN SECTION 5 4EC THAT IN CASE THE AMOUNT OF LONG TERM CAPITAL GAIN IS INVESTED IN THE LONG TERM SPEC IFIED ASSET THEN THE ASSESSEE IS NOT REQUIRED TO PAY THE CAPITAL GAIN TAX. THE LONG TERM SPECIFIED ASSETS WERE ALSO DEFINED IN EXPLANATION B TO SECTION 54EC. THERE WAS NO LIMITAT IMPOSED FOR THE PURPOSE OF INVESTMENT. SUBSEQUENTLY, SECTION 54EC WAS AMENDED BY THE FINANCE ACT 2006. AS PER THIS AMENDED PROVISION, THE LONG TERM SPECIFIED ASS ET WAS DEFINED TO MEAN ANY BOND REDEEMABLE AFTER 3 YEARS AND ISSUED BY THE NATIONAL HIGHWAY AUTHORITY OF INDIA OR BY THE RURAL ELECTRIFICATION CORPORATION. SUBSEQUENTLY, TH E CENTRAL GOVT. ISSUED A NOTIFICATION NO. 380 OF 2006 DATED 22 ND DEC. 2006 WHICH READS AS FOLLOWS. SO. NO. 2146(E). (1) IN EXERCISE OF THE POWERS CO NFERRED BY SUB- CL (II) OF CL.(B) OF THE EXPLANATION TO SECTION 54E C OF THE INCOME TAX ACT, 10 1961, THE CENTRAL GOVT. NOTIFIES THE BONDS FOR AN A MOUNT OF RUPEES THREE THOUSAND FIVE HUNDRED CRORES TO BE ISSUED BY THE RU RAL ELECTRIFICATION CORPORATION LTD., A COMPANY FORMED AND REGISTERED U NDER THE COMPANIES ACT, 1956, DURING THE PERIOD FROM 26 TH DEC. 2006 TO 31 ST MARCH 2007 AS LONG TERM SPECIFIED ASSET FOR THE PURPOSE OF THE SAID SECTION SUBJECT TO THE FOLLOWING CONDITIONS NAMELY:- (I) A PERSON WHO HAS MADE AN INVESTMENT OF AN AMOUN T AGGREGATING MORE THAN FIFTY LAKH RUPEES IN THE BOND S NOTIFIED AS LONG TERM SPECIFIED ASSET BY THE CENTRAL GOVT. FO R THE PURPOSE OF SECTION 54EC OF THE I.T. ACT, 1961 IN THE OFFICI AL GAZETTE VIDE NOTIFICATION NO. SO NO.963(E) DATED 26 TH JUNE, 2006 OR NOTIFICATION NO. SO NO. 564(E) DATED 29 TH JUNE, 2006 SHALL NOT BE ALLOTTED ANY BONDS NOTIFIED AS LONG TERM SPECIFIED ASSET BY THIS NOTIFICATION. (II) A PERSON WHO HAS NOT COVERED BY CL. (I) SHALL NOT BE ALLOTTED THE BONDS NOTIFIED AS LONG TERM SPECIFIED ASSET BY THIS NOTIFICATION, FOR ANY AMOUNT WHICH EXCEEDS THE AMOU NT OF FIFTY LAKHS RUPEES AS REDUCED BY THE AGGREGATE OF THE INV ESTMENT, IF ANY, MADE BY HIM IN THE BONDS NOTIFIED AS LONG TERM SPE CIFIED ASSET BY THE CENTRAL GOVT FOR THE PURPOSES OF SECTION 54EC O F THE I.T. ACT, 1961, IN THE OFFICIAL GAZETTE VIDE NOTIFICATION NO. SO. NO.963(E) DATED 29 TH JUNE, 2006 OR NOTIFICATION NO. SO NO.964(E) DATED 29 TH JUNE, 2006. THE NOTIFICATION IMPOSED TWO CONDITIONS 11 (1) NO MORE BONDS WILL BE ISSUED BY ANY PERSON, IF HE HAS ALREADY MADE AN INVESTMENT OF AN AMOUNT AGGREGA TING MORE THAN RS. 50 LAKHS IN THE BONDS ALREADY NOTIFIED IN NOTIFICATION NO. 963E DATED. 29 JUNE, 206 OR 964E DATED 29 TH JUNE, 2006 (2) PERSONS NOT COVERED UNDER THE FIRST CONDITION, NO PERSON IS ALLOTTED ANY BONDS, NOTIFIED AS LONG TER M CAPITAL ASSET WHICH EXCEEDS RS. 50 LAKHS AS REDUCED BY THE AGGREG ATE INVESTMENT, IF ANY, MADE BY HIM IN THE BONDS NOTIFI ED AS LONG TERM SPECIFIED ASSET. THE HON'BLE MADRAS HIGH COURT IN THE CASE OF AREV A T & D INDIA LTD. VS. ACIT, 326 ITR 540 HAD AN OCCASION TO CONSIDER AS TO WHETHER T HE CONDITIONS IMPOSED IN THE NOTIFICATION ARE ULTRA VIRUS U/S 54EC OF THE ACT. A CCORDING TO THE HON'BLE HIGH COURT, IT WAS HELD THAT CONDITIONS MENTIONED IN THE NOTIFICAT IONS ARE VALID BECAUSE SECTION 54EC WAS AMENDED BY THE FINANCE ACT 2007 W.R.E.F. 01-04- 2006. THE PROVISO HAS ALREADY BEEN INTRODUCED IN SECTION 54EC OF THE ACT. THE CONTENTI ON OF THE ASSESSEE IS THAT THE PROVISO PROVIDES FOR MAKING INVESTMENT OF RS. 50.00 LACS IN ANY FINANCIAL YEAR. THE PROVISO IS AN EXCEPTION TO THE MAIN SECTION. THE INVESTMENT IS TO BE MADE WITHIN SIX MONTHS FROM THE DATE OF TRANSFER OF ASSETS. AS PER COUNSEL OF THE ASSESSEE , IF THE PERIOD OF SIX MONTHS SPILLS OVER THE NEXT FINANCIAL YEAR IN WHICH TRANS FER HAS TAKEN PLACE THEN THE ASSESSEE CAN MAKE INVESTMENT OF RS. 50.00 LACS IN THE FINANCIAL YEAR IN WHICH TRANSFER HAS TAKEN PLACE AND RS. 50.00 LACS IN THE SUBSEQUENT FINANCIAL YEAR PROVIDED THE INVESTMENT IS WITHIN THE PERIOD OF SIX MONTHS FROM THE DATE OF TRANSFER. THU S THE LD. AR OF THE ASSESSEE WAS OF THE VIEW THAT ASSESSEE CAN CLAIM DEDUCTION OF RS. 1.00 CRORE. WE HAD ALREADY REPRODUCED SECTION 54EC WHILE REPRODUCING THE SUBMISSIONS OF T HE LD. AR OF THE ASSESSEE. SECTION 12 45 SAYS THAT ANY PROFITS OR GAINS ARISING FROM THE TRANSFER OF A CAPITAL ASSET EFFECTED IN THE PREVIOUS YEAR SHALL BE DEEMED TO BE AN INCOME OF T HE PREVIOUS YEAR IN WHICH THE TRANSFER TOOK PLACE SAVE AS OTHERWISE PROVIDED IN SECTION 54 , 54B, 54D, 54E, 54EA, 54EB, 54F, 54G AND 54H. HENCE, SECTION 54EC IS NOT MENTIONED I N SECTION 45 OF THE ACT. AS PER SECTION 54EC, THE PROFITS OR GAINS ARISING FROM THE TRANSFER OF A CAPITAL ASSET IS TO BE DEALT WITH AS PER SECTION 54EC, IN CASE THE ASSESSEE HAS INVESTED THE WHOLE OR ANY PART OF THE CAPITAL GAIN IN THE LONG TERM CAPITAL SPECIFIED ASS ET. THUS DEDUCTION IS ELIGIBLE TO THE INVESTMENT. THE PROVISO TO SECTION 54EC PROVIDES TH AT AN INVESTMENT MADE ON OR AFTER THE FIRST DATE OF APRIL, 2007 IN THE LONG TERM SPEC IFIED ASSET BY AN ASSESSEE DURING ANY FINANCIAL YEAR DOES NOT EXCEED RS. 50.00 LACS. HENC E, THE INVESTMENT SHOULD NOT EXCEED RS. 50.00 LACS. THE PROVISO WAS INTRODUCED BY THE F INANCE BILL, 2007. IN THE MEMO EXPLAINING THE PROVISION OF FINANCE BILL, 2007, IT HAS BEEN MENTIONED AS UNDER:- THIS AMENDMENT WILL TAKE EFFECT FROM 1 ST APRIL, 2007 IT IS ALSO PROPOSED TO AMEND THE SAID SECTION SO AS TO PROVIDE FOR A CEILING ON INVESTMENT BY AN ASSESSEE IN SUCH LONG T ERM SPECIFIED ASSETS . INVESTMENTS IN SUCH SPECIFIED ASSETS TO AV AIL EXEMPTION U/S 54EC ON OR AFTER 1 ST DAY OF APRIL, 2007 WILL NOT EXCEED FIFTY LAKH RUPEES IN A FINANCIAL YEAR; IT IS TRUE THAT TRIBUNAL UNDER LAW HAS NO AUTHORITY TO DECIDE THE ULTRA VIRUS PROVISIONS. HOWEVER, WHOLE CONSTRUING THE PROVISION, ONE CAN DE FINITELY LOOK INTO THE FACTS AS TO WHETHER THE INTERPRETATION PLACED BY THE TRIBUNAL I S FAIRLY APPLICABLE. THE LD. DR DURING THE COURSE OF PROCEEDINGS BEFORE US HAS FAIRLY CONT ENDED THAT THE INTERPRETATION WHICH THE LD. AR WANTS TO PLACE ON THE PROVISO TO SECTION 54E C WILL ENABLE THE ASSESSEE TO CLAIM EXEMPTION OF AROUND RS. 1.00 CRORE. IN CASE, THE TR ANSFER OF ASSETS HAS TAKEN PLACE FROM IST 13 OCT. TO 31 ST MARCH BECAUSE THE ASSESSEE WILL BE ABLE TO INVEST RS. 50.00 LACS IN A FINANCIAL YEAR IN WHICH THE TRANSFER HAS TAKEN PLACE AND RS. 50.00 LACS IN SUBSEQUENT FINANCIAL YEAR. HOWEVER, THE ASSESSEE'S WHO HAVE EARNED THE CAPITAL GAIN ON TRANSFER OF ASSETS FROM IST APRIL TO 30 TH SEPT. WILL BE ABLE TO HAVE DEDUCTION ONLY OF RS. 5 0.00 LACS. WE THEREFORE, FEEL THAT ASSESSEE IN THE INSTANT CASE IS ENTITLED TO EXEMPTION OF RS. 50.00 LACS U/S 54EC AND IT IS NOT THE CASE WHERE TWO INTERPRETATIONS OF SECTION 54EC ARE POSSIBLE. THE EARLIER NOTIFICATION OF THE GOVT. CLEARLY SUGGESTED THAT TH E ASSESSEES ARE ENTITLED TO THE EXTENT OF RS. 50.00 LACS U/S 54EC OF THE ACT. INVESTMENT WITH IN 06 MONTHS IS THE INVESTMENT FOR THAT FINANCIAL YEAR IN WHICH TRANSFER HAS TAKEN PLA CE. HENCE, SUBSEQUENT INVESTMENT IS TO BE CONSIDERED AS PART OF THE INVESTMENT OF FINANCIA L YEAR IN WHICH TRANSFER HAS TAKEN PLACE. WE THEREFORE, HOLD THAT THE LD. CIT(A) WAS N OT JUSTIFIED IN ALLOWING DEDUCTION TO THE ASSESSEE TO THE EXTENT OF RS. 1.00 CRORE U/S 54 EC OF THE ACT. WE THEREFORE, UPHOLD THE ORDER OF THE AO. 3. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLO WED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 31-0 1-2012. SD/- SD/- (R.K. GUPTA) (N.L. KALRA) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR DATED; 31/01/2012 *MISHRA COPY FORWARDED TO :- 1. THE ACIT, CIRCLE- 2, AJMER 2. SHRI RAJ KUMAR JAIN & SONS (HUF), AJMER 3. THE LD. CIT(A) 4 THE LD. CIT BY ORDER 5 THE LD.DR 6 THE GUARD FILE (ITA NO. 648/JP /11) A.R, ITAT, JAIPUR 14