ASST CIT CEN CIR 3, THANE V. PRAKASH GUNAJISAWARDEKAR, THANE

ITA 6642/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3289 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 03-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR DARSI SUMAN RATNAMDR
• Keywords: Capital asset; Benefit of exemption
• Section: 80C; 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI RAJENDRA, ACCOUNTANT MEMBER ITA NO.6642/MUM/2014 ASSESSMENT YEAR-2009-10 ACIT, CIRCLE - 3, ROOM NO.02, 6 TH FLOOR, ASHAR IT PARK,B-WING, WAGLE INDL. ESTATE, THANE(W)-400602 / VS. PRAKASH GUNAJI SAWARDEKAR, 102/B, ATLANATA HIRANANDANI ESTATE, B.G. ROAD, PATLIPADA, THANE(W)-400607 PAN NO. AADPS1088B ( / REVENUE) ( / ASSESSEE) / REVENUE BY DR. DARSI SUMAN RATNAM-DR / ASSESSEE BY NONE / DATE OF HEARING : 30/05/2016 / DATE OF ORDER: 09/06/2016 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DATED 07/07/2014 OF THE LD. FIRST APPELLATE AUTHORI TY, ITA NO.6642/MUM/2014 PRAKASH GUNAJI SAWARDEKAR 2 MUMBAI, ON THE GROUND THAT THE LD. COMMISSIONER OF INCOME TAX (APPEAL) DID NOT APPRECIATE THE FACT THA T AS PER AMENDMENT BY THE FINANCE ACT, 2007, AS PER PROVISO TO SECTION 54EC OF THE ACT, THE INVESTMENT MADE ON OR AFTER 01/04/2007, IN THE LONG TERM SPECIFIED ASSET, DURIN G ANY FINANCIAL YEAR DOES NOT EXCEED RS.50,00,000/-. 2. DURING HEARING, THE LD. DR, DR. DARSI SUMAN PATNAM, DEFENDED THE ADDITION MADE BY THE ASSESSING OFFICER, WHEREAS, NONE WAS PRESENT FOR THE ASSESSEE IN SPITE OF ISSUANCE OF NOTICE, THUS, WE HAVE NO OPTION BUT TO PROCEED EX-PARTE, QUA THE ASSESSEE, AND TEND TO DIS POSE OF THIS APPEAL ON THE BASIS OF MATERIAL AVAILABLE ON R ECORD. 2.1. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD. DR AND PERUSED THE MATERIAL AVAILABLE ON RECORD. TH E FACTS, IN BRIEF, ARE THAT THE ASSESSEE IS A RETIRED SENIOR CITIZEN, WAS CONNECTED WITH MARKETING CONSULTANCY IN THE FIELD O F PHARMACEUTICAL INDUSTRY, WAS HAVING ITS OFFICE AT 1 02B ATLANATA, HIRACHANDANI ESTATE, THANE. THE LD. ASSES SING OFFICER MADE THE ADDITION OF RS.51,34,710/- WHILE F RAMING ASSESSMENT U/S 143(3) OF THE ACT ON ACCOUNT OF ITA NO.6642/MUM/2014 PRAKASH GUNAJI SAWARDEKAR 3 DECLINE OF EXEMPTION CLAIMED U/S 54E OF THE ACT AMO UNTING TO RS.50 LAKHS. ON APPEAL, BEFORE THE LD. COMMISSI ONER OF INCOME TAX (APPEAL), THE ADDITION WAS DELETED AGAIN ST WHICH THE REVENUE IS IN APPEAL BEFORE THIS TRIBUNAL . 2.2. IF THE OBSERVATION MADE IN THE ASSESSMENT ORD ER, LEADING TO ADDITION MADE TO THE TOTAL INCOME, CONCL USION DRAWN IN THE IMPUGNED ORDER, MATERIAL AVAILABLE ON RECORD, ASSERTIONS MADE BY THE LD. DEPARTMENTAL COUNSEL, IF KEPT IN JUXTAPOSITION AND ANALYZED, UNDER THE FACTS DISCUSS ED HEREINABOVE, WE FIND THAT THE ASSESSEE SOLD SHARES LEADING TO CAPITAL GAINS OF RS.1,11,63,450/- AND OUT OF THI S AMOUNT RUPEES ONE CRORE WAS INVESTED IN REC BONDS ON TWO D ATES NAMELY RS.50 LAKH ON 31/03/2009 AND REMAINING RS.50 LAKH ON 31/05/2009. THE LD. ASSESSING OFFICER DISPU TED THE ALLOWABILITY OF CLAIMED EXEMPTION U/S 54EC OF THE A CT, AMOUNTING TO RUPEES ONE CRORE WHEN THE MAXIMUM LIMI T FOR MAKING INVESTMENT U/S 54EC OF THE ACT WAS RS.50 LAKHS ONLY. THE STAND OF THE ASSESSEE WAS THAT NO RESTRICTION IS SPECIFIED FOR INVESTING RS.50 LAKH E ACH IN TWO ITA NO.6642/MUM/2014 PRAKASH GUNAJI SAWARDEKAR 4 DIFFERENT FINANCIAL YEARS, THEREFORE, THE ASSESSING OFFICER ALLOWED THE EXEMPTION ONLY UPTO RS.50 LAKH AND DISA LLOWED FOR THE REMAINING RS.50 LAKH. WHILE DOING SO, THE A SSESSING OFFICER REFERRED TO NOTIFICATION NUMBER 380 OF 2006 DATED 22/12/2006, ISSUED BY CBDT, RESTRICTING THE INVESTM ENT IN BONDS TO A SUM OF RS.50 LAKH PER PERSON. REFERENCE WAS ALSO MADE TO THE DECISION FROM HONBLE MADRAS HIGH COURT IN AREBA T & D INDIA LTD. VS ACIT 177 TAXMAN 192. T HE LD. COMMISSIONER OF INCOME TAX (APPEAL) DELETED THE ADD ITION ON THE PLEA THAT THE ASSESSEE HAS FULFILLED THE CON DITION ENSHRINED IN SECTION 54EC OF THE ACT AS THE INVESTM ENT WAS MADE ON TWO DIFFERENT FINANCIAL YEARS. BEFORE COMIN G TO ANY CONCLUSION, WE ARE REPRODUCING HEREUNDER THE RELEVA NT PROVISION OF SECTION 54EC OF THE ACT:- CAPITAL GAIN NOT TO BE CHARGED ON INVESTMENT IN CER TAIN BONDS. 54EC. (1) WHERE THE CAPITAL GAIN ARISES FROM THE TRANSFER OF A LONG-TERM CAPITAL ASSET (THE CAPITAL ASSET SO TRA NSFERRED BEING HEREAFTER IN THIS SECTION REFERRED TO AS THE ORIGINAL ASSET) AND THE ASSESSEE HAS, AT ANY TIME WITHIN A P ERIOD OF SIX MONTHS AFTER THE DATE OF SUCH TRANSFER, INVESTE D THE WHOLE OR ANY PART OF CAPITAL GAINS IN THE LONG-TERM SPECIFIED ASSET, THE CAPITAL GAIN SHALL BE DEALT WITH IN ACCO RDANCE WITH THE FOLLOWING PROVISIONS OF THIS SECTION, THAT IS TO SAY, ITA NO.6642/MUM/2014 PRAKASH GUNAJI SAWARDEKAR 5 (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 O F THE CAPITAL GAIN THE SAME PROPORTION AS THE COST OF ACQ UISITION 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 1ST DAY OF APRIL, 2007 IN THE LONG-TERM SPECIFIED ASSET BY AN ASSESSEE DURING ANY FINANCIAL YEAR DOES NOT EXCEED FIFTY LAKH RUPEES : [ PROVIDED FURTHER THAT THE INVESTMENT MADE BY AN ASSESSEE IN THE LONG-TERM SPECIFIED ASSET, FROM CAP ITAL GAINS ARISING FROM TRANSFER OF ONE OR MORE ORIGINAL ASSET S, DURING THE FINANCIAL YEAR IN WHICH THE ORIGINAL ASSET OR A SSETS ARE TRANSFERRED AND IN THE SUBSEQUENT FINANCIAL YEAR DO ES NOT EXCEED FIFTY LAKH RUPEES.] (2) WHERE THE LONG-TERM SPECIFIED ASSET IS TRANSFER RED OR CONVERTED (OTHERWISE THAN BY TRANSFER) INTO MONEY A T ANY TIME WITHIN A PERIOD OF THREE YEARS FROM THE DATE O F ITS ACQUISITION, THE AMOUNT OF CAPITAL GAINS ARISING FR OM THE TRANSFER OF THE ORIGINAL ASSET NOT CHARGED UNDER SE CTION 45 ON THE BASIS OF THE COST OF SUCH LONG-TERM SPECI FIED ASSET AS PROVIDED IN CLAUSE (A) OR, AS THE CASE MAY BE, C LAUSE (B) OF SUB-SECTION (1) SHALL BE DEEMED TO BE THE INCOME CHARGEABLE UNDER THE HEAD 'CAPITAL GAINS' RELATING TO LONG- TERM CAPITAL ASSET OF THE PREVIOUS YEAR IN WHICH TH E LONG- TERM SPECIFIED ASSET IS TRANSFERRED OR CONVERTED (O THERWISE THAN BY TRANSFER) INTO MONEY. EXPLANATION.IN A CASE WHERE THE ORIGINAL ASSET IS TRANSFERRED AND THE ASSESSEE INVESTS THE WHOLE OR A NY PART OF THE CAPITAL GAIN RECEIVED OR ACCRUED AS A RESULT OF TRANSFER OF THE ORIGINAL ASSET IN ANY LONG-TERM SPE CIFIED ASSET AND SUCH ASSESSEE TAKES ANY LOAN OR ADVANCE O N THE SECURITY OF SUCH SPECIFIED ASSET, HE SHALL BE DEEME D TO HAVE CONVERTED (OTHERWISE THAN BY TRANSFER) SUCH SPECIFI ED ASSET ITA NO.6642/MUM/2014 PRAKASH GUNAJI SAWARDEKAR 6 INTO MONEY ON THE DATE ON WHICH SUCH LOAN OR ADVANC E IS TAKEN. (3) WHERE THE COST OF THE LONG-TERM SPECIFIED ASSET HAS BEEN TAKEN INTO ACCOUNT FOR THE PURPOSES OF CLAUSE (A) O R CLAUSE (B) OF SUB-SECTION (1), (A) A DEDUCTION FROM THE AMOUNT OF INCOME-TAX WITH REFERENCE TO SUCH COST SHALL NOT BE ALLOWED UNDER SECTION 88 FOR ANY ASSESSMENT YEAR ENDING BEFORE THE 1ST DAY OF APRIL, 2006; (B) A DEDUCTION FROM THE INCOME WITH REFERENCE TO S UCH COST SHALL NOT BE ALLOWED UNDER SECTION 80C FOR ANY ASSE SSMENT YEAR BEGINNING ON OR AFTER THE 1ST DAY OF APRIL, 20 06. EXPLANATION.FOR THE PURPOSES OF THIS SECTION, (A) 'COST', IN RELATION TO ANY LONG-TERM SPECIFIED ASSET, MEANS THE AMOUNT INVESTED IN SUCH SPECIFIED ASSET OUT OF CAPITAL GAINS RECEIVED OR ACCRUING AS A RESULT OF THE TRANS FER OF THE ORIGINAL ASSET; (B) 'LONG-TERM SPECIFIED ASSET' FOR MAKING ANY INVE STMENT UNDER THIS SECTION DURING THE PERIOD COMMENCING FRO M THE 1ST DAY OF APRIL, 2006 AND ENDING WITH THE 31ST DAY OF MARCH, 2007, MEANS ANY BOND, REDEEMABLE AFTER THREE YEARS AND ISSUED ON OR AFTER THE 1ST DAY OF APRIL, 2006, BUT ON OR BEFORE THE 31ST DAY OF MARCH, 2007, (I) BY THE NATIONAL HIGHWAYS AUTHORITY OF INDIA C ONSTITUTED UNDER SECTION 3 OF THE NATIONAL HIGHWAYS AUTHORITY OF INDIA ACT, 1988 (68 OF 1988); OR (II) BY THE RURAL ELECTRIFICATION CORPORATION LIMI TED, A COMPANY FORMED AND REGISTERED UNDER THE COMPANIES A CT, 1956 (1 OF 1956), AND NOTIFIED BY THE CENTRAL GOVERNMENT IN THE OFFIC IAL GAZETTE FOR THE PURPOSES OF THIS SECTION WITH SUCH CONDITIONS (INCLUDING THE CONDITION FOR PROVIDING A LIMIT ON T HE AMOUNT OF INVESTMENT BY AN ASSESSEE IN SUCH BOND) A S IT THINKS FIT: PROVIDED THAT WHERE ANY BOND HAS BEEN NOTIFIED BEFORE THE 1ST DAY OF APRIL, 2007, SUBJECT TO THE CONDITIONS S PECIFIED IN THE NOTIFICATION, BY THE CENTRAL GOVERNMENT IN THE OFFICIAL GAZETTE UNDER THE PROVISIONS OF CLAUSE (B) AS THEY STOOD IMMEDIATELY BEFORE THEIR AMENDMENT BY THE FINANCE A CT, ITA NO.6642/MUM/2014 PRAKASH GUNAJI SAWARDEKAR 7 2007, SUCH BOND SHALL BE DEEMED TO BE A BOND NOTIFI ED UNDER THIS CLAUSE; (BA) 'LONG-TERM SPECIFIED ASSET' FOR MAKING ANY INV ESTMENT UNDER THIS SECTION ON OR AFTER THE 1ST DAY OF APRIL , 2007 MEANS ANY BOND, REDEEMABLE AFTER THREE YEARS AND IS SUED ON OR AFTER THE 1ST DAY OF APRIL, 2007 BY THE NATIO NAL HIGHWAYS AUTHORITY OF INDIA CONSTITUTED UNDER SECTI ON 3 OF THE NATIONAL HIGHWAYS AUTHORITY OF INDIA ACT, 1988 (68 OF 1988) OR BY THE RURAL ELECTRIFICATION CORPORATION L IMITED, A COMPANY FORMED AND REGISTERED UNDER THE COMPANIES A CT, 1956 (1 OF 1956). 2.2. IF THE AFORESAID PROVISION IS ANALYZED, IT DE ALS WITH CAPITAL GAINS NOT TO BE CHARGED ON INVESTMENT IN CERTAIN BONDS. SUB-SECTION (1) SPEAKS WHERE THE CAP ITAL GAIN ARISES FROM THE TRANSFER OF LONG TERM CAPITAL ASSET AND THE ASSESSEE HAS ANY TIME WITHIN A PERIOD OF SIX MO NTHS, AFTER THE DATE OF SUCH TRANSFER, INVEST, THE WHOLE OR ANY PART OF THE CAPITAL GAINS IN THE LONG TERM SPECIFIED ASS ET, THE CAPITAL GAIN SHALL BE DEALT WITH IN ACCORDANCE WITH THE PROVISIONS OF THE SECTION. THE POSITION HAS BEEN CL ARIFIED WITH INSERTION OF EXPLANATION WHICH SPEAKS ABOUT C OST IN RELATION TO ANY LONG TERM SPECIFIED ASST, MEANS TH E AMOUNT INVESTED IN SUCH SPECIFIED ASSET OUT OF THE CAPITAL GAINS RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF THE ITA NO.6642/MUM/2014 PRAKASH GUNAJI SAWARDEKAR 8 ORIGINAL ASSET, MEANING THEREBY, THE DATE OF RECEIP T OR ACCRUING ARE THE IMPORTANT DATES FOR MAKING INVESTM ENT. THE IMPUGNED AMOUNT WAS INVESTED IN REC BOND BY THE ASSESSEE IN TWO DIFFERENT FINANCIAL YEARS. THE PRO VISION SECTION 54EC PROVIDES FOR EXEMPTION FROM TAX TO LON G TERM CAPITAL GAIN, PROVIDED THE SAME IS INVESTED IN THE SPECIFIED BONDS, DECIDED BY THE GOVERNMENT. OUR VIEW FIND SUPPORTS FROM THE DECISION FROM HONBLE JURISDICTIO NAL HIGH COURT IN CELLO PLAST (2012) 24 TAXMAN.COM 111 (BOM.) TO THE EFFECT THAT LAW DOES NOT COMPEL A MAN TO DO THAT WHICH HE CANNOT POSSIBLY PERFORM. EVEN OTHERWI SE, SECTION 54EC PRESCRIBES THAT EXEMPTION SHALL BE AVA ILABLE IF THE INVESTMENT IS MADE IN THE SPECIFIED BONDS WI THIN A PERIOD OF SIX MONTHS, THUS, THE ASSESSEE, POSSIBLY CAN MAKE THE INVESTMENT OF THE AMOUNT WITHIN THE SPECIF IED PERIOD, WHEN IT IS RECEIVED BY THE ASSESSEE. THE IN TENT AND PURPOSE OF SECTION 54EC IS THE DATE, WHEN THE ASSES SEE ACTUALLY COLLECTS/RECEIVES THE SALE CONSIDERATION A ND THEREAFTER MAKES INVESTMENT WITHIN SIX MONTHS AND T HAT IS THE DATE OF TRANSFER, THUS, THE SPIRIT OF THE LE GISLATION IS VERY MUCH CLEAR. THE INVESTMENT CAN ONLY BE MADE WH EN ITA NO.6642/MUM/2014 PRAKASH GUNAJI SAWARDEKAR 9 ANY AMOUNT IS ACTUALLY RECEIVED BY THE ASSESSEE. I N FACT, DATE OF RECEIPT BY THE ASSESSEE/INVESTOR AND DATE O F DEPOSIT FOR OBTAINING THE PRESCRIBED BONDS ARE IMPO RTANT DATES. SUPPOSE, THE REQUIRED BONDS ARE NOT AVAILABL E WITH A PARTICULAR BANK/INSTITUTION AND ARE ISSUED AT A L ATER STAGE, THE DATE OF DEPOSIT OF THE AMOUNT IN THE BAN K OR THE INSTITUTION, AS THE CASE MAY BE, ARE THE RELEVANT D ATES FOR GETTING THE BENEFIT OF EXEMPTION U/S 54EC OF THE AC T. FOR THE PURPOSE OF SECTION 54EC, THE DATE OF INVESTMENT IS TO BE REGARDED AS THE DATES OF INVESTMENT/ THE PAYMENT RECEIVED BY THE AUTHORIZED BANK. IT IS NOTED THAT S ECTION 54EC OF THE ACT HAS NO RESTRICTION IF THE SPECIFIED INVESTMENT OF RS.50 LAKH IS MADE IN TWO DIFFERENT F INANCIAL YEARS. THE RATIO LAID DOWN BY THE MUMBAI BENCH OF T HE TRIBUNAL IN ITO VS MR. BALDWIN D.FERNANDES (ITA NO.5229/MUM/2013) ORDER DATED 19/10/2015, THE CHENNAI BENCH OF THE TRIBUNAL IN SMT. SRIRAM INDUBA I VS ITO, (ITA NO.1950/MDS/2012), ORDER DATED 31/01/2013 . THUS, WE ARE OF THE VIEW, THE EXEMPTION U/S 54EC OF THE ACT IS AVAILABLE TO AN ASSESSEE, IF THE LONG TERM C APITAL GAINS, EARNED BY THE ASSESSEE, IS INVESTED IN THE S PECIFIED ITA NO.6642/MUM/2014 PRAKASH GUNAJI SAWARDEKAR 10 LONG TERM ASSET AND SUCH INVESTMENT IS MADE WITHIN SIX MONTHS FROM THE DATE OF TRANSFER OF SUCH LONG TERM ASSET. AS PER THE PROVISO TO SECTION 54EC, THE INVESTMENT IN ANY FINANCIAL YEAR IS RESTRICTED TO RS.50 LAKH AND SINC E THE ASSESSEE HAS MADE THE INVESTMENT OF RS.50 LAKH EACH IN DIFFERENT TWO FINANCIAL YEARS BUT WITHIN SIX MONTH FROM THE DATE OF TRANSFER OF THE ASSET,. THE DECISION FR OM AHMEDABAD BENCH OF THE TRIBUNAL IN ASPI GINWALA VS ACIT (2012) 044 (II) ITCL 0488; ITA NO.3226 AND 3227/AHD/2011. CONSIDERING THE TOTALITY OF FACTS, WE FIND NO INFIRMITY IN THE CONCLUSION DRAWN BY THE LD. COMMISSIONER OF INCOME TAX (APPEAL). FINALLY, THE APPEAL OF THE REVENUE IS DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN IN THE PRESENCE OF LD. DR AT THE CONCLUSION OF THE HEARING ON 30/05/2016. SD/- SD/- (RAJENDRA) (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER MUMBAI; # DATED : 09/06/2016 F{X~{T? P.S/. .. ITA NO.6642/MUM/2014 PRAKASH GUNAJI SAWARDEKAR 11 %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. %& '( / THE APPELLANT (RESPECTIVE ASSESSEE) 2. )*'( / THE RESPONDENT. 3. + + , ( %& ) / THE CIT, MUMBAI. 4. + + , / CIT(A)- , MUMBAI, 5. /01 )2 , + %& %23 , / DR, ITAT, MUMBAI 6. 14 5 / GUARD FILE. / BY ORDER, */& ) //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI