ITO 25(3)(5), MUMBAI V. WORLI AUTOMOBILE CENTRE, MUMBAI

ITA 7096/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3023 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 26-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: DHIRENDRA M SHAH
• Keywords: Question of law
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC, MUMBAI BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER ITA NO. 7096/MUM/2014 (ASSESSMENT YEAR : 2011-12) THE INCOME TAX OFFICER 25(3)(5), ROOM NO.606, C-10, 6 TH FLOOR, PRATYAKSHAKAR BHAVAN, BKC, BANDRA (EAST), MUMBAI -51 ... APP ELLANT VS. M/S. WORLI AUTOMOBILE CENTRE, KUMKUM BUNGLOW, 1 ST FLOOR, 161, S.V. ROAD, VILE PARLE(WEST) MUMBAI 400 056 PAN:AAAFW3678C .... RESPONDENT C.O. NO.74/MUM/2016 (ARISING OUT OF ITA NO. 7096/MUM/2014, ASSESSMENT YEAR : 2011-12) M/S. WORLI AUTOMOBILE CENTRE, KUMKUM BUNGLOW, 1 ST FLOOR, 161, S.V. ROAD, VILE PARLE(WEST) MUMBAI 400 056 PAN:AAAFW3678C ... CROSS OBJECTOR VS. THE INCOME TAX OFFICER 25(3)(5), MUMBAI. REVENUE BY : SHRI SANTOSH MANKOSKAR ASSESSEE BY : SHRI DHIRENDRA M. SHAH DATE OF HEARING : 21/06/2016 DATE OF PRONOUNCEMENT : 29/06/2016 ORDER THE CAPTIONED APPEAL BY THE REVENUE AND CROSS O BJECTION BY ASSESSEE, PERTAINING TO ASSESSMENT YEAR 2011-12 A RE DIRECTED AGAINST 2 ITA NO. 7697/MUM/2014 (ASSESSMENT YEAR : 2009-10) AN ORDER PASSED BY CIT(A)-32, MUMBAI DATED 08/09/2 014, WHICH IN TURN ARISES OUT OF AN ORDER PASSED BY THE ASSESSING OFF ICER UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 01/11/2013. 2. IN THIS APPEAL OF THE REVENUE, THE ONLY ISSUE IN VOLVED RELATES TO THE ACTION OF THE CIT(A) IN ALLOWING EXEMPTION UNDE R SECTION 54EC OF THE ACT OF RS.48,50,000/- OVER AND ABOVE THE AMOUNT OF RS.50,00,000/- ALLOWED BY THE ASSESSING OFFICER. 3. BRIEFLY PUT, THE RELEVANT FACTS ARE THAT DURING THE YEAR UNDER CONSIDERATION, ASSESSEE FIRM SOLD A PROPERTY SITUAT ED AT WORLI ON 21/03/2011 FOR A TOTAL CONSIDERATION OF RS.1.00 CRO RE. IN THE RETURN OF INCOME FILED, ASSESSEE CLAIMED THAT IT HAD INVESTED IN REC BONDS OF RS.50,00,000/- ON 31/03/2011 AND ALSO RS.48,00,000/ - IN SUCH BONDS ON 31/07/2011. SINCE THE AFORESAID TWO INVESTMENTS WE RE MADE IN THE LONG TERM SPECIFIED ASSET AS MENTIONED IN SECTION 54EC OF THE ACT AND THE SAME WERE ACQUIRED WITHIN A PERIOD OF SIX MONT HS FROM THE DATE OF TRANSFER OF THE SALE OF ASSET THE AMOUNT OF RS.98 ,50,000/- WAS CLAIMED AS DEDUCTIBLE IN TERMS OF SECTION 54EC OF THE ACT. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE INVESTMENT IN REC BONDS, THOUGH MADE WITHIN A PERIOD SIX MONTHS, AS PRESCRIBED IN SECTION 54EC( 1) OF THE ACT, YET THEY WERE MADE IN TWO DIFFERENT FINANCIAL YEARS I.E . RS.50,00,000/- IN FINANCIAL YEAR 2010-11 AND RS.48,50,000/- IN FINANC IAL YEAR 2011-12, AND THUS, ASSESSEE COULD TAKE THE BENEFIT OF INVESTMEN T IN THE SPECIFIED BONDS TO A MAXIMUM OF RS.50,00,0000/- UNDER SECTI ON 54EC(1) OF THE ACT. ACCORDINGLY, HE HELD THAT THE SUM OF RS.48,50, 000/- INVESTED OVER 3 ITA NO. 7697/MUM/2014 (ASSESSMENT YEAR : 2009-10) AND ABOVE CEILING PRESCRIBED, AND THAT TOO IN THE S UBSEQUENT FINANCIAL YEAR, DOES NOT QUALIFY FOR EXEMPTION UNDER SECTION 54EC(1) OF THE ACT. IN APPEAL, THE CIT(A) DISAGREED WITH THE ASSESSING OFFICER AND INSTEAD ALLOWED THE CLAIM OF THE ASSESSEE. THE CIT(A) NOTE D THAT THE INVESTMENT MADE BY THE ASSESSEE OF RS.50,00,000/- O N 31/3/2011 AND RS.48,50,000/- ON 31/7/2011 IN REC BONDS WERE WITHI N THE PERIOD OF SIX MONTHS PRESCRIBED UNDER SECTION 54EC(1) OF THE AC T. SECONDLY, THE CIT(A) NOTICED THAT THE SECOND PROVISO TO SECTION 5 4EC(1) OF THE ACT, WHICH LIMITS THE EXEMPTION TO THE EXTENT OF RS.50,0 0,000/-, WHEN SUCH INVESTMENTS WERE MADE IN TWO FINANCIAL YEARS, WAS I NSERTED BY THE FINANCE (NO.2) ACT 2014 W.E.F. 1/4/2015. ACCORD ING TO THE CIT(A), SINCE THE AFORESAID RESTRICTION HAS BEEN INSERTED B Y THE LEGISLATURE W.E.F. 01/04/2015, PRIOR TO THAT, THE INSTANT CLAIM OF T HE ASSESSEE WAS WITHIN THE CONFINES OF LAW. THEREFORE, HE HAS ALLOWED THE CLAIM OF THE ASSESSEE. AGAINST SUCH A DECISION, REVENUE IS IN A PPEAL BEFORE THE TRIBUNAL. 4. AT THE TIME OF HEARING, THE LD. DEPARTMENTAL RE PRESENTATIVE DID NOT DISPUTE THE POINT APPRECIATED BY THE CIT(A) T HAT THE RESTRICTION ON THE CLAIM OF EXEMPTION UNDER SECTION 54EC(1)OF THE ACT UPTO RS.50,00,000/-, EVEN IN CASE WHERE SUCH INVESTMENT FALLS UNDER TWO FINANCIAL YEARS, CAME INTO FORCE W.E.F. 01/04/2015. THUS, THE SAID RESTRICTION WOULD APPLY IN RELATION TO ASSESSMENT Y EAR 2015-16 AND ONWARDS AND CERTAINLY NOT TO THE ASSESSMENT YEAR UN DER CONSIDERATION I.E. ASSESSMENT YEAR 2010-11. LD. REPRESENTATIVE F OR THE ASSESSEE ALSO REFERRED TO THE JUDGMENT OF HONBLE MADRAS HIGH CO URT IN THE CASE OF CIT VS. C. JAICHANDER & ANOTHER IN TC(A) NOS. 419 A ND 533 OF 2014 4 ITA NO. 7697/MUM/2014 (ASSESSMENT YEAR : 2009-10) DATED 15/09/2014, WHEREIN ALSO SIMILAR POSITION HAS BEEN AFFIRMED. A COPY OF THE SAID JUDGMENT OF HONBLE MADRAS HIGH CO URT HAS BEEN PLACED ON RECORD. THE QUESTION OF LAW, WHICH WAS CONSIDERED BY THE HONBLE MADRAS HIGH COURT READS AS UNDER:- (I) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE TRIBUNAL WAS RIGHT IN HOLDING THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION OF RS.1 CRORE UNDER SECTION 54EC, IN RESPECT OF INVESTMENT OF RS.50.00 LAKHS MADE IN TWO DIFFERENT FINANCIAL YEARS? THE HONBLE HIGH COURT WAS DEALING WITH A SIMILAR S ITUATION RELATING TO ASSESSMENT YEAR 2008-09, WHICH WAS PRIOR TO THE INS ERTION OF THE SECOND PROVISO TO SECTION 54EC(1) OF THE ACT BY THE FINANCE (NO.2) ACT, 2014. AFTER DISCUSSING THE ISSUE IN EXTENSO, THE H ONBLE HIGH COURT CONCLUDED AS UNDER:- 10. THE LEGISLATURE HAS CHOSEN TO REMOVE THE AMBIG UITY IN THE PROVISO TO SECTION 54EC(1) OF THE ACT BY INSERTING A SECOND PROVISO WITH EFFECT FROM 1.4.2015. THE MEMORANDUM EXPLAINI NG THE PROVISIONS IN THE FINANCE (NO.2) BILL, 2014 ALSO S TATES THE SAME WILL BE APPLICABLE FROM 1.4.2015 IN RELATION TO ASSESSME NT YEAR 2015-16 AND THE SUBSEQUENT YEARS. THE INTENTION OF THE LEG ISLATURE PROBABLY APPEARS TO BE THAT THIS AMENDMENT SHOULD BE FOR THE ASSESSMENT YEAR 2015-16 TO AVOID UNWANTED LITIGATIONS OF THE PREVIOUS EYRAS. EVEN OTHERWISE, WE DO NOT WISH TO READ ANYTHING MOR E INTO THE FIRST PROVISO TO SECTION 54EC(1) OF THE ACT, AS IT STOOD IN RELATION TO THE ASSESSEE. 11. IN ANY EVENT, FROM A READING OF SECTION 54EC(1 ) AND THE FIRST PROVISO, IT IS CLEAR THAT THE TIME LIMIT FOR INVEST MENT IS SIX MONTHS FROM THE DATE OF TRANSFER AND EVEN IF SUCH INVESTME NT FALLS UNDER TWO FINANCIAL YEARS, THE BENEFIT CLAIMED BY THE ASS ESSEE CANNOT BE DENIED. IT WOULD HAVE MADE A DIFFERENCE, IF THE RESTRICTI ON ON THE INVESTMENT IN BONDS TO RS.50,00,000/- IS INCORPORAT ED IN SECTION 54EC(1) OF THE ACT, ITSELF. HOWEVER, THE AMBIGUI TY HAS BEEN REMOVED BY THE LEGISLATURE WITH EFFECT FROM 1.4.201 5 IN RELATION TO THE ASSESSMENT YEAR 2015-16 AND THE SUBSEQUENT YEAR S.[UNDERLINED FOR EMPHASIS BY ME] RESPECTFULLY FOLLOWING THE AFORESAID RATIO OF THE H ONBLE MADRAS HIGH COURT, I FIND THAT THE CIT(A) HAS MADE NO MISTAKE I N ALLOWING ASSESSEES 5 ITA NO. 7697/MUM/2014 (ASSESSMENT YEAR : 2009-10) CLAIM FOR DEDUCTION UNDER SECTION. 54EC OF THE ACT OF RS.48,50,000/- ON ACCOUNT OF INVESTMENT MADE IN REC BONDS ON 31/07/20 11, OVER AND ABOVE THE EXEMPTION OF RS.50,00,000/- ALLOWED BY TH E ASSESSING OFFICER WITH RESPECT TO THE INVESTMENT IN REC BONDS ON 31/0 3/2011. THUS, I AFFIRM THE ORDER OF THE CIT(A) AND ACCORDINGLY THE REVENUE FAILS IN ITS APPEAL. 5. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. 6. IN THE CROSS OBJECTION FILED BY THE ASSESSEE, TH E FIRST ISSUE RELATES TO THE DEDUCTION UNDER SECTION 54EC OF THE ACT OF R S.48,50,000/- ALLOWED BY THE CIT(APPEALS). THIS ASPECT OF THE CR OSS OBJECTION IS MERELY IN SUPPORT OF THE ORDER OF THE CIT(APPEALS), WHICH HAS ALREADY BEEN AFFIRMED IN THE APPEAL OF THE REVENUE. HENCE, THIS GROUND OF THE CROSS OBJECTION DOES NOT REQUIRE ANY SPECIFIC ADJUD ICATION, AND IS DISCUSSED. 7. THE NEXT GROUND RAISED BY THE ASSESSEE IN THE CR OSS OBJECTION IS WITH REGARD TO THE ACTION OF THE CIT(APPEALS) IN NO T ALLOWING DEDUCTION OF RS.2,40,000/- WHILE COMPUTING CAPITAL GAINS. TH E SAID SUM OF RS.2,40,000/- REPRESENTED DEMAND RAISED BY THE MUN ICIPAL CORPORATION IN RESPECT OF THE SHOP SOLD BY THE ASSESSEE. THE ASSESSING OFFICER AS WELL AS THE CIT(APPEALS) HAVE DISALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE IMPUGNED AMOUNT COULD NOT BE CO NSIDERED TO BE A COST INCURRED IN CONNECTION WITH TRANSFER OF THE PR OPERTY SO AS TO BE DEDUCTIBLE AS PER SECTION 48 OF THE ACT IN ORDER T O COMPUTE CAPITAL GAINS. 6 ITA NO. 7697/MUM/2014 (ASSESSMENT YEAR : 2009-10) 8. BEFORE ME, THE LD. REPRESENTATIVE FOR THE ASSESS EE POINTED OUT THAT THE AFORESAID PAYMENT WAS REQUIRED TO BE MADE BY THE ASSESSEE IN ORDER TO EFFECTUATE THE TRANSFER OF PROPERTY AND, THEREFORE, IT WAS DEDUCTIBLE WHILE COMPUTING THE CAPITAL GAINS. 9. HAVING CONSIDERED THE OBJECTION OF THE ASSESSEE AS ALSO THE FACTUAL MATRIX, IN MY VIEW, THE IMPUGNED EXPENDITUR E CANNOT BE SAID TO BE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WI TH THE TRANSFER OF PROPERTY IN QUESTION AND, THEREFORE, ITS DEDUCTION UNDER SECTION 48(I) OF THE ACT HAS BEEN RIGHTLY DENIED BY THE LOWER AUTHO RITIES. THE RELEVANT DISCUSSION IN THE ORDER OF THE CIT(APPEALS) REVEALS THAT THE IMPUGNED SUM REPRESENTS THE ARREARS OF MUNICIPAL TAXES PAYA BLE ON THE PROPERTY. THEREFORE, IT IS NOT AN AMOUNT WHICH CAN BE SAID TO HAVE BEEN INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH TRANSFER OF PROPERTY WITHIN THE MEANING OF SECTION 48(I) OF THE ACT. THUS, ON THIS ASPECT ASSESSEE FAILS. 10. THE LAST GROUND RAISED BY THE ASSESSEE IS FOR A WARD OF COSTS, WHICH IS DECLINED IN THE ABSENCE OF ANY JUSTIFIABLE REASON. 11. RESULTANTLY, THE APPEAL OF THE REVENUE AS WELL AS CROSS OBJECTION FILED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29/06/201 6 SD/- (G.S. PANNU) ACCOUNTANT MEMBER MUMBAI, DATED 29/06/2016 VM , SR. PS 7 ITA NO. 7697/MUM/2014 (ASSESSMENT YEAR : 2009-10) COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT , 2. THE RESPONDENT. 3. THE CIT(A)- 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI