DR KUMAR M DHAWALE, MUMBAI V. ACIT 11(2), MUMBAI

ITA 7585/MUM/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 87816 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 11-09-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 24-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASGHAR ZAIN
• Keywords: Capital asset; Cost of acquisition; Reasonable cause
• Section: 54F; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH A, MUMBAI BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ITA NO.7585/M/2012 ASSESSMENT YEAR: 2009-10 DR. KUMAR M . DHAWALE, M. LDHAWALE & ASSOCIATES, SEKHSARIA BUILDINGS, 40, PAREKH STREET, GIRGAON, MUMBAI - 400004 PAN: AAEPD0884B VS. ACIT 11(2), AAYAKAR BHAVAN, MUMBAI (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI BHUPENDRA SHAH, A.R. REVENUE BY : SHRI ASGHAR ZAIN, D.R. DATE OF HEARING : 24.11.2014 DATE OF PRONOUNCEMENT : 09.01.2015 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESS EE AGAINST THE ORDER DATED 16.10.2012 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [(HEREINAFTER REFERRED TO AS CIT(A)] RELEVANT TO ASSESSMENT YEAR 2009-10. 2. THE ASSESSEE HAS TAKEN FOUR GROUNDS OF APPEAL. GROUNDS NO. 1 & 2 RELATE TO THE DISALLOWANCE UNDER SECTION 54EC. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT DU RING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD SOLD HIS PROPERTY I N JANUARY 2009 AND HAD MADE INVESTMENT IN THE RURAL ELECTRIFICATION CORPORATION (REC) BONDS AND CLAIMED THE DEDUCTION OF RS. 1 CRORE FROM CAPITAL GAINS U/S 54EC OF THE I.T. ACT, 1961. IT WAS NOTICED BY THE ASSESSING OFFICER (HEREINAFTE R REFERRED TO AS THE AO) THAT ITA NO.7585/M/2012 DR. KUMAR M. DHAWALE 2 THE INVESTMENT IN THE REC BONDS WAS MADE IN TWO INS TALLMENTS. THE FIRST INVESTMENT OF RS.50,00,000/- IN THE REC BONDS WAS M ADE ON 31.3.2009 AND THEREAFTER OF ANOTHER RS,50,00,000/- ON 30.4.2009. THE ASSESSEE HAD THUS CLAIMED EXEMPTION OF RS. 1 CRORE. THE ASSESSEE CLAI MED THAT HE HAD INVESTED THE FUNDS WITHIN 6 MONTHS AND THEREFORE WAS ENTITLE D FOR EXEMPTION UNDER SECTION 54EC. THE AO NOTED THAT AS PER PROVISO INSE RTED W.E.F. 1.4.2007 IN SECTION 54EC(1), THE ASSESSEE COULD HAVE MADE THE I NVESTMENT ONLY UPTO RS.50,00,000/- AND HE COULD HAVE THEREFORE GOT EXEM PTION UNDER SECTION 54EC ONLY FOR A SUM OF RS.50,00,000/- AND ACCORDINGLY, H E ALLOWED EXEMPTION FOR RS.50,00,000/- AND MADE THE ADDITION OF RS.50,00,00 0/-. 4. IN APPEAL, THE LD. CIT(A) UPHELD THE FINDINGS OF THE AO ON THE ISSUE. BEING AGGRIEVED, THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND THA T THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION O F THE BANGALORE BENCH IN THE CASE OF VIVEK JAIRAZBHOY VS. DY. COMMISSIONER OF INCOME- TAX IN ITA NO.236/BANG/2012 AND AHMEDABAD BENCH IN THE CASE OF ASPI GINWALA, SHREE RAM ENGG. & MFG. INDUSTRIES VS. ASST. COMMISSIONER OF INCOME-TAX, 20 TAXMANN.COM 75 (AHD.). IN THE CASE OF ASPI GINWALA, THE CO-ORDINATE BENCH HAS HELD AS UNDER : '7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORDS AND FIND THAT THE ASSESSEE AND HIS BROTHER SHRI RUSTOM GINWALA SOLD A PROPERTY ON 22-10-2007 FOR RS. 6.21 CRORES. THE ASSESSEE AND HIS BROTHER HAD 50% S HARE IN THIS PROPERTY. THE ASSESSEE MADE INVESTMENT OF RS. 50 LAKHS ON 31 -12- 2008 IN REC BONDS AND RS. 50 LAKHS ON 26-05-2008 IN NHAI BONDS AND CLAIMED EXEMP TION OF RS. 1 CRORE U/S 54EC OF THE ACT. THE INVESTMENT IN REC BONDS WAS ALLOWED BY THE AO AS IT WAS WITHIN THE TIME LIMIT OF SIX MONTHS PRESCRIBED IN SECTION 54EC OF THE ACT, WHILE THE INVESTMENT IN NHAI BONDS WHICH WAS MADE ONLY ON 26-05-2008 WAS NOT ALLOWED AS ACCORDING TO THE LOWER AUTHORITIES THE ASSESSEE IS ONLY ENTIT LED FOR EXEMPTION U/S 54EC UPTO RS. 50 LAKHS ONLY. THE ASSESSEE'S CASE, HOWEVER, IS THAT AS PER THE PROVISO TO SECTION 54EC, INVESTMENT MADE ON OR AFTER 1ST APRIL, 2007 I N THE LONG TERM SPECIFIED ASSET BY AN ASSESSEE DURING ANY FINANCIAL YEAR SHOULD NOT EXCEED RS. 50 LAKHS. THE ASSESSEE'S CASE IS THAT SINCE THE PROPERTY WAS SOLD ON 22-10-2007 HE COULD HAVE ITA NO.7585/M/2012 DR. KUMAR M. DHAWALE 3 INVESTED IN ELIGIBLE INVESTMENT WITHIN SIX MONTHS I .E. ON OR BEFORE 21-04-2008 IN ORDER TO AVAIL EXEMPTION U/S 54EC OF THE ACT. THERE IS NO DISPUTE ABOUT RS. 50 LAKHS INVESTED ON 31-12-2007 IN REC BONDS. THE DISPUTE IS ONLY ABOUT FURTHER INVESTMENT OF RS. 50 LAKHS IN NHAI BONDS MADE ON 26-05-2008. S INCE SIX MONTHS IN THIS CASE INVOLVES TWO FINANCIAL YEARS, THE ASSESSEE'S CASE I S THAT IF HE HAD DEPOSITED ANOTHER RS. 50 LAKHS FROM 1ST APRIL, 2008 TO 21-04-2008, HE WAS ENTITLED FOR EXEMPTION U/S 54EC OF THE ACT. AS DURING THIS PERIOD FROM 01-04-2 008 TO 26-05-2008 SUBSCRIPTION IN ELIGIBLE INVESTMENT WAS CLOSED, THE INVESTMENT M ADE BY THE ASSESSEE ON 26-05- 2008 I.E. 1ST DAY OF THE REOPENING OF THE SUBSCRIPT ION OF ELIGIBLE INVESTMENT IN NHAI BONDS SHOULD BE TREATED IN TIME. THERE IS ALSO NO D ISPUTE ABOUT THE FACT THAT SUBSCRIPTION TO THE ELIGIBLE INVESTMENT WAS CLOSED DURING THE PERIOD 01-04-2008 TO 26-05-2008. THE DISPUTE WHICH REMAINS TO BE DECIDED BY US IN THIS CASE IS WHETHER AS PER THE PROVISIONS OF SECTION 54EC THE ASSESSEE IS ENTITLED FOR EXEMPTION OF RS. 1 CRORE AS SIX MONTHS PERIOD FOR INVESTMENT IN ELIGIB LE INVESTMENT INVOLVES TWO FINANCIAL YEARS. IF THE ANSWER TO THIS QUESTION IS 'YES', WHETHER INVESTMENT MADE BY THE ASSESSEE ON 26-05-2008 BEYOND SIX MONTHS PERIOD IS ELIGIBLE FOR EXEMPTION IN VIEW OF THE FACT THAT NO (ASST. YEAR 2008-09) SUBSC RIPTION FOR ELIGIBLE INVESTMENT WAS AVAILABLE TO THE ASSESSEE FROM 1ST APRIL, 2008 TO 26-05-2008. 8. WHILE GOING THROUGH THE PROVISO OF SECTION 54EC, WE FIND THAT THE PROVISO TO SECTION READS AS UNDER. - ' [PROVIDED THAT THE INVESTMENT MADE ON OR AFTER TH E 1ST DAY OF APRIL, 2007 IN THE LONG TERM SPECIFIED ASSET BY AN ASSESSEE DUR ING ANY FINANCIAL YEAR DOES NOT EXCEED FIFTY LAKH RUPEE]' IT IS CLEAR FROM THIS PROVISO THAT WHERE ASSESSEE T RANSFERS HIS CAPITAL ASSET AFTER 30TH SEPTEMBER OF THE FINANCIAL YEAR HE GETS AN OPPORTUN ITY TO MAKE AN INVESTMENT 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. SINCE THE LAN GUAGE OF THE PROVISO IS CLEAR AND UNAMBIGUOUS, WE HAVE NO HESITATION IN HOLDING THAT THE ASSESSEE IS ENTITLED TO GET EXEMPTION UPTO RS. 1 CRORE IN THIS CASE. THIS VIEW OF OURS GETS SUPPORT FROM THE FOLLOWING FINDING OF THE HON'BLE SUPREME COURT IN T HE CASE OF IPCA LABORATORY LTD. V. DY. CIT[2004] 266 ITR 521 /135 TAXMAN 594 (SC), WHEREIN IT HAS BEEN HELD BY THE HON'BLE SUPREME COURT THAT - 'EVEN THOUGH A LIBERAL INTERPRETATION HAS TO BE GIV EN TO SUCH A PROVISION THE INTERPRETATION HAS TO BE AS PER THE WORDING OF THE SECTION. IF THE WORDING OF THE SECTION IS CLEAR, THEN BENEFITS WHICH ARE NOT A VAILABLE CANNOT BE CONFERRED BY IGNORING OR MISINTERPRETING WORDS IN T HE SECTION' HERE THE SITUATION IS REVERSE. SINCE THE WORDING OF THE PROVISO TO SECTION 54EC IS CLEAR, THE BENEFITS WHICH ARE AVAILABLE TO THE ASSE SSEE CANNOT BE DENIED. IN VIEW OF ABOVE, IT IS HEREBY HELD THAT THE ASSESSEE IS ENTIT LED FOR EXEMPTION OF RS. 1 CRORE AS SIX MONTHS' PERIOD FOR INVESTMENT IN ELIGIBLE INVES TMENTS INVOLVED IS TWO FINANCIAL YEARS. ITA NO.7585/M/2012 DR. KUMAR M. DHAWALE 4 9. NOW, COMING TO THE SECOND ASPECT OF THE MATTER, WHETHER INVESTMENT OF RS. 50 LAKHS MADE IN NHAI BONDS ON 26-05-2008 CAN BE CONSI DERED TO BE MADE WITHIN SIX MONTHS PERIOD AS PER THE PROVISO TO SEC. 54EC, WE F IND THAT THE ASSESSEE WAS TO MAKE INVESTMENT IN SUCH BONDS BETWEEN 01-04-2008 TO 21-04-2008. THERE IS NO DISPUTE ABOUT THE FACT THAT SUBSCRIPTION OF ELIGIBL E BONDS WAS CLOSED DURING THIS PERIOD TILL 26-05-2008 AND ON THE 1ST DAY OF THE RE OPENING OF THE SUBSCRIPTION, THE ASSESSEE MADE THIS INVESTMENT. UNDER THE CIRCUMSTAN CES, WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSEE WAS PREVENTED BY SUFFICIE NT CAUSE WHICH WAS BEYOND HIS CONTROL IN MAKING INVESTMENT IN THESE BONDS WITHIN THE TIME PRESCRIBED. WE FURTHER FIND THAT VARIOUS JUDICIAL AUTHORITIES HAVE TAKEN A VIEW THAT EXEMPTION SHOULD BE GRANTED IN SUCH CASES WHERE THERE IS A DELAY IN MAK ING INVESTMENT DUE TO NON- AVAILABILITY OF THE BONDS AND HAVE HELD THAT IT IS A REASONABLE CAUSE AND THE EXEMPTION SHOULD BE GRANTED. IN THE CASE OF RAM AGA NVAL V. JT. CIT [2002] 81 ITD 163 (MUM), IT HAS BEEN HELD AS UNDER: 'IN REGARD TO CLAIM OF EXEMPTION UNDER SECTION 54F WE MAY MENTION THAT IT IS FOUND BY THE LEARNED CIT(A) THAT THE BANK WAS CLOSED ON 3 1 -8-1995 ON ACCOUNT OF STRIKE AS CERTIFIED BY THE OFFICIALS OF THE CONCERNED BANK . FROM THE CERTIFICATION GIVEN BY THE (ASST. YEAR 2008-09) BANK OFFICIALS, THE ASSESS EE HAD APPROACHED THE BANK OFFICIALS WITH THE CHEQUE FOR THE AMOUNT OF DEPOSIT ON 30-8-1995. THE ASSESSEE REMAINED UNABLE TO OBTAIN RECEIPT ON 31-8-1995 DUE TO BANK STRIKE AND THE CHEQUE WAS CLEARED ON 1-9-1995. IN THIS VIEW OF THE SITUAT ION, IT CAN WELL BE SAID THAT THE DEPOSIT OF THE ASSESSEE WAS IN ACCORDANCE WITH THE PROVISIONS OF STATUTE AS ON THE LAST DATE I.E. THE 31-8-1995, THE DEPOSIT COULD NOT BE MADE DUE TO THE REASON WHICH WAS BEYOND THE CONTROL OF THE ASSESSEE PARTICULARLY IN VIEW THAT THE EFFORTS WERE MADE BY THE ASSESSEE A DAY PRIOR TO LAST DATE TO DE POSIT THE REQUISITE AMOUNT IN THE BANK TO MAKE HIM ENTITLE FOR EXEMPTION UNDER SEC 54 F. AS MENTIONED EARLIER, THIS POSITION HAS ALSO BEEN ACCEPTED BY THE LEARNED CIT( A). THEREFORE, WE DIRECT THE ASSESSING OFFICER TO ALLOW THE NECESSARY EXEMPTION TO THE ASSESSEE. BEFORE PARTING WE MAY OBSERVE THAT SECTION 54F IS A BENEFICIAL PROVISION TO ENCOURAGE ASSESSEE TO INVEST IN HOUSE PROPERTIES, K EEPING IN MIND THE ABOVE OBJECT BEHIND THE INSERTION OF SECTION 54F AND CONSIDERING THE FACT THAT THE ASSESSEE WAS NOT AT FAULT IN NOT DEPOSITING THE AMOUNT BEFORE 31 -8-1995, WE HOLD THAT THE DEPOSIT MADE ON 1-9-1995 SATISFIES THE CONDITION LA ID DOWN IN SECTION 54F OF THE ACT.' SINCE NO CONTRARY DECISION WAS CITED ON BEHAL F OF THE REVENUE, WE ARE LEFT WITH NO OPTION BUT TO HOLD THAT THE INVESTMENTS MAD E BY THE ASSESSEE ON 26-05- 2008 BEYOND SIX MONTHS IS ELIGIBLE FOR EXEMPTION IN VIEW OF THE FACT THAT NO SUBSCRIPTION FOR ELIGIBLE INVESTMENT WAS AVAILABLE TO THE ASSESSEE FROM 1ST APRIL, 2008 TO 26-05-2008. 10. IN THE RESULT, BOTH THE APPEALS ARE ALLOWED.' 6. THIS VIEW HAS BEEN FURTHER AFFIRMED BY THE PANAJ I BENCH OF THE TRIBUNAL IN THE CASE OF MS RANIA FALEIRO [2013] 33 TAXMANN .COM 611(PANAJI TRIBUNAL) ITA NO.7585/M/2012 DR. KUMAR M. DHAWALE 5 WHEREIN THE TRIBUNAL WHILE INTERPRETING THE PROVISI ONS OF SECTION 54EC HAS OBSERVED THAT THE LANGUAGE OF SECTION 54EC IS CLEAR AND UNAMBIGUOUS AND IT LEADS TO THE INTERPRETATION THAT THE ASSESSEE CAN M AKE THE INVESTMENT IN TWO DIFFERENT FINANCIAL YEARS PROVIDED IN A FINANCIAL Y EAR THE INVESTMENT MADE DID NOT EXCEED RS.50,00,000/-. RESPECTFULLY FOLLOWING THE ABOVE REFERRED DECISIONS OF THE CO-ORDINATE BENCHES, THIS ISSUE IS ACCORDINGLY DECIDED IN FAVOUR OF THE ASSESSEE. 7. GROUND NO.3 IS REGARDING THE LEVY OF INTEREST U /S 234 BEING CONSEQUENTIAL DOES NOT REQUIRE ANY ADJUDICATION AT THIS STAGE. 8. GROUND NO.4 OF THE APPEAL RELATES TO THE INDEXE D COST OF ACQUISITION OF THE PROPERTY. THE AO COMPUTED THE LTCG ON THE PROPE RTY SOLD BY THE ASSESSEE BY ADOPTING THE DATE OF ACQUISITION AS DATE OF INHE RITANCE OF THE PROPERTY BY THE ASSESSEE WHEREAS THE ASSESSEE CLAIMS THAT THE DATE FOR THE PURPOSE OF INDEXATION SHOULD BE TAKEN THE DATE OF ACQUISITION BY THE PER SON FROM WHOM THE PROPERTY HAS BEEN INHERITED BY THE ASSESSEE. IN THIS RESPEC T, THE LEARNED COUNSEL FOR THE ASSESSEE HAS RELIED ON THE ORDER OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. MANJULA J. SHAH (2011) 16 TAXMANN 42 (BOM .), HOLDING AS UNDER: '21. APART FROM THE ABOVE, SECTION 55(1)(B)(2)(II) OF THE ACT PROVIDES THAT WHERE THE CAPITAL ASSET BECAME THE PROPERTY OF THE ASSESSEE BY ANY OF THE MODES SPECIFIED UNDER SECTION 49(1), OF THE ACT, NO T ONLY THE COST OF IMPROVEMENT INCURRED BY THE ASSESSEE BUT ALSO THE COST OF IMPRO VEMENT INCURRED BY THE PREVIOUS OWNER SHALL BE DEDUCTED FROM THE TOTAL CONSIDERATIO N RECEIVED BY THE ASSESSEE WHILE COMPUTING THE CAPITAL GAINS UNDER SECTION 48 OF THE ACT. THE QUESTION OF DEDUCTING THE COST OF IMPROVEMENT INCURRED BY THE P REVIOUS OWNER IN THE CASE OF AN ASSESSEE COVERED UNDER SECTION 49(1) OF THE ACT WOULD ARISE ONLY IF THE PERIOD FOR WHICH THE ASSET WAS HELD BY THE PREVIOUS OWNER IS INCLUDED IN DETERMINING THE PERIOD FOR WHICH THE ASSET WAS HELD BY THE ASSESSEE . THEREFORE, IT IS REASONABLE TO HOLD THAT IN THE CASE OF AN ASSESSEE COVERED UNDER SECTION 49(1) OF THE ACT, THE CAPITAL GAINS LIABILITY HAS TO BE COMPUTED BY CONSI DERING THAT THE ASSESSEE HELD THE SAID ASSET FROM THE DATE IT WAS HELD BY THE PREVIOU S OWNER AND THE SAME ANALOGY HAS ALSO TO BE APPLIED IN DETERMINING THE INDEXED C OST OF ACQUISITION.' ITA NO.7585/M/2012 DR. KUMAR M. DHAWALE 6 9. WE FIND THAT THE ISSUE IS SQUARELY COVERED BY TH E ABOVE DECISION OF THE JURISDICTIONAL HIGH COURT IN FAVOUR OF THE ASSESSEE . RESPECTFULLY FOLLOWING THE SAME, THIS ISSUE IS ACCORDINGLY DECIDED IN FAVOUR O F THE ASSESSEE. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS HE REBY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 09/01/ 2015. SD/- SD/- (R.C. SHARMA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 09/01/ 2015. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.