PARESH RANJITRAI RATHOD, MUMBAI V. DCIT 7(3), MUMBAI

ITA 7997/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79094 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-06-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 04-06-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 28-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIKAS AGARWAL
• Assessee Lawyers: SHAILESH S SHAH
• Keywords: Capital asset
• Section: 54

Judgement Text

, , , , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C, MUMBAI .., . .!'#, $ , % BEFORE SHRI I.P.BANSAL, JM AND SHRI N.K.BILLAIYA, A M ITA NO.7997/MUM/2011 : ASST.YEAR 2008-09 MR.PARESH RANJITRAI RATHOD, 118/P, HIRJI GOVINDJI COMPOUND, T.J. ROAD, SEWREE, MUMBAI 400 015. DY.CIT 7(3), MUMBAI. ( &' / // / APPELLANT) / VS. ( )*&'/ RESPONDENT) &' + , + , + , + , /APPELLANT BY : SHRI SHAILESH S. SHAH )*&' + , + , + , + , /RESPONDENT BY : VIKAS AGARWAL + -.$ / / / / DATE OF HEARING : 04.06.2014 /01 + -.$ / DATE OF PRONOUNCEMENT : 04.06.2014 2 2 2 2 / / / / O R D E R PER I.P.BANSAL (JM) : THIS IS AN APPEAL FILED BY THE ASSESSEE. IT IS DI RECTED AGAINST ORDER PASSED BY LD. CIT(A)-13, MUMBAI DATED 29/06/2011 FOR ASSES SMENT YEAR 2008-09. GROUNDS OF APPEAL READ AS UNDER: THE GROUNDS OF APPEAL SET OUT BELOW ARE WITHOUT PRE JUDICE TO ONE ANOTHER: 1.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN UPHOL DING THE DISALLOWANCE MADE BY THE LEARNED ASSESSING OFFICER OF RS.50 LACS OUT OF TOTAL EXEMPTION CLAIMED UNDER SECTION 54EC OF THE INCOME TAX ACT, 196 LOF R S. 100 LACS BY THE APPELLANT AND THE REASONS ASSIGNED FOR DOING SO ARE WRONG AND CONTRARY TO THE FACTS OF THE CASE, THE PROVISIONS OF INCOME TAX ACT, 1961, AND T HE RULES MADE THEREUNDER. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) ERRED IN HOLDIN G (A) THAT THE LIMIT U/S 54EC OF THE INCOME TAX ACT, 1961 FOR INVESTMENT IN THE LONG TERM SPECIFIED ASSETS SHALL BE RESTRICTED ONLY TO I NVESTMENT MADE DURING THE FINANCIAL YEAR IN WHICH THE LONG TERM CAPITAL GAIN IS DETERMINED AND (B) THAT INVESTMENTS MADE IN THE LONG TERM SPECIFIE D ASSETS IN THE SUBSEQUENT YEAR SHALL NOT BE CONSIDERED AS THEY ARE NOT MADE IN THE FINANCIAL YEAR IN WHICH THE LONG TERM CAPITAL GAINS IS DETERMINED. ITA NO.7997/MUM/2011 : ASST.YEAR 2008-09 2 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FAILED TO APPR ECIATE THAT THE APPELLANT HAS SATISFIED BOTH THE CONDITIONS SPECIFIED IN SECTION 54EC WHICH ARE: (A) THE LONG TERM CAPITAL GAIN SHOULD BE INVESTED I N SPECIFIED BONDS WITHIN THE PERIOD OF SIX MONTHS FROM THE DATE OF TRANSFER OF L ONG TERM CAPITAL ASSET, (B) THE INVESTMENT MADE IN SPECIFIED BONDS DURING A NY FINANCIAL YEAR DOES NOT EXCEED RS. 50 LACS. 2. THE ASSESSEE IS AN INDIVIDUAL EARNING INCOME UND ER THE HEAD SALARY, HOUSE PROPERTY, CAPITAL GAINS AND INCOME FROM OTHER SOURCES. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE AS A CO-OWNE R SOLD A PROPERTY AT PAREL ON 20/12/2007 FOR A SUM OF RS.17.00 CRORES AND AFTE R REDUCING THE EXPENSES AND COST PRICE ETC. THE NET CAPITAL GAIN WAS COMPUT ED AT RS.16,88,63,408/-. THE SHARE OF THE ASSESSEE BEING 1/6 TH , CAPITAL GAIN WAS COMPUTED AT RS.2,81,43,901/-, OUT OF WHICH EXEMPTION FOR INVEST MENT UNDER SECTION 54EC OF THE INCOME TAX ACT,1961(THE ACT) WAS CLAIMED AT RS. 1.00 CRORE BY MAKING INVESTMENT IN TWO FINANCIAL YEARS I.E. IN F.Y.2007- 08 OF RS.50.00 LACS AND IN F.Y 2008-09 OF RS.50.00 LACS. THE DETAILS OF INVES TMENT MADE BY THE ASSESSEE IS INCORPORATED IN THE ORDER OF LD.CIT(A) AS PER FO LLOWING SCHEDULE: S.NO. NON-CONVERTIBLE REDEEMABLE TAXABLE BONDS FACE VALUE OF EACH BOND (IN RS.) NO. OF BONDS INVESTMENT (IN RS.) DATE OF INVESTMENT. 1. RURAL ELECTRIFICATION CORPORATION LTD. (REC) 10,000 500 50,00,000/- 31/03/2008 2. NATIONAL HIGHWAY AUTHORITY OF INDIA (NHAI) 10,000 500 50,00,000/- 31/05/2008 TOTAL 1,00,00,000/- 2.1 THE AO DENIED THE CLAIM TO THE EXTENT OF RS.50 .00 LACS ON THE GROUND THAT THE REST OF INVESTMENT OF RS.50.00 LACS DOES N OT FALL WITHIN THE FINANCIAL YEAR AND ACCORDING TO THE PROVISIONS ASSESSEE COUL D MAKE INVESTMENT OF RS.50.00 LACS ONLY IN ONE FINANCIAL YEAR. IT IS IN THIS MANNER THE DISALLOWANCE OF RS.50.00 LACS HAS BEEN MADE WHICH WAS CLAIMED BY THE ASSESSEE UNDER SECTION 54EC OF THE ACT. AS AGAINST THIS, IT IS TH E CASE OF THE ASSESSEE THAT ENTIRE INVESTMENT OF RS.1.00 CRORE HAS BEEN MADE WI THIN A PERIOD OF SIX MONTHS OF THE DATE OF TRANSFER. THEREFORE, ASSESSE E HAS FULFILLED THE CONDITIONS LAID DOWN IN SECTION 54 EC OF THE ACT AND THE DISA LLOWANCE MADE BY THE AO IS ITA NO.7997/MUM/2011 : ASST.YEAR 2008-09 3 NOT IN ACCORDANCE WITH THE PROVISIONS OF LAW. THE DISALLOWANCE MADE BY THE AO HAS BEEN UPHELD BY LD. CIT(A). THE ASSESSEE BEING AGGRIEVED HAS FILED AFOREMENTIONED GROUNDS OF APPEAL. 3. AFTER NARRATING THE FACTS IT WAS SUBMITTED BY LD . AR THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE VARIOUS DE CISIONS OF THE TRIBUNAL IN WHICH IT HAS BEEN HELD THAT IF ASSESSEE HAD INVESTE D RS.50.00 LACS EACH IN SPECIFIED ASSETS IN TWO DIFFERENT FINANCIAL YEARS BUT WITHIN SIX MONTHS FROM THE DATE OF TRANSFER OF CAPITAL ASSET, RESTRICTIVE PRO VISO TO SECTION 54EC WOULD NOT LIMIT EXEMPTION CLAIM TO RS.50.00 LACS ONLY AND IT WAS HELD THAT ENTIRE INVESTMENT OF RS.1.00 CRORES WAS LIABLE TO BE DED UCTED UNDER SECTION 54EC. HE PLACED RELIANCE ON THE FOLLOWING DECISIONS: S.NO. PARTICULARS BENCH OF TRIBUNAL DATE OF ORDER PAGE NOS. 1. 2. 3. 4. ITO V. MS RANIA FALERIO (ITA NO.9/PNJ/2013) SMT.SRIRAM INDUBAL V. ITO (ITA NO.1950/MDS/2012) SHRI VIVEK JAIRAZBHOY V. DCIT (ITA NO.236/BANG/2012) COROMANDEL INDUSTRIES (P) LTD. V. ACIT, COMPANY CIR. 1(3), (2013) 36 TAXMANN.COM 6 PANAJI CHENNAI BANGALORE CHENNAI 18.04.2013 31.01.2013 14.12.2012 25/06/2013 1-7 8-15 16-34 3.1 THUS, IT WAS SUBMITTED BY LD. AR THAT THE DISAL LOWANCE OF RS.50.00 LACS MADE BY AO AND SUSTAINED BY LD. CIT(A) SHOULD BE DE LETED. 4. ON THE OTHER HAND, IT WAS SUBMITTED BY LD. DR T HAT A CONTRARY VIEW HAS BEEN TAKEN BY JAIPUR BENCH OF THE ITAT IN THE CASE OF ACIT VS. RAJ KUMAR JAIN & SONS(HUF). 19 TAXMANN.COM 27 (JAIPUR). THUS, HE SUBMITTED THAT THE PROVISIONS OF ACT ARE CLEAR AND UN-AMBIGUOUS. THER EFORE, HE PLEADED THAT DISALLOWANCE HAS RIGHTLY BEEN MADE BY AO AND SUSTAI NED BY LD. CIT(A). 5. WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTEN TIONS HAVE CAREFULLY BEEN CONSIDERED. IT IS NOT DISPUTED BY THE LD. DR THAT THE DECISIONS RELIED UPON BY LD. AR COVERS THE ISSUE IN FAVOUR OF THE AS SESSEE. HOWEVER, LD. DR HAS RELIED UPON THE DECISION OF JAIPUR ITAT IN THE CASE OF RAJ KUMAR JAIN ITA NO.7997/MUM/2011 : ASST.YEAR 2008-09 4 (HUF) (SUPRA). THUS, APPARENTLY THERE IS A CONFLI CTING VIEW AVAILABLE ON THE ISSUE. 5.1 IT MAY BE RELEVANT TO MENTION HERE THAT KEEPIN G IN VIEW THE ABOVE POSITION, THIS TRIBUNAL VIDE ORDER SHEET DATED 19/1 1/2012 HAS REFERRED THIS MATTER TO THE HONBLE PRESIDENT FOR CONSTITUTION O F SPECIAL BENCH AND THE MATTER WAS PLACED BEFORE HONBLE PRESIDENT. HOWEVE R, HONBLE PRESIDENT VIDE HIS NOTING DATED 22/10/2013 HAS OBSERVED THAT THERE IS NO NEED FOR CONSTITUTION OF SPECIAL BENCH AND THE APPEAL WAS FI XED BEFORE REGULAR BENCH IN DUE COURSE. ACCORDINGLY, THIS APPEAL HAS COME UP F OR HEARING AND IS BEING HEARD. 6. AFTER CAREFUL CONSIDERATION OF THE ARGUMENTS OF BOTH THE PARTIES WE FOUND THAT THE JAIPUR BENCHS DECISION WAS ALSO CITED BY THE REVENUE BEFORE ITAT IN THE CASE OF ITO VS. MS. RANIA FALEIRO (SUPRA), WHER EIN THE TRIBUNAL HAS PREFERRED TO TAKE A VIEW IN FAVOUR TO THE ASSESSE E AND THE OBSERVATIONS OF THE TRIBUNAL ARE REPRODUCED BELOW: 4. WE HAVE ALSO NOTED THAT SUBSEQUENTLY, A CONTRAR Y VIEW HAS BEEN TAKEN BY JAIPUR BENCH IN ASST. COMMISSIONER OF INCOME-TAX VS. RAJ KURMAR JAIN & SONS (HUF), 19 TAXMANN .COM 27 (JP.). SUBSEQUENT TO THAT DECISION, THE BANGALORE BENCH IN THE CASE OF VIVEK JAIRAZBHOY VS. DY. COMMISSIONER OF INCOME-TAX VIDE ORDER DTD. 14,12,2012 TOOK VIEW IN FAVOUR OF THE ASSESSEE. FROM THE PROVISIONS OF SEC. 54EC WE NOTED THAT THE LIMIT OF RS. 50,00,000/- AS GIVEN UNDER THE PROVISO IS PER PERSON PER FINANC IAL YEAR. THE PLAIN READING OF THE SECTION AS WELL AS THE PROVISO CLEAR LY SUGGESTS THE SAME INTERPRETATION. THERE IS NO AMBIGUITY IN THE INTERP RETATION. HAD THERE BEEN AN INTENTION OF THE LEGISLATURE TO RESTRICT THE EXE MPTION TO RS.50,00,000/-, THE LEGISLATURE WOULD HAVE PROVIDED THE EMBARGO IN THIS REGARD. RESTRICTION RELATES ONLY TO THE INVESTMENT MADE IN ANY FINANCIA L YEAR BY THE ASSESSEE. MAKING OF THE INVESTMENT IS A CONDITION FOR AVAILIN G OF THE EXEMPTION. CONDITION FOR AVAILING OF THE EXEMPTION REQUIRES TH AT THE INVESTMENT CAN BE MADE WITHIN A PERIOD OF 6 MONTHS. IF 6 MONTHS FALLS WITHIN A DIFFERENT FINANCIAL YEAR, AS HAS HAPPENED IN THIS CASE, IN OU R OPINION, THIS TRIBUNAL CANNOT ADD THE EMBARGO THAT THE ASSESSEE CANNOT MAK E THE INVESTMENT TO AVAIL OF THE EXEMPTION UNDER SECTION 54EC IN THE DI FFERENT FINANCIAL YEAR IF HE HAD ALREADY MADE THE INVESTMENT IN THE FINANCIAL YEAR IN WHICH THE CAPITAL ASSET IS TRANSFERRED. IN OUR OPINION, THE L ANGUAGE OF SECTION 54EC IS CLEAR AND UNAMBIGUOUS AND IT LEADS TO THE INTERPRET ATION THAT THE ASSESSEE CAN MAKE THE INVESTMENT IN TWO DIFFERENT FINANCIAL YEARS PROVIDED IN A FINANCIAL YEAR THE INVESTMENT MADE DID NOT EXCEED R S.50,00,000/-. WE HAVE ALSO GONE THROUGH THE CIRCULAR NO. 3/2008 DTD. 12.3.2008 ISSUED BY THE CBDT BEING AN EXPLANATORY NOTE ON THE PROVISION S RELATING TO DIRECT TAXES IN FINANCE ACT, 2007. IN PARA 28.2 THEREOF T HE REASON FOHTFE THE LIMIT ON THE QUANTUM OF THE INVESTMENT BY A PERSON IN A FINANCIAL YEAR ARE GIVEN AS UNDER ITA NO.7997/MUM/2011 : ASST.YEAR 2008-09 5 28.2 THE QUANTUM OF INVESTIBLE BONDS ISSUED BY NH AI AND REC BEING LIMITED, IT WAS FELT NECESSARY TO ENSURE THAT THE BENEFIT WAS AVAILABLE TO ALL THE INVESTORS. FOR THIS PURPOSE, IT WAS NECESSARY TO ENSURE THAT THE LIMITED NUMBER OF BONDS AVAILABLE F OR SUBSCRIPTION IS ALSO AVAILABLE FOR SMALL INVESTORS. THEREFORE, WIT H A VIEW TO ENSURE EQUITABLE DISTRIBUTION OF BENEFITS AMONGST PROSPECT IVE INVESTORS, THE GOVERNMENT DECIDED TO IMPOSE A CEILING ON THE QUANT UM OF INVESTMENT THAT COULD BE MADE IN SUCH BONDS. ACCOR DINGLY, THE SAID SECTION HAS BEEN EMNDED SO AS TO PROVIDE FOR A CEIL ING ON INVESTMENT BY AN ASSESSEE IN SUCH LONG-TERM SPECIFIELD ASSETS. INVESTMENTS IN SUCH SPECIFIED ASSETS TO AVAIL EXEMPTION UNDER SEC TION 54EC ON OR AFTER 1 ST DAY OF APRIL, 2007 WILL NOT EXCEED FIFTY LAKH RUPE ES IN A FINANCIAL YEAR. FROM THIS CIRCULAR ALSO, IT IS APPARENT THAT THE GO VERNMENT ONLY INTENDED TO RESTRICT THE INVESTMENT IN A PARTICULAR FINANCIAL Y EAR AND ACCORDINGLY HAS FIXED THE LIMIT OF RS. 50,00,000/- AS PERMISSIBLE L IMIT IN A PARTICULAR FINANCIAL YEAR. THE GOVERNMENT DID NOT INTEND TO RE STRICT THE MAXIMUM AMOUNT OF EXEMPTION PERMISSIBLE UNDER SECTION 54EC. LEGISLATURE IN OUR OPINION HAS CONSCIOUSLY USED THE WORDS IN A FINANC IAL YEAR IN THE PROVISO TO SEC. 54EC OF THE ACT. IF THE LEGISLATURE WANTED TO RESTRICT THE EXEMPTION ITSELF TO RS, 50,00,000/-, IT COULD HAVE SIMPLY D ISPENSED WITH USING THE WORDS IN A FINANCIAL YEAR. THE HONBLE SUPREME CO URT WHILE DECIDING THE CASE OF VIKRANT TYRES LTD. VS. FIRST ITO, 274 ITR 8 21 LAID DOWN LAW OF INTERPRETATION OF THE STATUTE BY HOLDING THEREIN AS UNDER IT IS SETTLED PRINCIPLE OF LAW THAT THE COURTS WHI LE CONSTRUING REVENUE ACTS HAVE TO GIVE A FAIR AND REASONABLE CON STRUCTION TO THE LANGUAGE OF A STATUTE WITHOUT LEANING TO ONE SIDE O R THE OTHER, MEANING THEREBY THAT NO TAX OR LEVY CAN BE IMPOSED ON A SUBJECT BY AN ACT OF PARLIAMENT WITHOUT THE WORDS OF THE STATE CLEARLY SHOWING AN INTENTION TO LAY THE BURDEN ON THE SUBJECT. IN THIS PROCESS, THE COURTS MUST ADHERE TO THE WORDS OF THE STATUTE AND THE SO CALLED EQUITABLE CONSTRUCTION OF THOSE WORDS OF THE STATU TE IS NOT PERMISSIBLE. THE TASK OF THE COURT IS TO CONSTRUE THE PROVISIONS OF THE TAXING ENACTMENTS ACCORDING TO THE ORDINARY AND NAT URAL MEANING OF THE LANGUAGE USED AND THEN TO APPLY THAT MEANING TO THE FACTS OF THE CASE AND IN THAT PROCESS IF THE TAX PAYER IS BROUG HT WITHIN THE NET HE IS CAUGHT OTHERWISE HE HAS TO GO FREE. 5. EVEN IN THE CASE OF CIT VS. VEGETABLE PRODUCTS L TD., 88 ITR 192 THE HONBLE SUPREME COURT HAS TAKEN VIEW THAT IF THERE ARE TWO VIEWS POSSIBLE, THE VIEW FAVOURABLE TO THE SUBJECT SHOULD BE TAKEN. IN VIEW OF THE AFORESAID DISCUSSION, WE ARE OF THE VIEW THAT NO INTERFERENCE IS CALLED FOR IN THE ORDER OF CIT(A) AND CIT(A) HAS RIGHTLY DELETED THE ADDITI ON MADE BY THE ASSESSING OFFICER. WE, ACCORDINGLY, DISMISS THE APP EAL FILED BY THE REVENUE. 6. IN THE RESULT, THE APPEAL FILED BY THE REVENUE S TANDS DISMISSED. 7. ORDER PRONOUNCED IN THE OPEN COURT ON 18.04.2013 6.1 IN THIS VIEW OF THE SITUATION, TAKING THE VIE W ADOPTED BY THIS TRIBUNAL IN THE CASE OF ITO VS. MS. RANIA FALERIO (SUPRA) IN W HICH THE VIEW TAKEN BY JAIPUR ITA NO.7997/MUM/2011 : ASST.YEAR 2008-09 6 BENCH OF ITAT HAS ALSO BEEN CONSIDERED, WE DECIDE T HE ISSUE IN FAVOUR OF THE ASSESSEE AND ALLOW THE APPEAL FILED BY THE ASSESSEE . THE DISALLOWANCE OF RS.50.00 LACS SUSTAINED BY LD. CIT(A) IS DELETED AN D APPEAL FILED BY THE ASSESSEE IS ALLOWED. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 4 TH JUNE, 2014 . 2 + /01 34 04/06/2014 0 + : SD/- SD/- (N.K.BILLAIYA) (I.P.BANSAL) $ $ $ $ / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; 3 DATED : 4 TH JUNE, 2014. VM. 2 + )-! ; !1- 2 + )-! ; !1- 2 + )-! ; !1- 2 + )-! ; !1-/ COPY OF THE ORDER FORWARDED TO : 1. &' / THE APPELLANT 2. )*&' / THE RESPONDENT. 3. <() / THE CIT, MUMBAI. 4. < / CIT(A)-13, MUMBAI 5. !?: )- , , / DR, ITAT, MUMBAI 6. :@ A / GUARD FILE. 2 2 2 2 / BY ORDER, *!- )- //TRUE COPY// B BB B/ // /C D C D C D C D (DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI