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Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD
Before: SHRI S.S. GODARA & SHRI PRADIP KUMAR KEDIA
आदेश / O R D E R PER PRADIP KUMAR KEDIA - AM: The captioned appeal filed at the instance of the assessee is against the order of the Commissioner of Income Tax(Appeals)-5, Ahmedabad [CIT(A) in short] dated 08/07/2016 in the matter of assessment order under s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") dated 24/08/2015 relevant to Assessment Year (AY) 2012-13.
ITA No.2313/Ahd/2016 M/s. Emo Tiles Company vs. ITO Asst.Year – 2012-13 - 2 - 2. The grounds of appeal raised by the Assessee read as under:- 1.1. The order passed u/s.250 on 08.07.2016 by CIT(A)-5, A’bad upholding the disallowance of exemption u/s.54EC of Rs.14 lakhs made by AO is wholly illegal, unlawful and against the principles of natural justice.
1.2. The Ld.CIT(A) has grievously erred in law and or on facts in not considering fully and properly the submissions made and evidence produced by the appellant with regard to the impugned additions.
2.1. The Ld.CIT(A) has grievously erred in law and on facts in confirming the disallowance of exemption u/s.54EC of Rs.14 lakhs.
2.2 That in the facts and circumstances of the case as well as in law, the Ld.CIT(A) ought not to have upheld the disallowance of exemption u/s.54EC of Rs.14 lakhs.
3.1. The Ld.CIT(A) has failed to appreciate that since the investment in REC CEG bond was made in name of the partners of the appellant firm out of the partnership funds and appeared in the books of the firm, the said investment was the assets of the appellant firm u/s.14 of the India Partnership Act, 1932 and as such the exemption u/s.54EC was admissible.
Briefly stated, the assessee is a partnership firm and engaged in manufacturing and job work of tiles. It filed its return of income for A.Y. 2012-13 which inter alia included long term capital gain (LTCG) of Rs. 10,90,024/- in respect of sale of land at Sanand Gujarat. The assessee inter alia claimed exemption of Rs. 14 lakhs u/s. 54EC in respect of investment made in bonds against the long term capital gains. However
ITA No.2313/Ahd/2016 M/s. Emo Tiles Company vs. ITO Asst.Year – 2012-13 - 3 - the Assessing Officer denied exemption u/s. 54EC on the ground that the bonds have been purchased in the name of the partners of the assessee firm instead of the assessee firm itself. In first appeal the CIT(A) confirmed the action of the Assessing Officer and denied the exemption claimed u/s. 54EC of the Act.
Aggrieved the assessee is in appeal before the Tribunal.
The Learned Authorized Representative for the assessee Mr. S.N. Divatia submitted that while the REC bonds u/s. 54EC were brought in the name of the partners, the payments were made out of sale proceeds credited with the firm. The Learned Authorized Representative further submitted that the bonds appear in the books of account of the firm notwithstanding the purchases made in the name of the partners and are thus property of the firm. For this purpose he relied upon the balance sheet of the firm placed on record. The Authorized Representative next submitted that the interest income received from REC bonds have also been credited and accounted for in the books of the firm. The Learned Authorized Representative thus submitted that the income arising from REC bonds are also assessed as income in the hands of the firm. The Learned Authorized Representative next relied upon section 14 of the Indian Partnership Act, 1932 for the proposition that property of the partnership firm includes property held by the partners on behalf of the
ITA No.2313/Ahd/2016 M/s. Emo Tiles Company vs. ITO Asst.Year – 2012-13 - 4 - firm. The Learned Authorized Representative relied upon the decision of the Hon’ble Delhi High Court in the case of CIT vs. Kamal Wahal (2013) 30 taxmann.com 34 Delhi to support claim of exemption.
The Learned Departmental Representative on the other hand relied upon the order of the Learned CIT(A) and pointed out that the assessee firm was eligible to apply in the name of the partnership firm itself and therefore there was no reason for the firm to purchase the REC bonds in the name of partners. The Learned Departmental Representative submitted that no interference with order of the Ld. CIT(A) is called for, where the investments has been made in the name of person other than assessee which is not consonance with the mandate of section 54EC of the Act.
We have carefully considered the rival submissions. The limited controversy in the present case arises on account of investment made in the name of partners instead of the assessee firm while availing the exemption u/s. 54EC of the Act. We find that the bonds have been duly declared in the books of account of the firm and interest thereon has also been accounted for by the firm itself. Therefore the investment made in the name of partners are in substance and in effect belong to the partnership firm in sync with section 14 of the partnership Act.
ITA No.2313/Ahd/2016 M/s. Emo Tiles Company vs. ITO Asst.Year – 2012-13 - 5 - 7. The provision of section 54EC being beneficial in nature, we are inclined to grant liberal construction as per the guidance available in the judicial precedents rendered in Kamal Wahal (supra). Thus we find merit in the plea of the assessee. The Assessing Officer is directed to grant benefit of exemption available u/s. 54EC on investment made in the name of the partners as claimed.
In the result appeal of the assessee is allowed.
This Order pronounced in Open Court on 10 / 01 /2018
Sd/- Sd/- (एस.एस.गोदारा) (�द�प कुमार के�डया) �या�यक सद�य लेखा सद�य ( PRADIP KUMAR KEDIA ) ( S.S. GODARA ) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad; Dated 10 / 01 /2018 mukul आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त(अपील) / The CIT(A)-5 �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 5. 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, स�या�पत ��त //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील�य अ�धकरण, अहमदाबाद / ITAT, Ahmedabad