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Income Tax Appellate Tribunal, “A”
Before: SHRI S.S.GODARA & DR. DIPAK P. RIPOTE
ORDER
Per S.S.Godara, JM:
This assessee’s appeal for Assessment Year 2016-17 is directed against the Commissioner of Income Tax(Appeals), Pune- 5’s order dated 31.10.2019 passed in case no.PN/CIT(A)/5/ITO Ward 7(2), Pune/10200/2018-19, in proceedings u/s.143(3) of the Income Tax Act, 1961 [in short “the Act”].
Heard both the parties. Case file perused.
The assessee’s sole substantive grievance raised in the instant appeal challenges correctness of both the lower authorities action disallowing his section 54EC deduction claim of Rs.50 lakhs invested in “REC” Bonds. The CIT(A)’s detailed discussion A.Y. 2016-17 Arun Harcharanlal Bhatia (A)
affirming the Assessing Officer’s action to this effect reads as follows: “[7] I have perused the material on record and the contention of the Appellant carefully. I have also gone through the various case laws cited by the appellant in respect of his claim including the case of CIT vs. Subhash Vinavak Supnekar of the Jurisdictional Bombay High Court. The appellant has also relied upon the case laws of Bhikulal Chandak (HUF) vs. ITO, ITAT Nagpur Bench and Parveen P. Bharucha vs. DCIT again of the Bombay High Court. However one glaring difference between the facts of the above cases and the appellant's own case is that in all the above cases the investment u/s. 54EC was; made out of advance received from the sale agreement which was concluded at a later date. In the appellant’s case such is not the situation. The investment in bonds which is the subject matter of claiming exemption u/s. 54EC, was made on 31.03.2013 on the basis of an agreement to sale executed with one Shri Kabir Bhandari on 06.03.2013. However admittedly the. Said agreement did not fructify and the amount received as advance was returned to the proposed buyer. Subsequently, the actual transfer of the property was made to an entirely different purchaser, Smt. Sanaya Rohinton Nariman, more than two years later on 09.10.2015. It is therefore seen that this was a completely new transfer agreement which had no bearing with the amount of advance received in 2013. In the case laws cited above by the appellant, it is noted that the Judicial Authorities have allowed investment in specified bonds u/s. 54EC when the same was done out of earnest money or advance which is received as part of the final sale consideration,; When this point was brought to the notice of the appellant, in his reply dated 18.10.2019, it was submitted that the exemption been claimed is in respect of the capital asset and not in respect of transferee and there is no clarification that such investment should be made from the advance received only in respect of final transaction. I am however unable to agree with this contention placed before me. It is absolutely clear as per the provisions of section quoted above that the investment in specified bonds is to be made after the transfer of the impugned property. Even if we look at the intention of transfer as given in section 2(47) of the I T Act the appellant's case does not fall in any of the specification therein. The Courts as well as the Circulars cited above would apply in cases where the investment is made out of the advance received in what may be considered part performance of a contract and hence fall within the intention of transfer. Such is clearly not the case here. The contract or agreement under which the capital asset has finally been transferred has no bearing with the amount of advance received and invested more than two years prior to such transfer. In these circumstances, I am inclined to A.Y. 2016-17 Arun Harcharanlal Bhatia (A) agree with the action of the AO in denying the benefit of exemption u/s.54EC to the appellant. The disallowance thus made is therefore confirmed.”
Mr.Kulkarni vehemently argued during the course of hearing that both the lower authorities have erred in law and on facts in disallowing the assessee’s section 54EC deduction claim despite the fact that he had reinvested his capital gains only out of advances received for transfer of the relevant capital asset. All these arguments fail to convince us once it has come on record that the assessee had cancelled the former agreement dated 06.03.2013 involving the impugned advances re-invested in “REC” Bonds followed by his ultimate transfer of the capital asset much after that on 09.10.2015. Faced with this situation, we conclude that both the learned lower authorities have rightly made the impugned section 54EC deduction disallowance as the corresponding capital gains reinvested had not arisen from transfer of the capital asset. The assessee fails in his instant sole substantive grievance therefore.
This assessee’s appeal is dismissed.
Order pronounced in the open Court on 29th August, 2022. (DR. DIPAK P. RIPOTE ACCOUNTANT MEMBER पुणे / Pune; "दनांक / Dated : 29th Aug, 2022/ SGR* A.Y. 2016-17 Arun Harcharanlal Bhatia (A)