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Income Tax Appellate Tribunal, DELHI BENCH: ‘F’, NEW DELHI
Before: SHRI H.S. SIDHU & SHRI O.P. KANT
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: ‘F’, NEW DELHI
BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER
ITA No.724/Del/2017 Assessment Year: 2013-14
Sh. Rohit Sawhney, Vs. ACIT, Z-48, Okhala Indl. Area, Circle-28(1), Phase-II, New Delhi New Delhi PAN :AMNPS4870R (Appellant) (Respondent)
Appellant by Ms. Gargi Sethee, Adv. Shri Arta Trana Panda, Adv. Respondent by Shri Surender Pal, Sr.DR
Date of hearing 11.09.2019 Date of pronouncement 29.11.2019
ORDER PER O.P. KANT, AM:
This appeal by the assessee is directed against order dated 29.12.2016 passed by the learned Commissioner of Income Tax (Appeals)-10, New Delhi, [in short ‘learned CIT(A)’] for assessment year 2013-14 raising following grounds:
That on the facts and circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) has erred in up- holding the order of assessing authority wherein she had made the addition of Rs.50 lakhs by restricting the exemption u/s 54EC up to Rs.50 lakhs out of total claim in respect of Rs.1 Crore on investment in Bonds made within six months of sale of property in two different financial years amounting to Rs.50 lakhs in each financial year.
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That the petitioner assessee craves the leave to this Hon’ble Court to add, deleted and modify any or all the clauses of Grounds of appeal.
Briefly stated facts of the case are that the assessee filed return of income on 21.09.2013, declaring total income of Rs.1,51,77,310/-. The case of the assessee was selected for scrutiny and statutory notices were issued and complied with. The Assessing Officer observed that during the year under consideration, the assessee has sold a property and worked out long term capital gain to the tune of Rs.1,93,16,309/-. Against the long term capital gain computed, the assessee claimed deduction of Rs. 1 crores under section 54EC of the Income-tax Act, 1961 (in short ‘the Act’). In support of the claim, the assessee submitted that he invested in REC Bonds for Rs.50 lakhs each in the month of January, 2013 and in the month of April, 2013. According to the Assessing Officer, in terms of provisions of Section 54EC of the Act, the assessee was entitled for the investment of Rs.50 lakhs made in the financial year 2012-13 only. According to the Assessing Officer, the assessee has abused provisions of the law, which in clear terms limit the investments under Section 54EC up to Rs. 50 lakhs only. The Assessing Officer held that reply of the assessee was not tenable and the intention of the legislation was clear that investment made on or after the 1st Day of April, 2017 in the long term specified assets by an assessee during the financial year does not exceed Rs. 50 lakhs. It was further observed by the Assessing Officer that the contention of the assessee cannot be held to be acceptable, since the provisions does not provide two different treatments to two
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different assessees and one who sells the property between April to September of the financial year and claims exemption u/s 54EC, is put at a disadvantage since the exemption available to him would be only Rs.50,00,000/- and secondly, the assessee who sells the property between October and March and claims exemption u/s 54EC, the investment can be made of Rs.50 lakhs in the current financial year and Rs. 50 lakhs in the subsequent financial year. With the above discussion, the Assessing Officer held that the grant of exemption under Section 54EC to the extent of Rs. 1 crore will vitiate the original intention of the legislature leading to discrimination amongst tax payers on the same issue. The Assessing Officer also relied on the proviso to sub-section (1) of Section 54EC and observed that intention of the legislature in inserting the said proviso to restrict the exemption to Rs.50 lakhs in the financial year so that the benefit can be given to many small investors. The Assessing Officer also relied on the various judicial pronouncements on issue of interpretation of statute. Further, relying on the decision of the Tribunal, Jaipur Bench, in the case of ACIT Vs. Shri Raj Kumar Jain & Sons (HUF), he restricted the deduction to the amount of Rs.50 lakhs only. On further appeal, the learned CIT(A) also upheld the finding of the Assessing Officer observing as under:
“4.1 I have carefully considered the written submissions of Ld. AR and assessment order passed by the Assessing Officer, the only issue involved is allowance of claim of exemption u/s. 54EC, which has been restricted by the Assessing Officer to the extent of Rs.50 lacs as per proviso to above section, which provides that the investment made on or after the first day of April, 2007 in the long term specified assets by an assessee during any financial year does not exceed Rs.50 lacs On the other hand, appellant is claiming
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deduction u/s, 54EC to the extent of Rs 1 crore relying on the judicial pronouncement of the Hon'ble Madras High Ccjh in the case of CIT, Chennai (2015) 53 Taxmann.com 466 (Mad.) vs. C. Jai Cander and reliance has also been placed on the decision of Pune Bench of TAT in the case ITO, Ward - 2(4), Nasik vs. Bala R Venkitachalam and claimed that since investment of Rs.50 lacs each has been made in two different financial .ears, the quantum of eligible exemption is Rs.1 crore.
4.1.1 In the above factual matrix of the case, it is pertinent to reproduce the provisions of section 54EC and proviso appended to the above section:
“(1) Where the capital gain arises from the transfer of a long- term capital asset (the capital asset so transferred being hereafter in this section referred to as the original asset) and the assessee has, at any time within a period of six months after the date of such transfer, invested the whole or any part of capital gains in the long-term specified asset, the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say,-
(a) if the cost of the long-term specified asset is not less than the capital gain arising from the transfer of the original asset, the whole of such capital gain shall not be charged under section 4A:
(b) if the cost of the long-term specified asset is less than the capital gain arising from the transfer of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of acquisition of the long- term specified asset bears to the whole of the capital gain, shall not be charged under section 45:
Provided that the investment made on or after the 1st day of April, 2007 in the long-term specified asset by an assessee during any financial year does not exceed fifty lakh rupees:
[Provided further that the investment made by an assessee in the long term specified asset, from capital gains arising from transfer of one or more original assets, during the financial year in which the original asset or assets are transferred and in the subsequent financial year does not exceed fifty lakh rupees.]”
4.1.2 From the proviso to section 54EC(1), it is evident that for claiming exemption under this section, the investment made in any financial year cannot exceed Rs.50 lacs. The assessment order on the issue passed by the AO is crystal clear wherein it has clearly
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been established that the provisions of the Act cannot be interpreted to suit one’s own purpose and it is well settled principle of interpretation that expression used in a statue should be construed according to the plain natural meaning of its language unless it is otherwise defined in the statute. Considering the facts of the case, it is evident that by interpreting the provisions of above section in a different way suitable to appellant’s purpose, appellant claimed the deduction by spreading over the investment in the REC Bonds in two different financial years and exemptions under this section have been claimed at Rs.1 crore on the ground that two financial years are involved for the purpose of investment. However the fact cannot be denied that in the present case, appellant accrued long term capital gain of Rs.1,93,16,309/- out of which Rs.1 crore has been claimed exempt u/s 54EC of the Act. The capital gain has been accrued to the appellant on sale of property named M/s JMD Regent Square situated in village Sarhaul on Mehrauli-Gurgaon Road, Dist. Gurgaon, Haryana for an amount of Rs.4,10,00,000/- on 10.01.2013. From this fact, it is clear that the date of transfer of original asset is 10.01.2013 and as per provisions of Section 54EC assessee was eligible to invest the capital gain arises on the above long term capital asset within a period of six months after the date of such transfer. But misinterpreting the above provisions of the Act, assessee claimed deduction by spreading the claim in two periods i.e. in the month of January, 2013 and in the month of April, 2013.
4 1.3 As per plain reading of provisions of Section 54EC, it is evident that capital gain shall be exempt u/s 54EC only to the extent it is invested in the long term specified asset within a period of six months from the date of such transfer. As per the above provisions of the Act, appellant cannot be allowed the benefit of exemption under this section in respect of investment made of Rs.50 lakh each on the ground that such investment falls in two different financial years. Simple reading of provisions of above section makes it clear that there is no provision for making investment in two different financial years. From the provisions of above section, it can easily be held that the total limit of investment u/s 54EC for exemption of capital gain in respect of transfer of capital asset cannot exceed Rs.50 lakh.
4.1.4 I am also inclined to agree with the observation of the AO that- law cannot differently treat two persons for the same cause. It is a fact that if the appellant’s claim is accepted to treat the investment in two different financial years for the purpose of allowance of exemption u/s 54EC, it will vitiate the original intent of legislature Provisions of Section 54EC cannot be interpreted in such a manner by spreading the claim of capital gain in two different financial years as this interpretation will put an assessee at disadvantage who sells his property between April to September to whom deduction u/s 54EC is available at Rs.50,00 000/- and an assessee who sells his
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property between October to March can claim exemption of Rs.50 lakh each in the current financial year and in the subsequent financial year.
4.1.5 Further, I am also in agreement with the observation of the AO that as per Explanatory Notes on the provisions of the Finance Act 2007, Government had decided to impose a ceiling on the quantum of investment that could be made in such bonds to ensure equitable distribution of benefits amongst prospective investors. Hence, AO has rightly held that the provision of limiting the exemption u/s 54EC by the Finance Act 2007 is inconsonance with the intention of the law.
4.1.6 Apart from the above, the intention of the law in restricting the claim of exemption u/s 54EC to the extent of Rs.50 lakh also established from the fact that second proviso has been appended to above section w.e.f. 01.04.2015 wherein it is provided as under:
“ Provided further that the investment made by an assessee in the long term specified asset, from capital gains arising from transfer of one or more original assets during the financial year in which the original asset or assets are transferred and in the subsequent financial year does not exceed fifty lakh rupees”.
4,1.7 Hence, it is clearly established that it was never the intention of the law to allow exemption u/s 54EC in excess of Rs.50 lakh. Therefore,.! am of the considered view that AO relying on the decision in the case ACIT, Circle- 2, Ajmer vs. Sh. Rajkumar Jain & Sons(HUF) (2012) 19taxmann.com 27 has rightly held that as per Section 54EC investment within six months is investment for that particular financial year in which transfer has taken place and said period of six months would not include some part of subsequent financial year.
4 1.8 Thus keeping in view, the facts and circumstances of the case as narrated by the AO duly supported with various judicial pronouncements of the Hon’ble Apex Court on the interpretation of law, I am of the considered view that assessee is eligible for claim of exemption as per provisions of Section 54EC(1) only to the extent of Rs.50 lakh and investment of Rs.50 lakh claimed in subsequent financial year does not qualify for the above exemption. Hence, the addition of Rs.50 lakh made by the AO is upheld and ground of appeal taken by the appellant is dismissed.
Before us, the learned counsel for the assessee filed a paper- book containing pages 1 to 93 and submitted that identical
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issued of investment in specified bonds of Rs.50 lakhs in the month of March of the financial year and Rs. 50 lakhs in the month of April of the next financial year has been allowed as deduction in following cases by the Tribunal: 1. ACIT Vs. Akshay Sobti (2019) 106 taxmann.com 60 (Del-Trib.) 2. Tulika Devi Dayal Vs. JCIT (2018) 89 taxmann.com 442 (Mum. –trib) 3. ACIT Vs. Shri Ajay Kaila (ITA No. 6907/Del/2015, Dated September, 2017)
On the other hand, the learned DR rlied on the order of the lower authorities. 5. In the instant case, the issue is whether the assessee is entitled for deduction of Rs. 1 crore as invested by the assessee in the month of January, 2013 and Rs. 50 lakhs in the month of April, 2013 as against the deduction of Rs.50 lakhs restricted by the Assessing Officer. For ready reference, the relevant provisions of Section 54EC of the Act is reproduced as under:
“ Capital gain not to be charged on investment in certain bonds. 54EC. (1) Where the capital gain arises from the transfer of a long-term capital asset 61[, being land or building or both,] (the capital asset so transferred being hereafter in this section referred to as the original asset) and the assessee has, at any time within a period of six months after the date of such transfer, invested the whole or any part of capital gains in the long-term specified asset, the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say,— (a) if the cost of the long-term specified asset is not less than the capital gain arising from the transfer of the original asset, the whole of such capital gain shall not be charged under section 45; (b) if the cost of the long-term specified asset is less than the capital gain arising from the transfer of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of acquisition of the long-term specified asset bears to the whole of the capital gain, shall not be charged under section 45 :
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Provided that the investment made on or after the 1st day of April, 2007 in the long-term specified asset by an assessee during any financial year does not exceed fifty lakh rupees : Provided further that the investment made by an assessee in the long- term specified asset, from capital gains arising from transfer of one or more original assets, during the financial year in which the original asset or assets are transferred and in the subsequent financial year does not exceed fifty lakh rupees.”
Thus, in terms of Section 54EC investment made in specified assets at any time within six months from the transfer of the original asset is entitled for deduction but the proviso to the section has restricted the investment during any financial year up to Rs. 50 lakhs only. Identical issue in dispute has been decided by the Tribunal in the case of ACIT Vs. Akshay Sobti (supra). The relevant portion is reproduced as under:
“6.1 As regards ground no. 2 which relates to disallowance of deduction u/s.54EC to the extent of Rs.50,00,000/- is concerned, we find that the AO had restricted the deduction claimed u/s.54EC to Rs. 50,00,000/- as against the deduction claimed by the appellant amounting to Rs. 1,00,00,000/- following the decision of the Honorable Income tax Appellate Tribunal, Jaipur Bench in the case of Shri Raj Kumar Jain & Sons IIUF {supra). However, the assessee submitted that the Assessing Officer has strangely and obliquely stopped short of making observation/mention of the very recent Judgment of Honorable High Court of Madras dated December 16, 2014 in case of CIT v. Coromandal Industries Ltd. [2015] 56 taxmann.com 209/230 Taxman 548/370 ITR 586 (Mag.) placed before him for the reason best known to him only. This is to be understood that the restriction of Rs. 50,00,000/- in a financial year was placed for evenly distributing the invest into the capital gains bonds on continued basis throughout the year. Therefore, the alternative was put into operation were in the capital gain bonds are available on tap throughout the year without stopping but the limit of investment has been capped to Rs. 50,00,000/- per assessee per financial year. This has resulted in even distribution of benefit to public at large. Had the intention of the legislation was cap the total investment to Rs. 50,00,000/-, the amendment in statute would have prescribed the limit on deduction allowed under the section 54EC and not on investment allowed under section 54EC. Therefore,
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the interpretation of ITAT, Jaipur Bench in Shri Raj Kumar Jain & Sons IIUF {supra), is misplaced, in total disregard to juagment of the higher authority (i.e. Honorable Madras High Court) which has elaborately discussed the issue involved, ambiguity of law and the provisions of latest amendments made to section 54EC by the Finance Act 2014 including the Notes on clauses - Finance Bill 2014 and Memorandum : Explaining the provisions in the Finance (No. 2) Bill, 2014; placing restriction on "lent to Rs. 50 lakhs with effect from 01.04.2015 by inserting a second proviso, assessing officer has totally ignored his reply in as much as reliance placed on the judgment of the Honorable Madras High Court. The Honorable High of Madras has held as under:-
'The legislature has chosen to remove the ambiguity in the proviso to Section 54EC(1) of Act by inserting a second proviso with effect from 1.4.2015. The memorandum explaining the provisions in the Finance (No.2) Bill, 2014 also states that the same will applicable from 1.4.2015 in relation to assessment year 2015-16 and the subsequent years. The intention of the legislature probably appears to be that this amendment should be for the assessment year 2015-2016 to avoid unwanted litigations of the previous years. Even otherwise, we do not wish to read anything more into the first proviso to Section 54EC (1) of the Act, as it stood in relation to the assessees.
The Honorable High court has further observed and underlined as under;
"In any event, from a reading of Section 54EC(1) and the first proviso, it is clear that the time limit for investment is six months from the date of transfer and even if such investment falls under two financial years, the benefit claimed by the appellant cannot be denied. It would have made a difference, if the restriction on the investment in bonds to Rs.50,00,000/- is incorporated in Section 54EC(1) of the Act itself. However, the ambiguity has been removed by the legislature with effect from 1.4.2015 in relation to the assessment year 2015-16 and the subsequent years.
For the foregoing reasons, we find no infirmity in the orders passed by the Tribunal warranting interference by this Court. The substantial questions of law are answered against the Revenue and these appeals are dismissed.”
Similarly, in the case of Tulika Devi Dayal (supra) and Shri Ajay Kaila (supra), the Tribunal has allowed the deduction up to
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Rs. 50 Lakhs in two financial years. Respectively following the finding of the Tribunal, we set aside the finding of the learned CIT(A) on the issue in dispute and direct the Assessing Officer to allow the deduction under Section 54EC of the Act for Rs. 1 crores as claimed by the assessee. The grounds of appeal of the assessee are according allowed. 8. In the result, the appeal of the assessee is allowed. Order is pronounced in the open court on 29th November, 2019.
Sd/- Sd/- (H.S. SIDHU) (O.P. KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 29th November, 2019. RK/-(D.T.D.) Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR
Asst. Registrar, ITAT, New Delhi