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Income Tax Appellate Tribunal, DELHI BENCH : SMC : NEW DELHI
Before: SHRI R.K. PANDA
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : SMC : NEW DELHI
BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA No.4904/Del/2016 Assessment Year: 2011-12 Kiran Kamra, Vs. ITO, 2286, Hudson Line, Ward-36(1), G.T.B. Nagar, New Delhi. Delhi. PAN: AAQPK8729C (Appellant) (Respondent) Assessee by : Shri K. Sampath, Advocate & Shri V. Raj Kumar, Advocate Revenue by : Shri S.L. Anuragi, Sr.DR Date of Hearing : 18.02.2019 Date of Pronouncement : 26.03.2019 ORDER
This appeal by the assessee is directed against the order dated 29th July, 2016 of the CIT(A)-12, New Delhi, relating to Assessment Year 2011-12. 2. The only effective ground raised by the assessee reads as under:- “On the facts and in the circumstances of the case and in law the ld.CIT(A) erred in confirming the action of the Assessing Officer in not allowing deduction u/s 54EC of the Income-tax Act, 1961 being the amount of investment made in the purchase of REC Bonds. The above action being arbitrary, erroneous, misconceived and unjust must be quashed with directions for relief.”
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Facts of the case, in brief, are that the assessee is an individual and derives income from other sources and long-term capital gain. It filed its return of income on 6th January, 2012 declaring the total income at Rs.7,160/- after claiming deduction of Rs.49,63,932/- u/s 54EC of the IT Act. During the course of assessment proceedings, the Assessing Officer observed from the details filed by the assessee that the assessee had sold property bearing No.115/5, Old Rajpur, Dehradun for Rs.58.40 lakhs to Sardar Harcharan singh vide sale deed duly executed on 17.03.2011. The amount of sale consideration was transferred to capital gain account scheme 1988. After that the assessee withdrew the amount from hear capital gain account to purchase REC Bonds on 19th March, 2012. The assessee further stated vide letter dated 4th December, 2015 that she wanted to buy a house property from the amount of sale proceeds and, hence, opened the bank account with Syndicate bank under Capital Gain Account Scheme 1988 and transferred the full consideration of Rs.58,40,000/- to this account between 23rd to 25th April, 2011. The original return was filed u/s 139 on 6th January, 2012 by claiming exemption u/s 54 of the Act. Neither she nor her husband or children owned any house in Delhi and for her bona fide needs she tried hard to buy a house property in Delhi. Subsequently, in absence of any property purchased, the amount was invested in section 54EC bonds instead of investing in property by withdrawing the amount from capital gain account. It was submitted that the conduct of the assessee was very clear that her intention was always to invest in eligible scheme in order to save tax on long-term capital gain. The assessee accordingly invested in REC bonds to claim tax exemption as per the intention of the legislature. 2
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However, the Assessing Officer was not satisfied with the arguments advanced by the assessee. He observed that as per the certificate issued by REC Ltd., the assessee was allotted bonds on 31.03.2012. As per the provisions of section 54EC, the exemption under this section can be claimed if investment in such bonds is made within six months from the date of transfer of asset. In view of the specific provision of the Act and considering the fact that the property was transferred on 17th March, 2011 whereas the assessee applied for REC bonds only on 19th March, 2012 which were allotted to the assessee on 31st March, 2012, the Assessing Officer rejected the claim of deduction u/s 54EC of the Act. He accordingly made addition of Rs.49,63,932/- to the total income of the assessee.
Before CIT(A), it was submitted that the assessee had entered into an agreement with Mrs. Puja Sethi and Mrs. Sachin Sethi for purchase of a plot No.24, Block-UP, Pitampura, Delhi measuring 150 sq. yards vide receipt cum Agreement dated 24.05.2011 for a total consideration of Rs.60 lakhs out of which she had paid Rs.20 lakhs as exempt money vide cheque No.833521 dated 24.05.2011 drawn from her account maintained with Syndicate Bank. Vide cheque No.833523 an amount of Rs.15 lakhs and vide cheque No.833522 dated 23rd May, 2011 another Rs.20 lakhs were paid. However, since the deal did not work out, she issued two legal notices against the sellers, namely, Mrs. Puja Sethi and Mr. Sachin Sethi. She received back the amount of Rs.55 lakhs on 21st February, 2012 and, thereafter, she invested the amount in REC bonds on 21.03.2012. It was accordingly argued that the assessee
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initially paid the money for purchase of house and since the deal did not materialize, the money was obtained after issue of legal notices and, thereafter, the money was
invested in capital gain account scheme. Therefore, the assessee is entitled to claim the benefit of deduction u/s 54EC of the Act.
However, the ld.CIT(A) was also not satisfied with the arguments advanced by the assessee. He noticed the provisions of section 54 and 54EC and came to the
conclusion that in order to avail the exemption u/s 54EC, the capital gain amount has to be invested in a long-term specified asset within a period of six months from the date of transfer. Since the assessee in the instant case has invested the amount of Rs.50 lakhs on 21st March, 2012 whereas the property was sold on 17th March, 2011,
therefore, the amount invested by the assessee for claiming deduction u/s 54EC is after the period of six months i.e., after one year and four days which is beyond time and, therefore, she is not entitled to claim the exemption u/s 54EC. So far as the argument
of the assessee that the amount was invested for purchase of residential property is concerned, he rejected the same on the ground that she was required to invest the amount in another house property if the deal did not materialize instead of investing in
REC bonds. He noted that the assessee has not fulfilled the conditions stipulated u/s 54 of the Act. He accordingly confirmed the addition of Rs.49,63,932/- made by the Assessing Officer by disallowing the claim of exemption u/s 54EC. Aggrieved with
such order of the CIT(A), the assessee is in appeal before the Tribunal.
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The ld. counsel for the assessee reiterated the same argument as advanced before the CIT(A). He submitted that the assessee in the instant case had paid an amount of Rs.60 lakhs to Mrs. Puja Sethi and Mr. Sachin Sethi for purchase of a house property at Plot No.24, Block-UP, Pitampura, Delhi. Since the deal could not materialize, after issue of two legal notices the assessee got back Rs.55 lakhs from the above two sellers on 21st February, 2012 and, thereafter, the amount was invested in REC Bonds on 21st March, 2012. He submitted that the exemption granted u/s 54 and 54EC are beneficial provision and should be interpreted liberally. Referring to the Circular No.359 dated 10th May, 1983 issued by CBDT, he submitted that the CBDT in the said circular has held that if the assessee invests the earnest money or the advance received in specified assets before the date of transfer of asset the amount so invested will qualify for exemption u/s 54E of the IT Act, 1961. In the said Circular the technical interpretation of section 54E was considered liberally and it was felt that the strict interpretation of the said provision would go against the purpose and spirit of the section. Referring to the Notification dated 30th June, 2006 issued by CBDT vide F.No.142/09/2006-TPL, he submitted that the CBDT with a view to removing the hardship caused to taxpayers, in exercise of powers conferred by clause (c) of sub- section (2) of section 119 of the Income-tax Act, 1961, ordered that the limitation of six months for making the investment under section 54EC of capital gains arising from the transfer of a long-term capital asset, is extended - upto 30th September, 2006 in case of persons where the long-term capital asset was transferred between 29.09.2005 and 31.12.2005 (both dates inclusive); and upto 31st December, 2006 in case of 5
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persons where the long-term capital asset was transferred between 01.01.2006 and
30.06.2006 (both dates inclusive). He accordingly submitted that CBDT is also taking
liberal approach for giving the benefit u/s 54EC. Referring to the decision of the Hon'ble Supreme Court in the case of Union of India and Ors. Vs. M/s Wood Papers Ltd. & Anr. reported in AIR 1991 SUPREME COURT 2049, he submitted that the
Hon'ble Supreme Court has held that strict as well as liberal construction are required
to be invoked at different stages of interpreting exemption provisions. Referring to the decision of Hon'ble Supreme Court in the case of Collector of Central Excise, Bombay-I and Anr. Vs. Parle Exports (P) Ltd. (1990) 183 ITR 624 (SC), he submitted
that the Hon'ble Supreme Court in the said decision has held that the fairest and most
rational method to interpret the will of the law-maker is by exploring his intentions at
the time when the law was made, by signs the most natural and probable. And these
signs are either the words, the context, the subject-matter, the effects and
consequences, or the spirit and reason of the law. Referring to the decision of the Hon'ble Karnataka High Court in the case of CIT vs. Sambandam Udaykumar reported
in 345 ITR 389 (Kar.) and the decision in the case of CIT vs. J. Palemar Krishna, reported in 167 ITR 471, he submitted that once it is demonstrated that consideration
received on transfer of a capital asset is invested in the residential property, the fact
that the transactions involved in purchase or construction of such residential property
are not complete in all respects would not disentitle the assessee from benefit of
exemption u/s 54F. Referring to the decision in the case of CIT vs. Akbar Ali Dhala
(2014) 49 taxmann.com 202 (Madras), he submitted that the Hon'ble High Court in the 6
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said decision has held that the assessee’s right to make investment within six months cannot be curtailed only for reason of non-availability of specified bonds in market for
a period at time of expiry of stipulated six months. He also relied on the following decisions:- (i) CIT vs. Cello Plast, (2012) 24 taxmann.com 111 (Bom.); (ii) Dr. (Smt.) Sujatha Ramesh vs. Central Board of Direct Taxes, New Delhi (2017) 87 taxmann.com 228 (Kar); (iii) CIT vs. Dr. Arvind S. Phake, 401 ITR 96 (Bom); and (iv) Hindustan Unilever Ltd. vs. DCIT, (2010) 325 ITR 102 (Bom).
Relying on various other decisions, he submitted that various courts and
Tribunals are taking a liberal view for granting exemption u/s 54EC where the respective assessees have invested in the specific bonds beyond the period of six months. He accordingly submitted that since the assessee in the instant case had
initially invested the amount in purchase of a property and since the deal could not materialize had invested the money so refunded after legal notices, towards purchase of REC Bonds, therefore, the exemption u/s 54EC could not be denied to the assessee
on account of mere technicalities. A liberal approach should be adopted and the assessee be given the benefit of exemption.
The ld. DR, on the other hand, heavily relied on the order of the Assessing Officer and CIT(A). He submitted that since the assessee in the instant case has not
fulfilled the conditions prescribed u/s 54EC and made the deposit after a period of
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more than one year as against the period of six months provided in the statute, therefore, the order of the CIT(A) being in accordance with the law is fully justified and has to be upheld and the grounds raised by the assessee should be dismissed.
I have considered the rival arguments made by both the sides, perused the orders of the lower authorities and the paper book filed on behalf of the assessee. I have also considered the various decisions cited before me. I find the assessee in the instant case sold a property on 17th March 2011 situated at Delhi for a consideration of Rs.58.40 lakhs. The assessee kept the money in the capital gain account scheme 1988 and transferred the full consideration of Rs.58.40 lacs to this account between 23rd to 25th April 2011. The assessee accordingly in the return filed under Section 139 on 6th January 2012 claimed exemption under section 54 of the IT Act. Subsequently, the assessee invested an amount of Rs.49,63,932/- under section 54EC in REC bonds which were allotted to her on 31.03.2012 and the assessee accordingly claimed deduction of the same amount under section 54EC. The Assessing Officer denied exemption under section 54EC on the ground that the assessee applied for the REC bonds on 19th March 2012 which were allotted to the assessee on 31st March 2012 and the assessee has not invested in the REC bonds within the time prescribed under section 54EC, i.e., within a period of 6 months from the date of transfer and, therefore, the assessee is not entitled to the exemption under section 54EC of the Act. I find the Ld. CIT(A) upheld the denial of exemption under section 54EC on the ground that the assessee has not fulfilled the conditions laid down in the said provision. While
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doing so he has also considered the submission of the assessee that the money was
earlier advanced to Mrs Pooja Sethi and Mr Sachin Sethi for purchase of a residential
property for which an amount of Rs.60 lakhs was advanced and after due legal process
assessee got back an amount of Rs.55 lakhs which was subsequently invested in the
REC bonds. In my opinion, there is no infirmity in the order of the CIT(A) on this
issue. Admittedly, the assessee in the instant case has neither purchased the house
within the stipulated period nor constructed a house and nor invested the money in the
eligible bonds as provided under section 54EC of the IT Act within the stipulated
period. No doubt, the ld. counsel for the assessee relied on a series of decisions.
However, a perusal of the decisions cited by him shows that they are distinguishable
and not applicable to the facts of the present case. In some of the decisions the time
period for investment in 54EC bonds were extended since the bonds were not
available in the market during the time when the assessee was supposed to invest in
the specified bonds. Similarly, in certain cases the assessee has invested the money
prior to the transfer of the property out of the advances received and therefore it was
held that assessee is entitled to claim the exemption. In the instant case the assessee
has not invested the amount in the specified bonds within the specified period
prescribed as per the provisions of section 54EC. It is not the case of the assessee that
the bonds were not available in the market at the stipulated time. Although the
assessee had filed certain legal notices as available in the paper book the copy of the
agreement to sell of the said property is not filed in the paper book. The argument of
the ld. counsel for the assessee that beneficial provisions should be interpreted 9
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liberally is also not applicable in the instant case since in my opinion such interpretations cannot be stretched to an extent so as to make the provisions of the Act redundant. In any case, since the assessee has not fulfilled the conditions laid down in the provisions of section 54EC by not depositing the amount in the specified bonds, therefore, I am of the considered opinion that the assessee is not eligible for the claim of exemption under section 54EC of the Act. The order of the CIT(A) is accordingly upheld and the ground raised by the assessee is dismissed.
In the result the appeal filed by the assessee is dismissed.
The decision was pronounced in the open court on 26.03.2019.
Sd/- (R.K. PANDA) ACCOUNTANT MEMFBER Dated: 26th March, 2019 dk Copy forwarded to 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asstt. Registrar, ITAT, New Delhi