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Income Tax Appellate Tribunal, MUMBAI BENCH “A”, MUMBAI
Before: SHRI D. KARUNAKARA RAO & SHRI SAKTIJIT DEY
This is an appeal by the Department against order dated 23.8.2012 by ld. CIT(A)-35, Mumbai for Assessment Year 2009-10. The only effective ground raised by the Department reads as under :-
1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in directing the A.O to allow expenditure u/s 54EC of the Income Tax Act, 1961 amounting to Rs.50 lacs even though the said investment was made beyond six months from the end of the month in which transfer took place.
Briefly put, facts are the assessee is an individual. For assessment year under consideration, assessee filed his return of income on 22.4.2009 declaring total income of Rs.2,19,659/-. In course of assessment proceedings the Assessing Officer, on the basis of AIR information available on record, found that the assessee had invested Rs. 50 lacs in REC bonds and claimed exemption u/s 54EC of the Income Tax Act, 1961 (in short ‘the Act’) against Long Term Capital Gain of Rs. 50 lacs. He, therefore, called upon assessee to furnish necessary details regarding claim of exemption u/s 54EC of the Act. In response to the query raised by the Assessing Officer, assessee submitted necessary details alongwith the Development Agreement dated 3.4.2008 in terms of which assessee had received the amount of Rs. 50 lacs. On perusal of the Development Agreement it was noticed by Assessing Officer that assessee was a co-owner of the property with another person. He found that the development rights of the property were given to one builder, namely, M/s. Shah Builders as per the Development Agreement entered into between the parties. He, however, noticed that though the sale consideration of property is Rs.3,35,50,000/-, but assessee offered Rs. 50 lacs as Long Term Capital Gain, and moreover the assessee claimed as exemption u/s 54EC of the Act by claiming investment in REC bonds. Referring to Sec. 54EC of the Act, the Assessing Officer observed that as per the said provision the sale consideration/Long Term Capital Gain has to be invested in the bond within a period of 6 months from the date of transfer. In assessee’s case though the transfer had taken place on 3.4.2008, however, the amount of Rs. 50 lacs was invested on 5.7.2009 which is beyond 6 months from the date of transfer. Thus, he disallowed assessee’s claim of deduction u/s 54EC of the Act for the amount of Rs. 50 lacs. Being aggrieved by such disallowance, assessee preferred appeal before the CIT(A). The Ld. CIT(A), following a decision of ITAT, Pune Bench held that since the assessee has invested the sale consideration of Rs. 50 lacs within a period of 6 months from the date of receipt of the money, he will be eligible for deduction u/s 54EC of the Act. Accordingly, he allowed assessee’s claim. Being aggrieved, Department is before us.
The Ld. DR relied upon the observations of Assessing Officer and the grounds raised.
The Ld. AR, on the other hand, strongly supporting the order of the CIT(A) submitted that Sec. 54EC of the Act being a beneficial legislation has to be construed liberally. He submitted that the assessee having received the last installment of Rs. 50 lacs on 5.7.2009 could not have invested in REC bonds within 6 months from the date of registration of the Development Agreement. He submitted that the benefit given under the statute cannot be taken away by insisting upon the assessee to perform an impossible act. He submitted that considering the hardship to the assessee in the aforesaid situation, ITAT Pune Bench in the case of Mahesh Nemichand Ganeshwade vs ITO, [2012] 21 taxmann.com 136 has held that if the assessee invests in the bonds within a period of 6 months from the date of receipt of sale consideration, then the assessee would be eligible to claim deduction u/s 54EC of the Act. The ld. AR also relied upon the decision of ITAT, Kolkata Bench in the case of Chanchal Kumar Sircar vs ITO, [2012] 18 taxmann.com 304 laying down the same proposition.
We have considered the submissions of the parties and perused the material on record in the light of the decisions relied upon.
Undisputedly, the assessee has entered into a registered Development Agreement on 3.6.2008 and the sale consideration to be paid to the assessee in terms of the said Development Agreement was received in installments and the last of such installment amounting to Rs. 50 lacs was received by the assessee on 5.7.2009. These facts have not been controverted by the Department. The only issue which arises for consideration is, whether in the aforesaid facts and circumstances, the period of 6 months provided u/s 54EC should be reckoned from the date of Development Agreement or the date of receipt of last installment. While the assessee has claimed deduction u/s 54EC of the Act pleading that the 6 months period should be counted from the date of receipt of last installment, Assessing Officer has rejected such claim holding that it should be reckoned from the date of Development Agreement. We find that identical nature of dispute came up for consideration before ITAT, Pune Bench in the case of Mahesh Nemichand Ganeshwade (supra), wherein, the Tribunal after analyzing the object for which the provision contained u/s 54EC of the Act was brought to statute and other attendant circumstances ultimately concluded that if the assessee invests the sale consideration/capital gains in the bonds within a period of 6 months from the date of receipt of money, it will be eligible for exemption u/s 54EC of the Act. The relevant observation of the Tribunal is reproduced hereunder for convenience :-
“18. In our considered opinion, the interpretation placed by the CBDT in consultation with the Ministry of Law to the condition of making investment within six months from the date of transfer in section 54EC would support the claim of the assessee in this case also for exemption from capital gain with respect to the impugned sum of Rs.50 lakhs invested in specified assets on 3.8.2007 and 27.10.2007. In the present case, admittedly the impugned amount of sale proceeds have been received by the assessee much after the date of transfer i.e. 12.7.2005, so however, it is also emerging from the record that the investments of Rs.12,50,000/- and Rs.37,50,000/- made on 3.8.2007 and 27.10.2007 respectively have been made within six months of receipt of such consideration. Therefore, having regard to the interpretation placed by the CBDT to understand the requirement of making investment within six months from the date of transfer in section 54EC of the Act we are inclined to uphold the plea of the assessee for exemption from tax on capital gain qua impugned amount of Rs. 50 lakhs. Therefore on this aspect, assessee has to succeed. Thus, this Ground of appeal is allowed.”
6. The ITAT, Kolkata Bench in the case of Chanchal Kumar Sircar (supra) has also expressed a similar view. As the facts in assessee’s case are more or less similar and the ld. DR has not brought to our notice any contrary decision, respectfully following the aforesaid decisions of the ITAT, we hold that the assessee is eligible for exemption u/s 54EC of the Act. Accordingly, we uphold the order of CIT(A) by dismissing the ground raised.
In the result, appeal of Revenue is dismissed.
Order pronounced in the open court on 23rd September, 2016.