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Income Tax Appellate Tribunal, ‘D’ BENCH, CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI A. MOHAN ALANKAMONY
आदेश /O R D E R
PER N.R.S. GANESAN, JUDICIAL MEMBER:
These appeals filed by both the Revenue and the assessee are directed against the order of the Commissioner of Income Tax (Appeals), Coimbatore, dated 9.10.1992, for assessment year 1990-
Since common issue arises for consideration in all these appeals, we heard these appeals together and disposing of the same by this common order.
First, let’s take Revenue’s appeal in I.T.A.
No.3171/Mds/1992.
Dr. B. Nischal, the Ld. Departmental Representative, submitted that the assessee discounted the Industrial Development Bank of India (IDBI) bonds and received entire interest of `3,52,500/- during the assessment year under consideration.
However, the same was not offered for taxation. The assessee has admitted only a sum of `1,07,708/- being the proportionate interest for eleven months. According to the Ld. D.R., since the assessee has received entire amount of `3,52,500/- during the year under consideration, the Assessing Officer reopened the assessment under Section 147 of the Income-tax Act, 1961 (in short 'the Act') and assessed the same. However, the CIT(Appeals) deleted the addition on the ground that the interest was received in advance on capital bonds attributable to 36 months. Therefore, the right to receive the amount accrued to the assessee arises only in the next assessment year. The advance cannot be construed as income of the assessee during the year under consideration. The CIT(Appeals) has also found that reopening of assessment was due to change of opinion, therefore, he deleted the addition on the ground that the Assessing Officer has no jurisdiction to reopen the assessment. According to the Ld. D.R., the income chargeable to tax escaped assessment, therefore, the Assessing Officer has rightly reopened the assessment, hence, the CIT(Appeals) is not justified in deleting the addition made by the Assessing Officer.
On the contrary, Shri S. Sridhar, the Ld.counsel for the assessee, submitted that what was received by the assessee is nothing but interest on IDBI bonds. However, the assessee received the same in advance. According to the Ld. counsel, the assessee has no right to receive the interest in advance. Merely because the advance was received on a discounted rate, that cannot be a reason to treat the same as income of the assessee.
According to the Ld. counsel, the interest on IDBI bonds has to be assessed in the year in which the assessee has right to receive the money, therefore, the assessee has rightly offered the proportionate interest to the extent of `1,07,708/-. The CIT(Appeals) has rightly found that the reopening was due to change of opinion, therefore, he cancelled the assessment on jurisdiction also. According to the Ld. counsel, the Assessing Officer is not justified in reopening the assessment under Section 147 of the Act.
We have considered the rival submissions on either side and perused the relevant material available on record. Admittedly, the assessee discounted the IDBI bonds and received a sum of `3,52,500/- in the year under consideration. The interest on the bonds was spread over for 36 months. What was received by the assessee is the entire interest for 36 months in advance. This Tribunal is of the considered opinion that the entire money received by the assessee cannot be construed as income in the hands of the assessee. What was to be construed as income is in respect of the money received for which the assessee has right to retain the same.
In the case before us, what was received by the assessee is advance money which would have been otherwise paid for 36 months. Therefore, the assessee has no right to retain the same.
Hence, this Tribunal is of the considered opinion that the CIT(Appeals) has rightly deleted the addition made by the Assessing Officer on merit. Since we have confirmed the order of the CIT(Appeals) on merit, it may not be necessary to go into the question of reopening of assessment under Section 147 of the Act.
Now coming to the assessee’s appeal in I.T.A.
No.1831/Mds/1994, Shri S. Sridhar, the Ld.counsel for the assessee, submitted that the assessee has transferred capital asset to M/s Indian Express (Madras) Pvt. Ltd. on 17.04.1989 for a total consideration of `37,79,978/- and claimed exemption under Section 54E of the Act. The Assessing Officer disallowed the claim of the assessee. The assessee had deposited in IDBI bonds only `15,00,000/- and claimed exemption on the entire amount of `37,79,978/-. Accordingly, the Assessing Officer proportionately allowed exemption under Section 54E of the Act. The Ld.counsel further submitted that the CIT(Appeals) restricted the claim under Section 48(2) of the Act to `10,34,131/- as against the claim of `17,14,486/-. According to the Ld. counsel, the authorities below ought to have allowed the entire claim as exemption under Section 48(2) and 54E of the Act.
On the contrary, Dr. B. Nischal, the Ld. Departmental Representative, submitted that the assessee filed revision petition under Section 264 before the Administrative Commissioner. The Administrative Commissioner found that any deduction before allowing under Section 54E of the Act, more particularly deduction under Section 48(i)(b) of the Act, has to be restricted only with regard to the amount invested in IDBI bonds. The Ld. D.R. further submitted that deduction under Section 48(i)(b) of the Act has to be made only to the capital gain determined under Section 48(i)(a) of the Act. Referring to Sections 54E and 48(i)(b) of the Act, the Ld. D.R. submitted that both the sections are operating in two different ways and therefore, no ambiguity in the application of Section 54E of the Act for exemption on long term capital gains if it is invested as prescribed therein. The Ld. D.R. further submitted that the assessee has transferred the capital asset, the immovable property for a total consideration of `37,79,978/- on 17.04.1989, and the assessee claimed exemption of the entire capital gain of `36,68,051/-. The Assessing Officer, however, found that the assessee has deposited only `15,00,000/- in IDBI bonds, therefore, he computed the exemption proportionately and allowed exemption to the extent of `14,55,000/- as against `36,68,051/- claimed by the assessee. According to the Ld. D.R.,this was rightly confirmed by the CIT(Appeals).
We have considered the rival submissions on either side and perused the relevant material available on record. The capital gain computed by the assessee to the extent of `36,68,051/- on sale of 75% of his right in the immovable property was claimed exemption under Section 54E of the Act. The Assessing Officer found that what was deposited in IDBI bonds is only `15,00,000/-.
Accordingly, he computed the exemption proportionately. It is obvious from the provisions of the Act that the assessee has to necessarily invest either in the capital asset or Capital Gains Bond as prescribed under Section 54E of the Act. For claiming exemption, the assessee has invested only `15,00,000/-.
Therefore, the assessee is entitled for exemption proportionately.
Accordingly, the CIT(Appeals) has rightly allowed the exemption proportionately. This Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.
The Revenue has filed one more appeal against the order of the CIT(Appeals) dated 16.06.1994.
The only issue arises for consideration is with regard to computation of capital gains.
The Ld. Departmental Representative submitted that the Assessing Officer computed the exemption under Section 54E of the Act at `14,55,000/- as against the claim of `36,68,051/-. On appeal by the assessee, the CIT(A) found that the deduction admissible under Section 54E of the Act is `11,33,926/- and the chargeable capital gains will be `17,23,552/-. The CIT(Appeals) has also found that further deduction of 60% has to be allowed under Section 48(2) of the Act. Ultimately, the CIT(Appeals) found that the exemption will be to the extent of `10,34,131/- and the assessable capital gains would be `6,89,421/-. Accordingly, the CIT(Appeals) estimated the capital gain chargeable to tax at `6,89,421/-. The Ld. D.R. further submitted that the CIT(Appeals) ought to have adopted the original cost of asset for which the property was acquired under Section 49 of the Act.
We have heard Shri S. Sridhar, the Ld.counsel for the assessee also. This issue was examined in the assessee’s appeal in I.T.A. No.1831/Mds/1994. This Tribunal found that after the consideration received by the assessee, what was deposited in IDBI bonds within the prescribed time is only `15,00,000/-. Therefore, the Tribunal upholds the order of the Assessing Officer which proportionately allowed exemption under Section 54E of the Act. In this appeal, the CIT(Appeals) has further allowed 60% under Section 48(2) of the Act. The 60% might have been allowed for improvement, etc. made by the assessee to the property.
Ultimately, the capital gains chargeable to tax was computed at `6,89,421/-. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.
In the result, all the appeals filed by the Revenue and the assessee are dismissed.
Order pronounced on 22nd April, 2016 at Chennai.