ITO, COIMBATORE vs. SHRI R.VENKATACHALAM, COIMBATORE

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-

appeals, we heard these appeals together and disposing of the

same by this common order.

No.3171/Mds/1992.

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

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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.

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

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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.

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

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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.

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

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ought to have allowed the entire claim as exemption under Section

48(2) and 54E of the Act.

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

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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).

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

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with the order of the lower authority and accordingly the same is

confirmed.

the CIT(Appeals) dated 16.06.1994.

computation of capital gains.

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)

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ought to have adopted the original cost of asset for which the

property was acquired under Section 49 of the Act.

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.

assessee are dismissed.

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Order pronounced on 22nd April, 2016 at Chennai.

sd/- sd/- (ए. मोहन अलंकामणी) (एन.आर.एस. गणेशन) (A. Mohan Alankamony) (N.R.S. Ganesan) लेखा सद�य/Accountant Member �या�यक सद�य/Judicial Member

चे�नई/Chennai, �दनांक/Dated, the 22nd April, 2016.

Kri.

आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. �नधा�रती /Assessee 2. Assessing Officer 3. आयकर आयु�त (अपील)/CIT(A), Coimbatore 4. आयकर आयु�त/CIT, Coimbatore 5. �वभागीय ��त�न�ध/DR 6. गाड� फाईल/GF.