TREADSDIRECT LIMITED,COIMBATORE vs. JCIT, COIMBATORE

आदेश / O R D E R PER G. PAVAN KUMAR, JUDICIAL MEMBER:

These are cross appeals filed by assessee and department

against order of Commissioner of Income Tax (Appeals)-I, Coimbatore

in ITA No.63/13-14, Dated 02.09.2014 for the assessment year 2010-

2011 passed u/s.143(3) and 250 of the Income Tax Act, 1961. For the

sake of convenience first we take up ITA No.2794/Mds/2014 for

adjudication.

The Brief facts of the case are that the assessee is domestic 2.

company in which public are not substantially interested, located at

Coimbatore and in the business of manufacture and sale of tread

rubber, bonding gum and allied products, retreading of types,

generation and distribution of power from wind mills. For the

assessment year 2010-2011, the assessee has filed return of income

on 24.09.2010 declaring total income of �29,22,05,072/-. Further,

the return was processed u/s.143(1) of the Act and case was selected

for scrutiny and notice u/s.143(2) of the Act was issued. In response

to the notice, the assessee’s Director and Manager appeared from time

to time and filed information called for by way of questionnaire dated

16.12.2012. At the time of hearing Books of accounts, Annual Report

and financial statements and Tax Audit Report in form 3CA and 3CD

ITA Nos.2794 &2941/Mds/2014 :- 3 -:

alongwith enclosures were submitted to the Assessing Officer and

ld.AO has made additions on account of excess deduction u/Sec 54EC

of the recoverable write off, Gratuity payments, foreign travel,

expenditure, overseas Commission and other expenditure to the

returned income and assessed income at �31,62,19,530/- and raised

demand. Aggrieved by the order of the Assessing Officer, the

assessee filed an appeal before the Commissioner of Income Tax

(Appeals).

In the appellate proceedings, the ld. Commissioner of 3.

Income Tax (Appeals) after hearing the arguments and perusing the

written submissions has granted part relief and confirmed the additions

of Assessing Officer in respect of Recoverable amount write off,

Gratuity Payment and Foreign Travel Expenses. Aggrieved by the

order of the Commissioner of Income Tax (Appeals), the assessee and

Revenue has filed appeals before the Tribunal.

The first ground raised by the assessee in respect of 4.

disallowance of �4,92,692/- is recoverable written off in the Profit and

Loss Account. In the assessment proceedings, the Assessing Officer

issued questionnaire and assessee Authorised Representative

submitted material evidence in respect of Sundry Debtors were

recovery is doubtful and same is written off. The ld.

ITA Nos.2794 &2941/Mds/2014 :- 4 -:

Authorised Representative has submitted Ledger Accounts, Sundry

Creditors account and also Closing stock account as on 31.03.2010.

The system of accounting being provision made but not credited to the

Debtors account. It was explained that Debtor accounts is credited

with provision it would be difficult for the recovery in the legal course.

The assessee has claimed the Bad Debts written off following

principles of Section 36(1) (vii) of the Income Tax Act, 1961 but the

Assessing Officer relied on the decision of Allahabad High Court in the

case of M/s. Jubilant Organosys vs. CIT (2004) 265 ITR 420. Further

in the appellate proceedings before the Commissioner of Income Tax

(Appeals) the assessee has filed written submissions and relied upon

the decision of Supreme Court in the case of Vijaya Bank vs. CIT and

Others (2010) 323 ITR 166 wherein it has been held that there is no

need to debit the accounts of debtors and need not be squared off

and the claim can be allowed subject to verification by Assessing

Officer on the accounting treatment. The ld.CIT(A) relied on the

findings of the Assessing Officer and considered that such provisions

are against principles of Section 36(i)(vii) of the Act were the accounts

are not squared off. The assessee has not written off the accounts

instead of giving credit to the Sundry Debtors made provision in

Balance Sheet. Aggrieved by the order of the CIT(A) the assessee

has filed an appeal before the Tribunal.

ITA Nos.2794 &2941/Mds/2014 :- 5 -:

4.1 The ld. Authorised Representative submitted that the

ld.CIT(A) has erred in upholding the order of the Assessing Officer and

methodology of Accounting and relied on the judicial decisions. The

assessee company has claimed deduction in the profit and loss account

for recoverable amount written off which the Assessing Officer verified

on the basis of information submitted in the assessment proceedings.

Further, the assessee company instead of writing off the accounts and

crediting the debtors account, has written off the amount which is in

accordance of law and pleaded for deletion of addition.

4.2 On the other hand, the ld. Departmental Representative

relied on the order of the Commissioner of Income Tax (Appeals) and

contested the issue.

4.3 We heard the rival submissions of both the parties, perused

the material on record and also judicial decisions cited. The assessee

has been following the system of Accounting methodology which is

accepted. Bad Debts occurred in the normal course of business and

write off can be made after considering the recovery of Debtors

becoming doubtful and the assessee has not squared off the debtors

account. Under amended provisions of section 36(i)(vii) of the act effective from 1st April, 1989, in order to obtain a deduction in relation

to bad debts, it is not necessary for the assessee to establish that the

ITA Nos.2794 &2941/Mds/2014 :- 6 -:

debt, in fact has become irrecoverable, it is enough if the bad debt is

written off as irrecoverable in the accounts of the assessee. Further,

the assessee has not placed on record before the lower authorities to

show that it debtors were not in a position to pay the debts or have

refused for payment. It is an unilateral act on the part of the assessee

to write off all these amount without bring any material on record to

show that amount are not recoverable. We rely on the decision of

Apex Court in the case of T.R.F. Ltd vs. Commissioner of Income Tax

(2010) 323 ITR 397(SC) and also similar issue was dealt by the

Jurisdictional High Court in the case of South India Surgical Co. Ltd vs.

ACIT (2006) 287 ITR 62 (Mad) where it was held as under:-

‘’It is not sufficient for the assessee to say that he became pessimistic about the prospect of recovery of the debt in question. He must feel honestly convinced that the financial position of the debtor was so precarious and shaky and that it would be impossible to collect any money from him. The question is really one of fact depending upon the various facts and diverse circumstances bearing on the debtors pecuniary position, his commitments and obligations. The judgment of the assessee in regarding the debt as a bad debt must be an honest judgment and not a convenient judgment. The judgment of the assessee must be established to have been taken on relevant facts and circumstances which should show that the debt is not realizable for some fault on the part of the debtor or some supervening impossibility on the part of the debtor to pay, but not possible difficulties or hurdles the assessee may have to incur to compel the recalcitrant debtor to pay. The assessee for his convenience may decide that the debt is too small and it is not worthwhile to pursue the debtor but that judgment would not be an honest judgment, which would establish that the debt has become a bad debt. A time-barred debt can be assumed to be bad, but is not necessarily bad because of expiry of limitation for recovery of the same.

ITA Nos.2794 &2941/Mds/2014 :- 7 -:

We after considering the accounting methodology of assessee

company and provisions of law on bad debts and judicial decisions do

not find any infirmity in the order of the Commissioner of Income Tax

(Appeals) on this ground and same is upheld. Hence ground of the

assessee is dismissed.

5 The second ground raised by the assessee company is that

the assessee has debited a sum of �40,46,754/- towards contribution

made towards the approved Employees Group Gratuity Fund Trust.

5.1 The Elgi Tyre and Tread Limited as per the scheme of

Arrangement approved by the Madras High Court has formed a

Employees Group Gratuity Fund Trust and subsequently as name M/s.

Treadsdirect Employees Group Gratuity Fund Trust. As per the

scheme of arrangement by High Court order all the approvals obtained

for erstwhile Company is applicable to the demerged companies also.

Since the assessee company is demerged company and scheme

guidelines shall be applicable. The ld. Authorised Representative

submitted trust deed copies pertaining to earlier company and also

demerged company and argued that that there was no change in

constitution or amendment to the object of the trust. This contribution

is made to protect the rights of its employees. There is no dispute

about the demerged scheme of arrangement but only apprehension

ITA Nos.2794 &2941/Mds/2014 :- 8 -:

that subsequent to de-merger, the assessee company should obtained

fresh approval from the Commissioner of Income Tax. Considering

the non approval by the Commissioner of Income Tax, the Assessing

Officer disallowed the claim. Against this, the assessee has filed an

appeal.

5.2 Before the ld. Commissioner of Income Tax (Appeals) the

assessee has made submissions at page 8 of the CIT order as under:-

‘’This ground of appeal is regarding the disallowance of ₹40,46,754/- being contribution made to Employees Gratuity Fund Account.

The Joint Commissioner of income tax disallowed ₹40,46,754/- payment of paid to Treadsdirect employee group gratuity trust on the contention that the same was not approved by the Commissioner.

The contention of the Joint Commissioner of income tax is not correct as Hon'ble Madras High Court in its order vide paragraph 3.14 clearly mentioned that as for as Provident fund, Gratuity fund, Super annuation fund on any other fund created on existed for the benefit of staff, workmen and the employees of the manufacturing division of ElL are Concerned, upon the scheme becoming effective TDL shall stand substituted for ElL.

Since, the scheme was made as per Hon'ble Madras High Court order there was no necessity for getting approval once again in the name of the new company as all employees, staff's were the same.

Further, the Joint Commissioner of income tax failed to consider the following decisions:

( i) Sri Krishna Drugs ltd Vs ACIT-ITAT Hyderabad ( ii) Aspinwall & co Vs CIT Kerala High Court

ITA Nos.2794 &2941/Mds/2014 :- 9 -:

Where it was held that contribution to even unregnized gratuity fund and unrecognized gratuity fund account is an allowable expenditure u/s.37 even if the same cannot be allowed under section 36(1)(V). Since the Joint Commissioner of Income Tax has not disputed the contribution made to the fund before filing the return of income, the contribution of ₹40,46,754/- will quality for deduction under section 37 if not allowable under section 36(1)(V) as it has been incurred wholly and exclusively for the purpose of business protection. The ld.CIT(A) acquainted with the order of Jurisdictional High Court

order on the scheme of arranged but on technical ground that

subsequent to demerger there should be a compulsory approval of

Commissioner of Income Tax even though there is no change in the

objects or alternation in the rules and relied on the order of the

Assessing Officer and confirmed the order. Against Commissioner of

Income Tax (Appeals) order assessee filed an appeal before the

Income Tax Appellate Tribunal.

5.3 Before the Tribunal, the ld. Authorised Representative

submitted that the assessee company is a demerged company and all

the terms and conditions apply and necessary approvals which are

applicable for Treads Direct Limited shall remain with the de-merged

company. The ld. Authorised Representative also

relied on the letter of the office of the Commissioner of Income Tax

giving approval from 20.02.1989 and prayed for deletion of addition.

ITA Nos.2794 &2941/Mds/2014 :- 10 -:

5.4 On the other hand, the ld. Departmental Representative

relied on the orders of the lower authorities and vehemently argued for

dismissal of the appeal.

5.5 We have heard the rival submissions of both the parties,

perused the materials on record and orders of the lower authorities.

The assessee company is a de-merged company from the Elgitread

(India) Ltd as per the composite scheme of arrangement and

amalgamation and the approval was granted with effect from

04.04.2008 and this assessment year being the second year of

operations after de-merger the Revenue has considered the approval

of High Court but disallowed the contribution to the gratuity fund.

The ld.AR drew our attention to page No.68 of paper book were the

gratuity fund was approved by letter dated 12.04.1990 which is in

existence from earlier year and Revenue has accepted the

contribution till the date of De-merger. The Revenue has disputed this

issue after post De-merger, even though there is no such change in

objects. But the ld.CIT(A) erred in upholding the order of the

Assessing Officer without realizing that gratuity fund is for welfare

measures of the employees, and has been approved from 1990

onwards. Since there is a apprehension by the Revenue that approval

has to be obtained for the name change, we remit the issue in dispute

ITA Nos.2794 &2941/Mds/2014 :- 11 -:

to the file of the Assessing Officer to re-examine the gratuity fund

objective and contributions and assessee shall obtain necessary

approvals from the Income Tax Department if required. It is

nevertheless to say that opportunity of being heard be granted to the

assessee and decide the issue on merits.

6 The last ground raised by the assessee in respect of foreign

travel expenses. The Assessing Officer has disallowed an amount of

�5,14,876/- in respect of foreign travel expense not related to

business. In the assessment proceedings, the assessee has filed details

of travel expenditure with statements. The assessee being a global

company has branches and subsidiaries in many countries and incurs

expenditure on business promotion or administrative works. The

Assessing Officer contention that the expenses are related to

subsidiary companies and the parent company cannot claim the

deduction, and disallowed expenditure. Aggrieved, by the order the

assessee preferred an appeal before the Commissioner of Income Tax

(Appeals).

6.1 In the appellate proceedings, the ld. Commissioner of

Income Tax (Appeals) considered the submissions and also the

reasons for expenditure incurred for the purpose of subsidiary

ITA Nos.2794 &2941/Mds/2014 :- 12 -:

companies. The Accounts department executives of assessee company

has to travel to branches for consolidation of Accounts for preparation

of Balance Sheet and incurred expenditure wholly and exclusively for

the purpose of Business. But the ld. Commissioner of Income Tax

(Appeals) confirmed the disallowance made by the Assessing Officer

with a finding that subsidiary companies are independent companies

and governed with laws in respective countries. Therefore, the

expenditure incurred for finalization and preparation of accounts and

the Auditing is required to be borne by them. Aggrieved by the order,

the assessee preferred an appeal before the Tribunal.

6.2. Before the Tribunal, the ld. Authorised Representative has

filed paper book, submitted statements of Foreign Travel Expenses

incurred alongwith name and designation of executives of the

company and disallowance made by Assessing Officer purely referred

to employees of Finance Department visits to subsidiary companies for

Accounts finalization and for consolidation of accounts required under

Indian Law. Further, the ld. Authorised Representative argued that

percentage of Travel expenses on a turnover if considered on

percentage basis is very negligible considering the global business

operations and prayed for deletion of addition.

ITA Nos.2794 &2941/Mds/2014 :- 13 -:

6.3 On the other hand, the ld. Departmental Representative

relied on the orders of the lower authorities and vehemently argued for

dismissal of the appeal.

6.4 We heard the rival submissions of both the parties, perused

the materials on record and orders of the lower authorities.

The assessee company is having global business operations and

definitely such subsidiary companies are to be managed in accordance

with standard accounting principle and Indian laws. The expenditure

percentage compared to turnover is very small amount. The

expenditure incurred for the business wholly and exclusively in carrying

out the operations and there is nexus between expenditure and

income of parent and subsidiary company. If such expenditure is

disallowed the subsidiary company has to claim deduction in respective

countries accounts. But practically it will be a difficult task considering

double taxation agreements between countries. Therefore, it is

apparent from the facts of the case that the expenditure has been

incurred wholly and exclusively for the purpose of business and falls

within the provisions of Sec.37(1) of the Act. Hence, we direct the

Assessing Officer to delete the addition. The ground of the assessee is

allowed.

Now, we take up Revenue appeal ITA No.2941/Mds/2014:-

ITA Nos.2794 &2941/Mds/2014 :- 14 -:

non deduction of TDS on commission payment made to foreign

agencies. The assessee has paid export commission of �42,87,219/-

and claimed in Profit and Loss account. In the assessment

proceedings, the ld. Authorised Representative has produced TDS

details and also commission details and explained that provisions u/s

40 (a)(ia) of the Act will not apply to the foreign agencies who do not

have business connection or permanent establishment in India. All

the foreign commission payments are incurred for the export turnover

and no part of income was received by them in India which deemed

to be accrued in India. The Assessing Officer on perusal of Sections

5(2) and 9(1) Explanations firmly believed that there is a

establishment of business connection in India and such payment is

subject to TDS. The assessee has filed detailed explanations covering

the provisions of TDS applicability, residential status and also CBDT

circulars and established that there is no business connection or

foreign agent in India and relied on the Judicial decision of Apex Court

in the case of CIT vs. Toshoku Ltd 125 ITR 525 wherein it was held

that if selling agent outside India does not have business connection

in India and such services rendered in India cannot be deemed or

accrued received in India. The Supreme Court also considered the

provisions of Section 5(2), 9(1) (i), 160 and 163 of the Act and also

ITA Nos.2794 &2941/Mds/2014 :- 15 -:

circulars and the assessee has established that commission was paid

only for the purpose of managing sales of assessee outside India

which involves technical expediency for marketing. But the ld.

Assessing Officer was trying to establish that there is a business

connection with subsidiary Company and disallowed foreign sales

commission of �42,87,219/-. Aggrieved by the order of the Assessing

Officer, the assessee preferred an appeal.

7.1 In the appellate proceedings, the ld. Authorised

Representative has filed written submissions and referenced to double

taxation agreement at page No.12 of CIT order as under:-

‘’The relationship between the assessee and the agents are principal to principal. The agents do not have any PE in India. Any tax that would accrue or arise in only outside the country and not in India. Very importantly this payment does not also fall within the ambit of Section 9(1)(vii) as the services under consideration is not for any technical service rendered nor could not be taken as a job which was managerial in nature. The non-residents are only procuring orders for the assessee and following up payments. No other service are rendered other than procuring the orders and collecting the amounts. The non-residents are not providing any technical services to the assessee. The commission payment made to non –residents also does not fall under the category of royalty of fees of technical services, therefore the Explanation to Sub-section (2) of section 9 has no application to the facts of the assessee’s case.

The Joint Commissioner of Income tax has not considered the following decisions where it has been held clearly that the liability to deduct TDS in respect of sales commission paid to non residents does not arise as n income accrue or arise in India. a) CIT vs. TOSHOKU Ltd (SC) b) DCIT vs. Angelique International Ltd.

ITA Nos.2794 &2941/Mds/2014 :- 16 -:

c) ITO vs Exotic Fruits Pvt. Ltd d) ITO Vs. Faizan Shoes (P) Ltd e) ACIT vs. Farida Shoes Pvt. Ltd f) IT vs. Trident Exports.

Further, the Joint Commissioner of Income Tax erred in disallowing �26,47,092/- twice which is not correct. The export commission payment of �42,87,210/- includes overseas sales commission of �26,47,092/- which was overlooked while passing the order. Ledge abstract of the Commission is enclosed for your kind perusal. 7.2 The ld. Commissioner of Income Tax (Appeals) on perusing

the information and judicial precedents and factual aspects of the

situation relied on the citations and observed that the assessee has

produced the details of the invoice overseas commission payments for

the sale of Tread Rubber and Bonding Gum. The relationship between

the assessee and the agent are principal to agent, and the agent do

not have any permanent establishment in India and deleted the

addition made by the Assessing Officer and aggrieved by

Commissioner of Income Tax (Appeals) order the Revenue has filed

appeal before Tribunal.

7.3 The ld. Departmental Representative raised the grounds on

technical fees and payment made to subsidiary commission attract

TDS provisions and relied on the judicial decisions. At the time of

argument, the ld. DR submitted that Commissioner of Income Tax

(Appeals) erred in allowing the ground of the assessee without

considering the relation of parent and subsidiary company and also use

ITA Nos.2794 &2941/Mds/2014 :- 17 -:

of technical services which attracts TDS and prayed for setting aside of

the order of the Commissioner of Income Tax (Appeals) and restore

the Assessing Officer order.

7.4 On the other hand, the ld. Authorised Representative filed

paper book and referred case laws to defend the case and argued

that the nature of commission is purely accrued or received outside

India by the sales agencies which do not have any permanent

establish in India and produced the Ledgers Accounts of export sale

commission and copy of the invoices raised by the foreign commission

agents, to establish the transaction with the company and relied on

the order of the Commissioner of Income Tax (Appeals).

7.5 We have heard the rival submissions of both the parties,

perused the material on record and orders of the lower authorities

and judicial citations referred by the parties. The ld.AR filed invoice

copies at page Nos.69 to 78 of paper book raised by foreign agents of

different countries on assessee company for commission on sale of

tread rubber and bonding gum. The Co-ordinate Bench of Tribunal in

the case of CIT vs. M.M. Forgings Ltd in ITA No.2679/Mds/2014, dated

19.06.2015 has dealt the issue referred at page No.10 of paper book

at para 12 and 13

ITA Nos.2794 &2941/Mds/2014 :- 18 -:

‘’5. We have heard both parties and gone through the case file. As already stated hereinabove, the CIT(A), whilst deleting the impugned addition u/s 40(a)(i) pertaining to overseas payments made by the assessee on account of commission, warehousing and other charges, has followed order of the 'tribunal'(supra) qua the very issue. On being granted opportunity, the Revenue has failed to prove that these expenses are liable to be taxed in India as income in the hands of concerned payees or any services had been rendered in India. The Revenue submits that the 'tribunal's’ order has not been become final and its appeal is pending before the hon'ble high court. In our considered opinion, mere pendency of an appeal involving the same issue against the order of the 'tribunal' is no ground to adopt a different approach in the impugned assessment year. Thus, we agree with the findings of the CIT(A) under challenge and reject grounds raised by the Revenue.”

ITA Nos.2794 &2941/Mds/2014 :- 19 -:

Similar view was also taken by the Mumbai Bench in the case of Vilas N. Tamhankar in ITA No.4522/Mum/2013 for the assessment year 2009-2010, vide order dated 21.11.2014, and same view was also taken by the jurisdictional High Court in the case of CIT vs. Faizan Shoes Pvt. Ltd, 367 ITR 155 (Mad) and further in the case of Brakes India Ltd. vs. DCIT (LTU) (144 ITD 403) the co-ordinate Bench of the Tribunal, it was held that

Respectfully following the decision of co-ordinate Bench, we dismiss

the ground of the Revenue and uphold the order of the Commissioner

of Income Tax (Appeals).

ITA Nos.2794 &2941/Mds/2014 :- 20 -:

Income Tax (Appeals) erred in allowing the additional deduction

u/s.54EC of the Act.

8.1 The assessee company has sold factory land at Ananthapur

for the aggregating value of �1,18,42,000/- and claimed exemption

u/s.54EC of the Act and produced copies of investment. In

assessment proceedings, it was submitted that the assessee company

has sold the property and invested in 54EC Bonds of �50,00,000/- on

28.02.2010 and �50,00,000/- on 30.04.2010. As per the conditions

specified u/s.54EC, the amount is required to be invested within a

period of six months from the date of transfer for claiming exemption

u/s.54EC of the Act. But the Assessing Officer interpreted that long

term capital gains investment u/s.54EC of the Act during the financial

year should not exceed �50,00,000/- and accordingly excess claim of

�50,00,000/- u/s.54EC is disallowed and brought to tax. Aggrieved by

the order of the Assessing Officer, the assessee preferred an appeal

before the Commissioner of Income Tax (Appeals).

8.2 In the appellate proceedings, the assessee filed detailed

written submissions establishing the investment made by the assessee

is in National Highway Authority of India capital gain bonds before

ITA Nos.2794 &2941/Mds/2014 :- 21 -:

filing the return of income and claimed exemption u/s.54EC of the Act.

The Authorised Representative relied on the provisions of Sec.54EC as

under:-

“Provided that the investment made on or after 1st April of 2007 in the long term specified asset by an assessee ‘’during any financial year’’ does not exceed 50 lakhs rupees’’. The assessee company has invested �50,00,000/- in February, 2010

and �50,00,000/- in April, 2010 both falls within six months from the

date of transfer and prayed for deletion of addition. The ld.CIT(A)

considered the submissions and also relied on the findings of the

Assessing Officer. The Assessing Officer tried to interpret the

provisions by restricting to �50,00,000/- to one financial year only and

observed at page No.5, of paper book para 6 of CIT order as under:-

Section 54EC(1) clearly states that if the assessee has at any point of time within a period of 6 months after the date of transfer of a long term capital asset, invested the whole or part of the capital gain in the long term capital asset, the capital gain shall be dealt with in accordance with the provisions of this Section. The provision clearly states that "investment made on or after 1st April of 2007 in the long term specified asset by an assessee 'during any financial year' does not exceed 50 lakh rupees". It is also to be considered that in the Finance Act 2014, an amendment was made in Section 54EC. As per the amendment, after the proviso to sub section (1), the following proviso shall be inserted w.ef. 1st April 2015 namely, "provided further that the investment made by an assessee in the long term Specified Asset from capital gains arising out of transfer from one or more capital asset during the Financial Year in which the relevant asset or assets are transferred and in the subsequent Financial Year does not exceed 50 lakh rupees'. The intention of the legislature is very clear by putting a restriction in total investments in the Specified Asset at Rs.50 Lakhs only. This

ITA Nos.2794 &2941/Mds/2014 :- 22 -:

amendment is effective from 2015-16 onwards. As per the existing law for the Financial Year 2009-10, the limit of Rs.50 Lakhs is with regard to investments in Specified Assets is for a particular Financial Year and is not linked to the total restriction of investment to Rs.50 Lakhs only. In the case of Smt. Sriram Indubal Vs ITO, Business Ward- VI(3), Chennai, the Hon'ble ITAT Bench 'D', Chennai held that, "if the assessee is able to keep the six months' limit from the date of transfer of capital asset; but; still able to place investment of �50 Lakhs each in two different financial years, we cannot say that the restrictive proviso will limit the claim to �50 Lakhs only. Since assessee here had placed �50 Lakhs in two different financial years but within six months period from the date of transfer of capital asset assessee was definitely eligible exemption upto �1 Crore. Similar view was also expressed in the case of the decision of the Hon'ble ITAT Chennai 'B' Bench, Chennai in the case of M/s. Coromandel Industries Pvt Ltd. Vs ACIT in ITA No.41/Mds/2013. Respectfully following the decision of the Jurisdictional Tribunal, the Assessing Officer is directed to delete the addition of Rs.50 Lakhs and allow the claim of the appellant u/s 54EC of the Income Tax Act, 1961. This ground of appeal is ALLOWED

and allowed the appeal. Aggrieved by the order, the Revenue filed an

appeal before the Tribunal.

8.3 Before the Tribunal, the ld. Departmental Representative

vehemently argued that the Commissioner of Income Tax (Appeals)

has not considered spirit of Sec. 54EC and also amendment to Sec

54EC made in the Finance Bill and prayed that the order be set aside

and allow the ground.

8.4 On the other hand, the ld.AR substainted claim by relying on

the order of the Commissioner of Income Tax (Appeals) and the

amendment to Sec.54EC is a prospective in nature. As far as the

ITA Nos.2794 &2941/Mds/2014 :- 23 -:

assessee company is concerned the law prevailing on the date of

transaction shall apply and supported with judicial decisions of the

Madras High Court in the cases of CIT vs. C. Jaichander 370 ITR 579

(Mad) and CIT vs. Coromandel Industries Ltd. 370 ITR 586 (Mad) and

pleaded to dismiss Revenue appeal.

8.5. We heard the rival submissions of both the parties, perused

the material on record and also judicial citations quoted. The assessee

has invested in long term capital gains within six months from the date

of transfer u/s.54EC of the Act in National Highway Authority of India

capital gain bond and complied with the provisions and there is no

dispute about the investment. The Assessing Officer tried to make a

distinction of provisions for restricting investment of �50,00,000/- only

in one financial year. The assessee company has invested in two

installments falling in two financial years and availed tax exemption.

The ld.CIT(A) had examined the facts and dealt with Finance Act, 2014

on this issue and also relied on Jurisdictional High Court decision of

C. Jaichander and Coromandel Industries Ltd (supra). We after

considering the apparent facts and jurisdictional High Court decision

are not inclined to interfere with the order of the Commissioner of

ITA Nos.2794 &2941/Mds/2014 :- 24 -:

Income Tax (Appeals) and accordingly, dismiss the Revenue ground.

Order pronounced on Thursday, the 31st day of December, 2015, at Chennai.

Sd/- Sd/- (चं� पूजार�) (जी. पवन कुमार) (G. PAVAN KUMAR) (CHANDRA POOJARI) �या�यक सद�य/JUDICIAL MEMBER लेखा सद�य /ACCOUNTANT MEMBER चे�नई/Chennai �दनांक/Dated:31.12.2015 KV आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 3. आयकर आयु�त (अपील)/CIT(A) 5. �वभागीय ��त�न�ध/DR 2. ��यथ�/Respondent 4. आयकर आयु�त/CIT 6. गाड� फाईल/GF