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Income Tax Appellate Tribunal, MUMBAI BENCHES “B”, MUMBAI
Before: Shri Joginder Singh, & Shri Rajesh Kumar
Per Joginder Singh (Judicial Member) The Revenue is aggrieved by the impugned order dated 20/05/2013 of the ld. First Appellate Authority, Mumbai.
The only ground raised in this appeal pertains to allowing exemption u/s 54EC of the Income Tax Act, 1961 (hereinafter the Act). The crux of the argument advanced by Shri Baldwin D. Fernandes Shri Randhir Gupta, ld. DR, is that the assessee did not made any investment within six months from the date of transfer and further did not fulfill the conditions prescribed in the agreement, therefore, exemption was wrongly allowed to the assessee. On the other hand, none was present for the assessee in spite of issuance of registered AD notice, therefore, we have no option but to proceed ex-parte qua the assessee and tend to dispose off this appeal on the basis of material available on record 2.1. If the observation made in the assessment order, leading to addition made to the total income, conclusion drawn in the impugned order, material available on record, assertions made by the ld. respective counsel, if kept in juxtaposition and analyzed, the facts, in brief are that the assessee is an individual declared income of Rs.3,17,780/- in his return filed on 23/04/2008. The assessee entered into a development agreement with Sahil Builders for sale of plot for a consideration of Rs.1,95,00,000/- and the agreement was registered on 26/04/2007. As per the development agreement, the terms of the payments were that the assessee has to make the payments as per the schedule mentioned at page 7 of the impugned order, i.e. the different payments were to be made from 09/03/2007 and till 02/04/2011, the last payment of Rs.5 lakh was to made at the time of conveyance. The assessee received Rs.45 lakh each on 07th and 08th October and invested the same in REC bond (Rs.50 lakh on 08/03/2008 and Rs.30 lakh on 14/03/2009) within Shri Baldwin D. Fernandes six months from the date of payment received from the developer. The ld. Assessing Officer was of the view that the amount has to be invested either from 09/03/2007 or 26/04/2007 (date of signing of agreement), whereas, the stand of the assessee is that the period of six months has to be calculated from the date when the amounts were actually received by the assessee. Now the moot question is to be adjudicated whether the claimed benefit is to be counted from the date of agreement or the date when the assessee actually received the amount? Before coming to any conclusion, we are expected to analyze the provision of section 54EC of the Act. The relevant provision is reproduced hereunder:-
Capital gain not to be charged on investment in certain bonds. 54EC. (1) Where the capital gain arises from the transfer of a long-term capital asset (the capital asset so transferred being hereafter in this section referred to as the original asset) and the assessee has, at any time within a period of six months after the date of such transfer, invested the whole or any part of capital gains in the long-term specified asset, the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say,— (a) if the cost of the long-term specified asset is not less than the capital gain arising from the transfer of the original asset, the whole of such capital gain shall not be charged under section 45; (b) if the cost of the long-term specified asset is less than the capital gain arising from the transfer of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of acquisition of the long- term specified asset bears to the whole of the capital gain, shall not be charged under section 45 :
Shri Baldwin D. Fernandes Provided that the investment made on or after the 1st day of April, 2007 in the long-term specified asset by an assessee during any financial year does not exceed fifty lakh rupees : [Provided further that the investment made by an assessee in the long-term specified asset, from capital gains arising from transfer of one or more original assets, during the financial year in which the original asset or assets are transferred and in the subsequent financial year does not exceed fifty lakh rupees.] (2) Where the long-term specified asset is transferred or converted (otherwise than by transfer) into money at any time within a period of three years from the date of its acquisition, the amount of capital gains arising from the transfer of the original asset not charged under section 45 on the basis of the cost of such long-term specified asset as provided in clause (a) or, as the case may be, clause (b) of sub-section (1) shall be deemed to be the income chargeable under the head "Capital gains" relating to long-term capital asset of the previous year in which the long-term specified asset is transferred or converted (otherwise than by transfer) into money. Explanation.—In a case where the original asset is transferred and the assessee invests the whole or any part of the capital gain received or accrued as a result of transfer of the original asset in any long-term specified asset and such assessee takes any loan or advance on the security of such specified asset, he shall be deemed to have converted (otherwise than by transfer) such specified asset into money on the date on which such loan or advance is taken. (3) Where the cost of the long-term specified asset has been taken into account for the purposes of clause (a) or clause (b) of sub-section (1),— (a) a deduction from the amount of income-tax with reference to such cost shall not be allowed under section 88 for any assessment year ending before the 1st day of April, 2006; (b) a deduction from the income with reference to such cost shall not be allowed under section 80C for any assessment year beginning on or after the 1st day of April, 2006. Explanation.—For the purposes of this section,— (a) "cost", in relation to any long-term specified asset, means the amount invested in such specified asset out of capital gains Shri Baldwin D. Fernandes (b) "long-term specified asset" for making any investment under this section during the period commencing from the 1st day of April, 2006 and ending with the 31st day of March, 2007, means any bond, redeemable after three years and issued on or after the 1st day of April, 2006, but on or before the 31st day of March, 2007,— (i) by the National Highways Authority of India constituted under section 3 of the National Highways Authority of India Act, 1988 (68 of 1988); or (ii) by the Rural Electrification Corporation Limited, a company formed and registered under the Companies Act, 1956 (1 of 1956), and notified by the Central Government in the Official Gazette for the purposes of this section with such conditions (including the condition for providing a limit on the amount of investment by an assessee in such bond) as it thinks fit: Provided that where any bond has been notified before the 1st day of April, 2007, subject to the conditions specified in the notification, by the Central Government in the Official Gazette under the provisions of clause (b) as they stood immediately before their amendment by the Finance Act, 2007, such bond shall be deemed to be a bond notified under this clause; (ba) "long-term specified asset" for making any investment under this section on or after the 1st day of April, 2007 means any bond, redeemable after three years and issued on or after the 1st day of April, 2007 by the National Highways Authority of India constituted under section 3 of the National Highways Authority of India Act, 1988 (68 of 1988) or by the Rural Electrification Corporation Limited, a company formed and registered under the Companies Act, 1956 (1 of 1956). 2.2. If the aforesaid provision is analyzed, it deals with capital gains not to be charged on investment in certain bonds. Sub-section (1) speaks where the capital gain arises from the transfer of long term capital asset and the assessee has any time within a period of six months, after the date of such transfer, invest, the whole or any part of the capital Shri Baldwin D. Fernandes gains in the long term specified asset, the capital gain shall be dealt with in accordance with the provisions of the section. The position has been clarified with insertion of explanation which speaks about ‘cost in relation to any long term specified asst’, means the amount invested in such specified asset out of the capital gains received or accruing as a result of the transfer of the original asset, meaning thereby, the date of receipt or accruing are the important dates for making investment. The property in question, i.e., joint property was sold vide agreement dated 02/04/2008 for a consideration of Rs,1,67,75,000/-. The relevant dates of the receipt of the consideration are summarized as under:-
Sl. The date of Amounts Total amount Stand of the No. receipt of the received Assessing Officer amount/ installment 1. 01/04/2008 14,30,000 + 30,60,000 Allowed by 1,00,000 + Assessing Officer 15,30,000 2. 15/07/2008 15,50,000 15,50,000 Allowed by Assessing Officer 3. 12/11/2008 50,50,000 50,50,000 Allowed by Assessing Officer 4. 05/07/2009 50,00,000 50,00,000 Assessing Officer denied claimed deduction u/s 54EC 2.3. If the aforesaid amounts are analyzed, the ld. Assessing Officer allowed the claimed deduction u/s 54EC of the Act for the amounts mentioned at serial no. 1 to 3 but denied for the amount mentioned at serial no at 4, by taking the period of six months from the date of agreement i.e. 02/04/2008. The Assessing Officer misdirected himself with Shri Baldwin D. Fernandes respect to the pattern of investment. Unless and until anybody receives the amount, which are paid as a part of the detailed brake up, how the assessee can invest the same. The exemption for the amount, which was denied by the Assessing Officer was received by the assessee only on 05/07/2009, thus, the period of six months has to be calculated from this date and not from the date of agreement. The impugned amount was invested in REC bond by the assessee in July, 2009 itself, thus, the assessee cannot possibly perform the impossible Act because the provision u/s 54EC provides for exemption from tax to long term capital gain, provided the same is invested in the specified bonds, decided by the Government. Our view find supports from the decision from Hon’ble jurisdictional High Court in Cello Plast (2012) 24 taxman.com 111 (Bom.) to the effect that law does not compel a man to do that which he cannot possibly perform. Even otherwise, section 54EC prescribes that exemption shall be available if the investment is made in the specified bonds within a period of six months, thus, the assessee, possibly can make the investment of the amount within the specified period, when it is received by the assessee. The intent and purpose of section 54EC is the date, when the assessee actually collects/receives the sale consideration and thereafter makes investment within six months and that is the date of transfer, thus, the spirit of the legislation is very much clear. If the date of the agreement is taken and the assessee does not receive any consideration, then, where is the question of investment? The investment Shri Baldwin D. Fernandes can only be made when any amount is actually received by the assessee. In fact, date of receipt by the assessee/investor and date of deposit for obtaining the prescribed bonds are important dates. Suppose, the required bonds are not available with a particular bank/institution and are issued at a later stage, the date of deposit of the amount in the bank or the institution, as the case may be, are the relevant dates for getting the benefit of exemption u/s 54EC of the Act. For the purpose of section 54EC, the date of investment is to be regarded as the dates of investment/ the payment received by the authorized bank, thus, we find no infirmity in the conclusion drawn by the ld. Commissioner of Income Tax (Appeals). Finally, the appeal of the Revenue is dismissed. This Order was pronounced in the open court in the presence of ld. DR at the conclusion of the hearing on 19/10/2015.