Karnataka High Court
Motor Industries Company Ltd., A ... vs Union Of India (Uoi) Through The ... on 12 December, 2006
Equivalent citations: [2007]289ITR134(KAR), [2007]289ITR134(KARN)
Author: D.V. Shylendra Kumar
Bench: D.V. Shylendra Kumar
ORDER D.V. Shylendra Kumar, J.
1. Writ petitioner is a company registered under the provisions of the Indian Companies Act, 1961 and an assessee under the provisions of the Income Tax Act, 1961 (for short 'the Act'). Petitioner is aggrieved due to the frustration of its intention to avail of certain benefits extended to an assessee in terms of Section 54EC of the Act.
2. If an assessee has made investment from out of the profits arising from the transfer of a "Long Term Capital Assets" in the notified bonds in terms of Section 54EC of the Act, then such income otherwise taxable as gains from the transfer of an asset is exempted from tax in terms of Section 54EC of the Act. Section 54EC of the Act reads as under.-
54-EC: Capital gain not to be charged on investment in certain bonds -
(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 leas 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.
(2) Where a 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 deduction from the amount of income tax with reference to such cost shall not be allowed under Section 88.
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 received or accruing as a result of the transfer of the original asset;
[(b)'long term specified asset" means any bond redeemable after three years, issued, -
(i) on or after the 1st day of April, 2000, by the National Bank for Agriculture and Rural Development established under Section 3 of the National Bank for Agriculture and Rural Development Act, 1981 or by the National Highways Authority of India constituted under Section 3 of the National Highways Authority Act, 1988;
(ii) on or after the 1st day of April, 2001, by the Rural Electrification Corporation Ltd., a company formed and registered under the Companies Act, 1956.]]
(iii) On or after the 1st day of April, 2002, by the National Housing Bank established under sub-section (1) of Section 3 of the National Housing Bank Act, 1987 or by the Small Industries Development Bank of India established under Sub-section (1) of Section 3 of the Small Industries Development Bank of India Act, 1989.] With this background the relief which the petitioner is claiming in the context of an exemption notification dated 29.6.2006, copy at Annexure-A to the petition, issued by the Central Government which has restricted the scope for such investment by notifying that the issue of the bonds wherein the petitioner had an opportunity for investment is restricted to a maximum of Rs. 1,500 crores (redeemable after three years) and to the misfortune of the petitioner, the bonds it appears came to be fully subscribed within short time from the date of issue, though financial year would end only by 31.3.2007; that in spite of transfer of certain assets effected on 26.4.2006, the petitioner finds no way of effecting investments in terms of the provisions of Section 54EC for the purpose of claiming benefit and therefore, is aggrieved by issue of Annexure-A1 & A2 notification, which has drastically reduced the scope for such investment and has approached this Court seeking for issue of a writ of mandamus.
4. Submission of Sri. K.P Kumar, learned Sr. Counsel appearing for the petitioner, is that whereas the provisions of Section 54EC itself does not impose any limit or restriction on the scope of such investments,, since the notification confines the eligible investment to the total of Rs. 1,500 crores, which benefit is available to the public at large; that the notified bonds that are issued having been subscribed, there is no scope for such investment any further and therefore, virtually the provisions of Section 54EC of the Act are rendered nugatory and therefore a writ of mandamus should be issued to compel the Central Government, which has issued the notification and to issue writs as under:-
1. Issue a writ in the nature of mandamus or any other appropriate writ, order or direction to the respondent No. 1 to remove the limit or ceiling prescribed under Annexures A-1 and A-2, thereby enabling respondent Nos. 2 and 3 to accept investment from the petitioner;
2. Issue a writ, order or direction to the respondent No. 1 to act in furtherance of Section 54EC of the Act to enable the petitioner to avail the benefit of exemption thereunder,
3. Issue a writ, order or direction to the respondent Nos. 2 and 3 to accept investment from the petitioner as having been made under Section 54EC of the Act.
4. Issue a writ, order or direction to respondent No. 4 to extend the time for investment in the specified bonds beyond 31.12.2006 till such time as the petitioner has an adequate opportunity to make an investment in the tax exemption bonds issued by respondent No. 2 and 3;
5. Issue a writ, order or direction to respondent No. 5 restraining him from denying the benefit of exemption under Section 54EC of the Act solely because the respondents Nos. 1 to 4 have made it impossible for the petitioner to invest in the requisite bonds;
6. Issue a writ of prohibition to respondent No. 5 ordering and directing him not to levy income tax on the capital gain or not to deny the benefit of exemption under Section 54EC only by reason of the fact that the petitioner is unable to invest in the bonds on account of respondent No. 1 not lifting the ceiling on investment, imposed on the respondent No. 2 and 3.
5. The notification at Annexures-A1 & A2, while no doubt is one, which indicates that investment in such an issue also entails an assesses under the instructions to claim benefit of Section 54EC primarily is not one for the purpose of Section 54EC as can be seen. But is a notification for the purpose of raising funds for the use of National Highways under the National Highway Act, 1988,
6. A. notification of this nature though is incidentally to provide benefits to the assesses under the Income Tax Act, is one essentially permitting the fund raised to issue bonds up to the limit mentioned. It is not necessarily one issued only for the purpose of availing the benefits in terms of Section 54EC of the Act. It is not incumbent upon the Central Government to compel such under taking like the National Highways Authority or the Rural Electrification Corporation Ltd., to borrow more funds from the public, only to enable or facilitate persons like the petitioner, who might have missed the bus earlier to reap the benefits of the concessions under Section 54EC of the Act.
7. Be that as it may, in matters of this nature where the legislature extends certain benefits, particularly like tax concession to assessees, it is essentially a matter of policy to decide as to which sector should be encouraged and should be given a concession in payment of income tax etc. As to what amount of bonds should be notified for claiming a concession under Section 54EC is also a matter of consideration within the realm of the legislature and its delegatee the Central Government. It is not for the courts to enter into such areas, particularly for issue of directions to the Government to compel them to extend or enlarge the scope of issue of such bonds or otherwise. The well accepted and celebrated legal principle is that no mandamus will be issued to the legislators. Such being the nature of the matter, 1 find no scope for interference for issue of a writ in the nature of mandamus as sought for by the petitioner, a writ of mandamus is declined the writ petition is dismissed.
8. It is open to the petitioner to move such authorities or such functionaries which may enable the petitioner to claim such benefits under the provisions of the Act by pointing out the anomaly, if any, in the matte-r.