Income Tax Appellate Tribunal - Ahmedabad
Assistant Commissioner Of Income-Tax vs Smt. Geeta Mayor on 23 July, 1999
Equivalent citations: [2000]74ITD314(AHD)
ORDER
R.K. Bali, Accountant Member
1. These two appeals by the Revenue involve common points and are therefore disposed of by a common order for the sake of convenience.
2. In both the appeals the common ground taken by the Revenue is as under:
The Id. CIT(A) has erred in law and on facts in directing the AC(IT) to rectify the intimations issued under Section 143(1)(a) and to accept the figures of capital gain as declared by the assessee.
3. Briefly the facts are that in ITA No. 2919/Ahd./1993, the assessee has filed her return of income on 31-8-1992 declaring total income of Rs. 10,47,272. In the return the Long Term Capital Gain earned by the assessee was computed at NIL figure in the following manner :
"Full value of consideration Rs. 6,47,94,047
Less:
1. Cost of acquisition 1,18,800
2. Expenses related to
the said transfer 19,41,701 Rs. 20,60,501 Rs. 6,27,33,546
Less : Other deductions :
1. Under Section. 48(2):
First Rs. 15,000 @ 100% 15000
Bal. 62,78,546 @ 60% 37,631,128 Rs. 3,76,46,128
2. Deductions correspon-
ding to investment of
Rs.2,50,00,000 being made
as envisaged by
Section 54E on or before
stipulated time
(evidence thereof will be
furnished soon after the
investment is made):
2,50,00,000 X 6,27,33,546
-------------------------
6,47,94,047 Rs. 2,42,04,980
3. Rs. 50,00,000 is made as
envisaged by section
54F in capital gain
deposit A/c No. 1875
with Bank of India, New
Cloth Market,
Ahmedabad on 27-8-1992 :
50,00,000 X 6,27,33,546
------------------------
6,47,94,047 Rs. 48,40,996
---------------
Rs. 6,66,92,104
Deductions restricted to ... Rs. 6,27,33,546
--------------------
Chargeable Capital Gain Rs. Nil'
4. In ITA No. 2920/Ahd./1993, the assessee filed her return on 31-8-1992 declaring total income of Rs. 7,89,960. The Long Term Capital Gain was computed at NIL figure in the following manner :
"Full value of consideration Rs. 4,22,11,586
Less:
1. Cost of acquisition 1,91,102
2. Expenses related to
the said transfer 12,60,953 Rs. 14,52,055 Rs. 4,07,59,531
Less : Other deductions :
1. Under Section. 48(2):
First Rs. 15,000 @ 10096 15000
Bal. Rs. 4,07,44,531 @ 60% 2,44,46,718 Rs. 2,44,61,718
2. Deductions correspon-
ding to investments of
Rs. 2,00,00,000 being
made as envisaged by
Section 54E on or before
stipulated time
(evidence thereof will be
furnished soon after
investments is made):
Rs. 2,00,00,000 X 4,07,59,531
--------------------------
4,22,1 1,586 Rs. 1,93,12,011
-----------------
Rs. 4,37,73,730
Deduction restricted to ... Rs. 4,07,59,531
-----------------
Chargeable Capital Gain ... Rs. NIL."
5. The Assessing Officer processed both these returns of income and issued intimation under Section 143(1)(a) on 2-9-1992. In the intimation so issued by income by way of Long Term Capital Gain was computed as under:
In the case of Smt. Geeta Mayor (ITA No. 2919/Ahd./93) :
A. Capital Gain as per Return Rs. 6,27,33,546
Less : (1) Exemption
Under Section. 54E
as per Return Rs. 2,42,04,980
(2) Exemption Under Section 54F
as per Return Rs. 48,40,996 Rs. 2,90,45,976
----------------
B. Balanc ... Rs. 3,36,87,570
C. Deduction Under Section 48(2) :
First Rs. 15,000 @ 100% Rs. 15,000
Bal. Rs. 3,36,72,570 @ 60% Rs. 2,02,03,542 Rs. 2,02,18,542
------------------ ----------------
D. Capital gain chargeable to tax Rs. 1,34,69,028
In the case of Smt. Pallavi Mayor
(ITA No. 2920/Ahd./93) :
A. Capital Gain as per Return Rs. 4,07,59,531
Less : Exemption Under Section. 54E
as per Return ... Rs. 1,93,12,011
-----------------
B. Balance ... Rs. 2,14,47,520
C. Deduction Under Section 48(2) :
First Rs. 15,000 @ 100% 15,000
Bal. Rs. 2,14,32.520 @ 60% 1,28,59,512 Rs. 1,28,74,512
----------- -------------------
D. Capital Gain chargeable to tax ... Rs. 85,73,008
-----------------
6. On receipt of intimation Under Section 143(1)(a), the assessee moved an application Under Section 154 on 20-11-1992 in the case of Smt. Geeta Mayor Q.TA No. 2919/Ahd./93) and on 19-1-1993 in the case of Smt. Pallavi Mayor QTA No. 2920/Ahd./93), requesting the Assessing Officer to rectify the intimation Under Section 143(1)(a) by praying that in the computation of Long Term Capital Gain made by the Assessing Officer in the intimation, deduction Under Section 48(2) has been calculated on the balance of capital gains, which remains after deducting the deductions admissible Under Section 54E and 54F. In the applications filed by the assessees it was contended that the language of Section 48(2) is very clear and the deduction Under Section 48(2) has to be allowed on the amount of capital gains, without deducting therefrom the deductions admissible under Sections 54E and 54F. In any case, it was contended that the view taken by the Assessing Officer was such which cannot come within the purview of Section 143(1)(a) as prima facie adjustments being a debatable issue. In support of their contention, the assessees enclosed an opinion of eminent jurist Late Shri S.P. Mehta to the effect that deduction under Section 48(2) has to be allowed on the total amount of capital gains and not on the amount of capital gains net of deductions under Sections 54E and 54F. The Assessing Officer however rejected the applications filed by the assessees under Section 154 and after referring to the Board's Circular No. 495, dated 22-7-1987 held that the deduction under Section 48(2) has to be allowed after providing for exemptions specified in Sections 54E and 54F etc.
7. Against the orders of the Assessing Officer dismissing the applications filed by the assessees under Section 154, the assessees preferred appeals to the CIT(A) who for the reasons given in the impugned orders and after taking into consideration the provisions of Section 48(2) came to the conclusion that the Assessing Officer was not justified in substituting its own computation of capital gains as against the computation given by the assessees in their returns of income, in an intimation under Section 143(1)(a). According to the CIT(A), the interpretation adopted by the assessee in the computation of capital gains filed along with the return is plausible interpretation which was also supported by the opinion of Late Shri S.P. Mehta. According to the CIT(A), the Assessing Officer could adopt the interpretation as done by him while passing the order under Section 143(3) after giving due opportunity to the assessee but the Assessing Officer cannot adopt the interpretation as done by him in an intimation under Section 143(1)(a). According to the CIT(A), which of the two interpretations i.e., one adopted by the assessee in the computation of income filed along with the return OR the interpretation as adopted by the Assessing Officer in the intimation under Section 143(1)(a), is correct, is a highly debatable issue and as such it will be outside the ambit of prima facie adjustment as contemplated in Section 143(1)(). Accordingly, the CIT(A) directed the Assessing Officer to rectify the intimation and accept the figure of capital gain as declared by the assessee with the further direction that the Assessing Officer will be free to take any view he may consider justified when the regular assessment is made and the assessee is given an opportunity of being heard in the matter.
8. The Revenue is aggrieved with the order of the CIT(A) and has filed this appeal. The ld. DR submitted that as per Explanation to Section 53, deductions under Sections 53, 54, 54B, 54D, 54E, 54F and 54G of the Act has to be allowed before statutory deduction under Section 48(2) of the Act. For this proposition he relied on the Commentary of Shri N.A. Palkhiwala, eighth Edition Volume I page 790 which reads as under :
The explanation inserted by the Finance Act, 1987 with effect from 1st April, 1988, provides that in Sections 53 to 54G references to capital gain should be construed as reference to the capital gain computed under Section 48(1)(a) i.e., before making the deductions under Section 48(1)(b), read with Section 48(2). The Explanation is merely of a clarificatory nature and has not changed the law. Three different concepts of capital gain are to be borne in mind : (a) the actual capital gain, arrived at by deducting from the full value of the consideration the cost of acquisition and improvement and the expenditure on the transfer under Section 48(1)(a); (b) the statutory capital gain, arrived at by deducting from the actual capital gain the exempted amount under Sections 53, 54, 54B, 54D, 54E, 54F or 54G; and (c) the taxable capital gain, arrived at by reducing the statutory capital gain by the standard deductions under Section 48(1)(b), read with Section 48(2). Thus, deduction under Sections 53 to 54G must first be made to arrive at the statutory capital gain and only thereafter would arise the question of making standard deduction under Section 48(1)(b), read with Sections 48(2) to arrive at the taxable capital gain.
Reliance was also placed on Taxman's Direct Taxes Ready Reckoner, 1992-93 pages A-86 & A-87. It was further submitted that the Hon'ble Kerala High Court in the case of CIT v. V.V. George [1997] 227 ITR 893/ 93 Taxman 257 has also accepted the interpretation put by the Assessing Officer which is also in accordance with the opinion of Shri N.A. Palkhiwala referred to supra. Accordingly it was submitted that deductions allowed by the Assessing Officer under Section 54 from capital gain and from the balance deductions allowed under Section 48(2) by the Assessing Officer was in order and there was no point of dispute or doubt. Accordingly it was prayed that the order of the CIT(A) should be reversed and that of the Assessing Officer should be restored.
9. Shri K.C. Patcl, the ld. counsel for the assessee relied on the order of the CIT(A) and further submitted that in the present case the issue to be decided by the Tribunal is as to whether the computation given by the assessee of the capital gains earned by her was plausible vis-a-vis computation adopted by the Assessing Officer. It was submitted that the Assessing Officer has already passed the order under Section 143(3) in the case of both the assessees on 24-12-1993 against which the assessees have filed the appeals which are pending. It was submitted that no doubt the decision of the Kerala High Court in the case of V.V. George (supra) is in favour of the interpretation given by the Assessing Officer which is primarily based upon the opinion of Shri N.A. Palkhiwala, eighth Edition at page 790, yet the assessee's Chartered Accountant has written a letter to Shri N.A. Palkhiwala advocating the interpretation adopted by the assessee in the computation of his income from his opinion/comment. Copy of the letter by the C.A. to Shri N.A. Palkhiwala has been given to us at pages 47 and 48 of the paper book. To the above letter Shri Palkhiwala has given a reply dated 25-10-1994, copy of which has been given to us at page 49 of the paper book wherein the eminent jurist replied that he adhere to what have been stated at page 790 of the Eighth Edition on Income-tax. In the said letter he further observed that having a clear recollection of your clarity of mind and legal acumen, on a quick reading of your Note I am inclined to think that your view is right but he mentioned in the reply that he did not have time enough to express a final opinion on the point raised by the C.A. From the above, the Id. counsel submitted that it is clear that even Shri Palkhiwala has not considered the interpretation put by the assessee on the computation of capital gain as absurd and without any merit. Shri K.C. Patel, the Id. counsel has filed a copy of Tribunal's order Mumbai Bench "A" in ITA No. 1323/Bom./91 in the case of M/s. Hotel Dinesh, Mumbai wherein the view adopted by the assessee as supported by the opinion of Shri S.P. Mehta was preferred. Accordingly, it was submitted that which of the two computations, one adopted by the Assessing Officer or the one adopted by the assessee is correct, is ahighly debatable issue and as such outside the ambit of Section 143(1)(a) which deals with onlyprima facie adjustments. Accordingly it was submitted that the order of the CIT(A) cancelling the intimation passed by the Assessing Officer under Section 143(1)(a) is quite in order and there is no merit in the appeals filed by the Revenue which should be dismissed.
10. We have considered the rival submissions and have also gone through the orders passed by the Assessing Officer under Section 143(1)(a) as well as CIT(A). The Board's Instruction No. 875 relied upon by the Assessing Officer stipulates that deductions under Section 48(2) are to be given after providing for exemption under Sections 54E and 54F etc. According to the Assessing Officer, Sections 54E and 54F provide for exemption which must be considered prior to the deduction under Section 48(2) because Section 48(2) is procedural and/or a machinery provision and should not be allowed to frustrate a charging provision such as Section 45(1). According to the Assessing Officer prior to insertion of Section 48(2), provision as contained in section SOT was ranking only after the provisions of Sections 54E and 54F etc. and the legislative intention even after insertion of Section 48(2) in substitution of Section 80T must be assumed to be the same as before and therefore the exemption under Sections 54E and 54F must be considered first. On the other hand, a plain reading of Section 48 which is a complete code in itself so far as deductions in respect of capital gains are concerned, clearly indicates that the computation done by the assessee is correct OR in any case is a very plausible computation notwithstanding the view expressed by Shri N.A. Palkhiwala in his Commentary on Income-tax which view has been approved by Kerala High Court in the case of V. V. George (supra). The ambit of Section 48(2), in our opinion, cannot be curtailed by interposing the provisions of Sections 54E and 54F etc. and thereby reducing the amount from which deductions under Section 48(2) are to be given. In any case, which of the two computations; one adopted by the Assessing Officer or the other adopted by the assessee is the correct computation, is a highly debatable issue and as such cannot be the subject-matter of prima facie adjustments under Section 143(1)(a) in view of the Board's Instruction No. 1814-No. 244/2/ 89-ITR-II, dated 4-4-1989 addressed to all Chief Commissioners and Directors General of Income-tax on the subject-matter of adjustments permissible under the proviso to Section 143(1)(a) wherein in para 9 the Board has expressed the view as under :
9. In the context of the legal position as outlined above, it follows that it will not be permissible for the Assessing Officer to disallow a claim for deduction, allowance or relief in cases where the claim is made on the basis of the decision of any High Court, Appellate Tribunal or other Appellate Authority, even though a contrary view in the matter may have been expressed by another High Court or another Bench of the Tribunal or any other appellate authority. The fact that the claim is based on a decision which has not been accepted by the Board will also not make any difference to this position.
11. Thus taking into consideration the totality of the facts and circumstances of the case, we are of the opinion that the order passed by the CIT(A) requires no interference particularly when the Assessing Officer has already passed the order under Section 143(3) in the case of both the assessees after considering the submissions of the assessees and adhering to his view that deduction under Section 48(2) is to be allowed only after allowing exemption under Sections 54E and 54F and those orders are subject-matter of appeal before the Appellate Authorities and will be adjudicated on merit in due course.
12. In the result, the appeals filed by the Revenue are dismissed.