Allahabad High Court
Commissioner Of Income Tax And Anr. vs Iqbal Ahmad L/H Of Late Jullan on 14 May, 2007
Equivalent citations: (2007)213CTR(ALL)77
Author: Bharati Sapru
Bench: Bharati Sapru
JUDGMENT
1. The present appeal filed under Section 260A of the IT Act, 1961 by the Revenue has been admitted by this Court vide order dt. 22nd Nov., 2000 on the following substantial questions of law:
(1) Whether on the facts and in the circumstances of the case, the Tribunal was justified in allowing the assessee deduction under Section 54E read with Section 54H of the IT Act, 1961 for purchase of capital gains units for Rs. 88,053?
(2) Whether on the facts and in the circumstances of the case, the Tribunal was justified in upholding the order of CIT(A) dt. 30th Dec, 1992 directing the AO to allow the assessee deduction under Section 54E r/w Section 54H on account of the agricultural land purchased upto 31st Dec, 1991 for Rs. 6,80,808 whereas deduction under Section 54E has been erroneously considered and allowed by the AO to the extent of Rs. 3,74,960 in his set aside assessment order dt. 21st Oct., 1991 passed under Section 143(3)/251 of the Act, whereas the CIT(A) vide his order dt. 24th June, 1991 has given no such direction to AO to consider the claim of the assessee under Section 54E of the Act?
2. The present appeal relates to the asst. yr. 1977-78.
Briefly stated facts giving rise to the present appeal are as follows:
The agricultural land of the respondent-assessee was acquired by the U.P. Government on 27th Jan., 1977, for U.P. Avas Evam Vikas Parishad for their scheme No. 7. The Special Land Acquisition Officer vide order dt. 5th Sept., 1984 awarded compensation which was subsequently enhanced under Section 23(1A) of the Land Acquisition Act, 1984. The respondent-assessee had not filed any return of income in the asst. yr. 1977-78 when the land was compulsorily acquired. Proceedings under Section 148 of the Act were initiated, pursuant to which, the respondent filed his return of income. The ITO, Meerut assessed the entire amount of compensation regarding capital gains arising in the year 1977-78 and imposed tax accordingly. The appeal preferred by the respondent was partly allowed. The Tribunal, however, had allowed the appeal preferred by the respondents and granted benefit of Section 54E r/w Section 54H of the Act.
3. We have heard Shri. A.N. Mahajan, learned standing counsel of the Revenue and Shri. V.K. Rastogi, learned Counsel for the respondent assessee.
4. Learned Counsel for the Revenue submitted that Section 54E of the Act was brought on the statute book by Finance (2) Act, 1977, w.e.f. 1st April, 1978. Its benefit could not have been extended in respect of capital gains which arose during the asst. yr. 1977-78. He further submitted that the Tribunal erred in law in granting benefits of the aforesaid provisions.
5. Shri V.K. Rastogi, learned Counsel on the other hand, submitted that the respondent has received initial compensation only on 5th Sept., 1984, and therefore, capital gains, if any, arose during the previous year, relevant to the asst. yr. 1985-86. Respondents having invested the amount within six months as contemplated under Section 54E of the Act, the Tribunal had rightly allowed the benefit. He has relied upon the decision of the Andhra Pradesh High Court in the case of Section Gopal Reddy v. CIT(1990) 181 FTR 378 (AP).
6. Having given our anxious consideration to the various pleas raised by the learned Counsel for the parties, we find that Section 45 of the Act deals with various situations when capital gains can be said to have arisen. Sub-s. (5), which was inserted by Finance Act, 1987 w.e.f. 1st April, 1988 provides that the capital gains in case of compulsory acquisition under any law could arise in the previous year when compensation or part thereof or such consideration or part thereof was first received. Even though Sub-section (5) was inserted by the Finance Act, 1987 w.e.f. 1st April, 1988, we are of the considered opinion that this provision is only clarificatory in nature and has to be given retrospective effect for the reason in cases where capital asset is being compulsorily acquired under any law, till such time compensation is received, the amount would not be available to the recipient for being invested in the specified assets in order to claim exemption.
7. The apex Court in the case of CIT v. Podai Cement (P) Ltd. (1997) 141 CTR 67 (SC) : AIR 1997 SC 2523 while interpreting the provisions under Section 22 of the Act has held that amendment introduced to Section 27 of the Act by the Finance Act, 1987 by substituting els. (iii), (iiia) and (iiib) in place of old Clause (iii) w.e.f. 1st April, 1988 was intended to supply an obvious omission or to clear up doubts as to the meaning of the word 'owner' in Section 22 of the Act. These amendments are clarificatory in nature and have to be given retrospective operation. The same principle is applicable in this case also. As we have already come to the conclusion that Sub-section (5) of Section 45 is to be given retrospective effect, the necessary consequences which would follow is that the amount of compensation having been received in the previous year relevant to the asst. yr. 1985-86 could not have been treated as capital gains during the asst. yr. 1976-77. It is not disputed that the respondent have invested the amount in specified assets within the period provided under Section 54E of the Act and, therefore, the applicability of Section 54E is to be judged from the date when capital gains had arisen.
8. In the present case, in the year 1984 Section 54E was on the statute book and, therefore, the Tribunal has rightly upheld the claim of respondent-assessee. The view which we have taken is in consonance with the decision of the Andhra Pradesh High Court in the case of Section Gopal Reddy (supra).
9. Accordingly, we are of the considered opinion that the order of the Tribunal does not suffer from any legal infirmity. The appeal fails and is dismissed. However, the parties shall bear their own costs.