Income Tax Appellate Tribunal - Pune
Phansalkar Suman Jaishrikrishna,, ... vs Department Of Income Tax on 12 December, 2013
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "A", PUNE
Before Shri Shailendra Kumar Yadav, Judicial Member
and Shri R.K. Panda, Accountant Member
ITA No. 2118/PN/2012
(Asstt.Year : 2008-09)
ITO, Ward-3(4), Pune .. Appellant
Vs.
Phansalkar Suman Jaishrikrishna,
F-101, Indradhanu Apartments,
CTS No.720,Behind Vanaz,
Paud Road, Kothrud, Pune - 411 029.
PAN No.ASNPP7526P .. Respondent
Assessee by : Shri Sunil Ganoo
Revenue by : Shri P.L. Pathade
Date of Hearing : 12-12-2013
Date of Pronouncement : 27-12-2013
ORDER
Per R.K. Panda, AM :
This appeal filed by the Revenue is directed against the order dated 29-06-2012 of the CIT(A)-II, Pune relating to Assessment Year 2008-09.
2. Facts of the case, in brief, are that the assessee, an individual filed his return of income on 31-03-2009 declaring total income of Rs.1,34,330/-. During the course of assessment proceedings the Assessing Officer noted that the assessee has sold a flat at Sion, Mumbai vide agreement of sale dated 05-11-2007. The assessee has invested a sum of Rs.50,75,030/- in purchase of residential property at Pune. In the computation of total income he has given the calculation of long term capital gain on sale of immovable property. The assessee 2 has claimed the exemption u/s.54EC on account of purchase of certain bonds for Rs.30,70,000/- and worked out the net capital gain at NIL. 2.1 From the various details furnished by the assessee the Assessing Officer noted that the assessee has purchased Rural Electrification Bonds on 30-06-2008. According to the Assessing Officer the assessee has to make investment in long term specified assets within a period of six months after the date of such transfer as per the provisions of section 54EC. However, in the instant case although the assessee has transferred the immovable property on 05-11-2007 the assessee purchased the bonds on 30-06-2008 as against the specified date in this case being on or before 04-05-2008. He, therefore, asked the assessee to explain as to why the deduction claimed u/s.54EC should not be disallowed.
2.2 The assessee in his reply submitted as under which has been reproduced by the Assessing Officer in the body of the Assessment order.
"The investment in the Bonds u/s.54EC was supposed to be made within six months from the date of sale of the property, i.e. on or before 4th May, 2008. But the said investment could not be made before the said date due to following reasons :
a. The issues of NHAI and REC Bonds were not open during the said period, which were closed on 31st march, 2008. The new issues were re-opened, in case of NHAI on 26th May, 2008 and in case of REC on 28th May, 2008. Bonds issue letters are obtained from their respective websites and attached herewith.
b. During the said period my age was 83 years. Due to old age I was not well and was not in a position to sign the documents, hence I could not invest the amount before 31st March, 2008, when the previous issues were closed.
Under the pretext of hope that CBDT will grant extension for investment as per previous experience. I have executed an Affidavit before Notary Public on 3rd May, 2008 to clarify my position causing undue hardship which was out of my control. I have filed copies of this affidavit to your office as well as to Commissioner of Income tax-II, Pune. Copy is enclosed.3
CBDT had issued an order u/s.119(2)(c) under reference no. F.No.142/09/2006-TPL dated 30th June 2006, extending time limit for investment in Bonds for Financial Year 2006-07 with a view of remove the hardship to taxpayers. On the same ground the exemption shall be allowed to me, as I invested under bonafide belief that, extension would be granted for such investment".
2.3 However, the Assessing Officer was not satisfied with the explanation given by the assessee on account of the following reasons (para 5 of the assessment order) :
i. The assessee has immediately made an agreement for purchase of Flat at Pune on 22-11-2007 and has made some payments before 31- 03-2008, to claim exemption u/s.54 available. However no such action was taken in respect of purchase of bonds for which the time limit was 6 months.
ii. It is claimed by the assessee that issues of NHAI and REC Bonds were not open on 4th of May 2008, i.e. the time limit available for purchase of Bonds. However these issue of bond was open upto 31-03- 2008 to avail of the exemption u/s.54EC. This is not done. iii. The claim of the assessee that CBDT will grant extension tax investment like granted in 2006 is not an excuse to make delayed investment and to claim exemption u/s.54EC in fact no such extension has been accorded by the CBDT. The representative of the assessee in his letter has accepted that no such extension for the period under review was given by the CBDT.
iv. When any deduction/exemption is claimed under law the condition laid down therein needs to be strictly adhered to since the assessee has failed to make investment in long term specified assessee within 6 months from the date of transfer, the exemption claimed is not in accordance with law".
The Assessing Officer accordingly disallowed the claim of deduction of Rs.29,21,938/- made u/s.54EC of the I.T. Act, 1961.
3. Before the CIT(A) it was submitted that due to the ill-health of the assessee he could not make the investment before 31-03-2008 and that no capital gain bonds u/s.54EC were available during the period from 01-04-2008 till 26-05-2008 in the case of NHAI and the REC bonds were also not available between the period 01-04-2008 to 28-05- 4 2008. It was submitted that the assessee was prevented from making investment in the bonds within the statutory time limit for the reasons beyond her control and the assessee has made the investment on 30-06- 2008 as the forms were available only in June 2008. The decision of the Mumbai Bench of the Tribunal in the case of M/s. Cello Plast Vs. DCIT reported in 2010 TIOL-60-ITAT-Mumbai and the decision of Ahmedabad Bench of the Tribunal in the case of Aspi Ginwala, Shree Ram Engg. & Mfg. Industries Vs. ACIT reported in (2012) 20 taxmann 75 (Ahd.) were relied upon. Based on the arguments advanced by the assessee and following the decisions cited before him the Ld.CIT(A) allowed the claim of exemption u/s.54EC made by the assessee.
4. Aggrieved with such order of the CIT(A) the Revenue is in appeal before us with the following grounds :
"1. The Ld.CIT(A) erred in deleting the disallowance of Rs.29,21,938/- made by the Assessing Officer u/s.54EC.
2. The Ld.CIT(A) erred in relying on the decision of ITAT Ahmedabad in the case of Aspi Ginwala Vs. ACIT (2012) 20 Taxmann 75 (Ahd.) and ITAT Mumbai in the case of M/s. Cello Plast Vs. DCIT, 2010- TIOL-60 while allowing the appeal of the assessee without appreciating the fact that in the above cases, the bonds were not available for purchase by the assessee throughout the six month period whereas in the assessee's case, the bonds were not available for purchase only from 01-04-2008 to 28-05-2008, and that the assessee could have invested in the bonds prior to 01-04-2008".
5. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find in the instant case the Assessing Officer denied the claim of exemption u/s.54EC on the ground that the assessee has purchased the Rural Electrification bonds on 30-06-2008 as against the statutory due date of 04-05-2008 or before 5 that date. The submission before the Assessing Officer that issue of NHAI and REC Bonds were open upto 31-03-2008 and were not open during the period when the assessee was supposed to invest and that the new issues were re-opened in case of NHAI on 26-05-2008 and in case of REC on 28-05-2008 has not been controverted by the Revenue. Thus, between Ist April 2008 to 26th May 2008 specified bonds were not available in the market and new issues were opened in case of NHAI on 26-05-2008 and in case of REC on 28-06-2008. The assessee has invested in the purchase of Rural Electrification Bonds on 30-06- 2008.
5.1 We find under somewhat similar circumstances the Mumbai Bench of the Tribunal in the case of M/s. Cello Plast (Supra) has allowed the claim of exemption u/s.54EC on the ground that there was a reasonable cause in not purchasing the specified bonds within the statutory time allowed as they were not available in the market and the assessee immediately purchased the bonds as soon as they were available and therefore the assessee was eligible for exemption u/s.54EC. We find on further appeal by the Revenue the jurisdictional High Court in the case of CIT Vs. Cello Plast reported in 253 CTR (Bombay) 246 has observed as under :
"17. The submissions are not well founded. The REC bonds could not be purchased as they were not available throughout the period of six months commencing from the date of the sale of the factory by the respondents and even thereafter till the extended date of 31/12/2006 under the CBDT Circular. That the bonds were available for a limited time during this period between 1/7/2006 to 31/8/2008, makes no difference. The respondents had time till 21/9/2006, to invest in these bonds to avail the benefit under section 54EC. Section 54EC entitles a person to avail of the right conferred thereby at any time during the period of six months from the date of sale of the asset. The respondents cannot be deprived of this right conferred by the Act for no fault of theirs. Thus, the availability of the bonds only for a limited time during this period cannot prejudice the assessee's right to exercise the same 6 upto the last date. The bonds were admittedly not available except during the said period.
18. Lex not cogit impossibila (law does not compel a man to do that which he cannot possibly perform) and impossibilum nulla oblignto est (law does not expect a party to do the impossible) are well known maxims in law and would squarely apply to the present case. The statue viz. Section 54EC of the Act provides for exemption from tax to long term capital gain provided the same is invested in bonds of Rural Electrification Corporation Limited or National Highway Authority of India. However, as the bonds were not available, it was impossible for the respondent-assessee to invest in them within six months of the sale of their factory building. Therefore, in the circumstance one would have to interpret Section 54EC of the Act to ensure that it does not lead to injustice. The Apex Court in the matter of Directorate of Enforcement Vs. Deepak Mahajan reported in 1994(3) SCC 440 observed as under:
"Though the function of the Court is only to expound the law and not legislate, none the less the legislature cannot be asked to sit to resolve the difficulties in the implementation of its intention and the spirit of the law. In such circumstances, it is the duty of the Court to mould or creatively interpret the legislation by liberally interpreting the statue".
Therefore, in the present facts, the six months provided for investing in bonds may be reasonably extended in view of the non availability of bonds till 22/1/2007.
19. The contention of the appellant revenue that Rural Electrification bonds were available upto 3/8/2006 and the respondent assessee should have purchased the bonds before 3/8/2006 is not sustainable as the time given by the statue to invest in bonds under Section-54EC of the Act is six months from the date of sale and, therefore, the respondent was entitled in law to wait till 21/9/2006 to invest in the bonds.
20. There remains an important aspect of some difficulty to be considered viz. the extent to and precise period during which the extension ought to be granted to avail the benefit of the provisions of section 54EC when the bonds referred to therein are not available. These aspects would have to be determined, based on two factors - the duration when the bonds were not available, and the period during which to wit the point of time during the six months or the extended period, if any, when they were not available. For instance, the bonds may not have been available at the commencement of the six months period or for a broken period or periods during the six months or towards the end of the six months.
21. It is difficult to lay down any particular rule in this regard. We think it both prudent and proper to consider only the case before us and only to the extent where the bonds were not available prior to the expiry of the six month period, including the last day. A person is entitled, as we have held earlier, to invest in the said bonds upto the last available date. If that be so, it must follow that the extension ought to be granted at least for the period prior to the expiry of six months when the bonds were not available and upto the date on which they were ultimately made available. In any event, in such a case an assessee would be entitled to a reasonable extension which must then be decided, depending upon the facts of each case. A person cannot be expected to make the investment on the first possible date on which the bonds were made available after the expiry of the six months period or any 7 extended date prescribed by the CBDT. During the period the bonds were unavailable a person is likely to invest the amount elsewhere. To expect or require him not to do so would be unjust for reasons too obvious to state. He cannot then be expected at a day's notice to break the investment and transfer the same to the bonds stipulated in Section 54EC.
22. In the present case, the bonds were not available from 4/8/2006 to 22/1/2007. The last date for investment in the normal course would have been 21/9/2006 which was extended upto 31/12/2006. The respondents ought to be entitled to an extension of the number of days between 4/8/2006 to 21/9/2006 at the very least and, in any event, to a reasonable extension. The respondents admittedly invested in the bonds on 31/1/2007 i.e. within nine days of their being available once again from 22/1/2007. Considering that the bonds were not available for such a long period, an extension of merely nine days is extremely reasonable in the present facts.
23. The first two grounds are, therefore, rejected. At the cost of repetition, we make it clear that we have not expressed any opinion as to the extent and specific period of extension in any other situation, including where the bonds may not have been available only for a day or two prior to the expiry of the six months period.
24. Thirdly, Mr. Suresh Kumar submitted that the respondent in any case could have purchase the bonds of the National Highway Authority which was an alternative mode of investment provided for availing the benefit of Section 54EC. As the respondent-assessee has not chosen to purchase the bonds of National Highway Authority of India it cannot claim the benefit of Section 54EC of the said Act and the amount of Rs.49.36 lacs is correctly chargeable to capital gain tax.
25. This submission is also not well founded. Section 54EC of the Act having given the respondent a choice of investing either in the bonds of Rural Electrification Corporation Limited or the National Highway Authority, the revenue cannot insist that the respondent ought to have invested its capital gain on sale of property in the bonds of the National Highway Authority.
26. The statue itself provides that the assessee, who is subject to long terms capital gain tax, can avail of exemption under Section 54EC of the Act if he invests in bonds of either the National Highway Authority of India or the Rural Electrification Corporation Limited. The choice of investing in one of the two organizations is with the respondent and the appellant revenue contrary to the statue cannot force the respondent to invest only in the bonds of one in preference to the other. The choice of which bonds to purchase is entirely with the respondent and in case the bonds of respondent's choice are not available as is proved in the present case, the time to invest in the bonds get automatically extended till the bonds are available in the market and the assessee can purchase the same.
27. In view of the above we answer question (a) in the negative i.e. in favour of the appellant revenue and against the respondent. So far as questions (b) and (c) are concerned the same are answered in favor of the respondent assessee and against the appellant-revenue." 8 5.2 Since the facts in the impugned case is identical to the facts of the case cited (Supra), therefore, respectfully following the decision of the jurisdictional High Court in the case of Cello Plast (Supra) we hold that the assessee in the instant case cannot be denied the benefit of exemption u/s.54EC on account of purchase of Rural Electrification Bonds after the specified date as the same were not available between 01-04-2008 to 26-05-2008. The ground by the Revenue that the Bonds were available upto 31-03-2008 and the assessee could have purchased the same before 31-03-2008 has got no merits in view of the decision of the Jurisdictional High Court cited (Supra) wherein it has been held that the time given by the statute to invest Bonds u/s.54EC of the Act is 6 months from the date of sale and therefore the assessee is entitled in law to wait till the last date to invest in the Bonds. In this view of the matter, we uphold the order of the CIT(A) on this issue and the grounds raised by the Revenue are dismissed.
6. In the result, the appeal filed by the Revenue is dismissed.
Pronounced in the Open court on 27-12-2013.
Sd/- Sd/-
(SHAILENDRA KUMAR YADAV) (R.K. PANDA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Pune, dated : 27th December, 2013
Satish
Copy of the order is forwarded to :
1. The Assessee
2. The Department
3. The CIT(A)-II, Pune
4. The CIT-II, Pune
5. D.R. "A" Bench, Pune
6. Guard File
By order
// True Copy //
Senior Private Secretary,
Income Tax Appellate Tribunal, Pune