Income Tax Appellate Tribunal - Delhi
Lt.Col.Virender Singh, Gurgaon vs Ito, Ward-4(4),, Gurgaon on 16 March, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "SMC", NEW DELHI
BEFORE SHRI R. K. PANDA, ACCOUNTANT MEMBER
ITA No.4436/Del/2017
Assessment Year : 2007-08
Lt. Col. Virender Singh, ITO, Ward- 4(4), Gurgaon,
I-7051, Davinder Vihar, Sector-56, Haryana.
Vs.
Gurgaon, Haryana.
PAN : AKJPS0190E
(Appellant) (Respondent)
Assessee by : Shri Ved Jain, Adv.
Department by : Shri B. R. Mishra, Sr.DR
Date of hearing : 13-02-2018
Date of pronouncement : 16-03-2018
ORDER
PER R. K. PANDA, AM :
This appeal filed by the assessee is directed against the order dated 19.05.2017 of CIT(A)-1, Gurgaon relating to assessment year 2007-08.
2. Facts of the case, in brief, are that the assessee is an individual. He had sold his land situated at Village Bakkarwala, Delhi to M/s Prabhu Ram Buildwell Pvt. Ltd. for a consideration of Rs.1,80,20,833/- in which the assessee had 1/3rd share. The assessee's share came to Rs.60,06,944/- and after allowing the indexed cost of acquisition, the long term capital gains worked out to Rs.41,39,905/-. The assessee claimed that he had purchased capital gain tax exemption bonds issued by the Rural Electrification Corporation Ltd. amounting to Rs.42 lakhs on 27.10.2007 and claimed deduction u/s 54EC of the 2 ITA No.4436/Del/2017 I.T. Act. The Assessing Officer pointed out that the assessee had transferred his capital assets on 10.10.2006 and the investment for purchase of Rural Electrification bond were required to be made within six months from the transfer of the capital assets. Since investment was made beyond this period, the Assessing Officer did not allow the deduction u/s 54EC of the I.T. Act.
3. In appeal, the ld. CIT(A) dismissed the appeal of the assessee. The assessee thereafter filed the appeal before the Tribunal. Before the Tribunal, the assessee took an additional ground of appeal that the land sold by the assessee was not a capital asset and therefore the capital gain arising on the transfer of land was not taxable. The assessee also filed certain additional evidences with regard to this additional ground of appeal. The Tribunal admitted the additional evidence and additional ground of appeal and restored the issue to the file of the Assessing Officer vide order dated 27.06.2014 by observing as under :-
"We have heard the rival submissions and perused the material available on record. On a perusal of the same, we are of the view that the ground raised by the assessee in terms of nature of land u/s 2(14) of the Act is a legal ground, as such in the interest of substantial justice in order to decide the issue of taxability of the specific income stated to have arisen as a result of sale of a specific land the issue is germane and goes to the root of the matter, the same is directed to be admitted. Considering the plea of additional evidence, we also hold that the same is relevant and crucial for determining the issue as such the same is also directed to be admitted. The prayer of the Ld. Sr. DR, Mr. Sameer Sharma that the issue has to be restored to the AO has merit as the facts necessarily are required to be looked into at the stage of the Assessing Officer. Accordingly, we deem it appropriate after admitting the additional ground and the additional evidence to restore the issue back to the file of the Assessing Officer with the direction to adjudicate upon thereon by way of a speaking order in accordance with law. The additional evidence filed by the assessee needless to say shall be taken into consideration while deciding the issue. The assessee would be at liberty to place whatever other evidence it has in its possession order to support its claim. In the result, the appeal of the assessee is allowed for statistical purposes."3 ITA No.4436/Del/2017
4. As the Tribunal had restored the specific issue of additional ground to the file of the Assessing Officer with a direction to consider the additional evidence, the Assessing Officer gave an opportunity to the assessee to submit evidence with regard to the claim that the land sold was not a capital asset. The Assessing Officer issued notice to the assessee specifically asking him to furnish the evidence with regard to the distance of the assessee's land from the nearest municipal limit. The assessee failed to furnish the necessary requisite documents except the letter issued by the Tehsildar, according to which, land sold by the assessee was agricultural land which came under the rural village Bakkarwala and which was more than 8 km. from the urbanized village Peeragarhi. Since there was no mention of the distance of the land sold by the assessee from the nearest municipal limits in the letter, the Assessing Officer held that the land was not a capital asset and accordingly held that the transfer of this land amounting to Rs.41,39,905/- is chargeable to tax.
5. Before the ld. CIT(A), the assessee took a plea that the land is more than 8 km. from the urbanized village Peeragarhi. However, the ld. CIT(A) dismissed the above contention of the assessee on the ground that in view of the provisions of section 2(14), the land sold by the assessee falls within the scope of the term 'capital asset' since the said land is situated within the limit of municipal limit of Delhi and was within the jurisdiction of municipality and the 4 ITA No.4436/Del/2017 land was not rural agricultural land but was a capital assets within the meaning of section 2(14) of the I.T. Act.
6. So far as argument of the assessee that he has invested in Rural Electrification Bond u/s 54EC is concerned, he held that this was already considered by the ld. CIT(A), who dismissed the appeal of the assessee and upheld the disallowance made by the Assessing Officer. The assessee had filed an appeal before the Tribunal against the order of the ld. CIT(A). The assessee had also raised an additional ground before the Tribunal that the land sold by the assessee was not a capital asset. Under these circumstances the issue of disallowance of deduction u/s 54EC is beyond his jurisdiction. He accordingly dismissed the ground raised by the assessee.
7. Aggrieved with such order of the ld. CIT(A), the assessee is in appeal before the Tribunal by raising the following grounds of appeal :-
"1. On the facts and circumstances of the case, the order passed by the learned Commissioner of Income Tax (Appeals) [CIT(A)] is bad, both in the eyes of law and on facts.
2. (i) Without prejudice to the above and in the alternate Ld. CIT(A) has been erred, both on facts and in law, in confirming the action of the AO is not allowing exemption u/s 54EC, despite the assessee fulfilling all the eligibility condition.
(ii) That the above said has been done rejecting the contention of the assessee that the investment in specified bonds having not been made within the prescribed period was for the reason beyond the control of the assessee.
3. The appellant craves leave to add, amend or alter any of the grounds of appeal."5 ITA No.4436/Del/2017
8. Ld. counsel for the assessee referring to page 8 of the Paper Book drew the attention of the Bench to the application dated 23.07.2007 for purchase of Rural Electrification Bonds with benefit of section 54EC of the I.T. Act. Referring to page 9 of the Paper Book, he drew the attention of the Bench to the Rural Electrification Bonds Certificate issued by the Rural Electrification Corporation Limited. He submitted that in the instant case land was sold on 25.10.2006 for a consideration of Rs.1.80 crores in which the assessee had 1/3rd share. The share of the assessee came to Rs.6,06,954/- and the long term capital gain earned by the assessee on the sale of the property was Rs.41,905/-. He submitted that as per the provisions of section 54EC, the due date of investment was upto 25.04.2007. He submitted that as mentioned earlier the bonds were not available in the market between 31.03.2007 to 02.07.2007 and the assessee invested in such Rural Electrification Bonds when they were available, therefore, the assessee is entitled to benefit u/s 54EC of the I.T. Act.
9. Referring to the decision of the Hon'ble Karnataka High Court in the case of Dr. (Smt.) Sujatha Ramesh vs. CBDT in Writ Petition No.54672/2015 order dated 24.10.2017, he submitted that the Hon'ble High Court in the said decision has held that in case the investment could not be made by the assessee within the prescribed period due to bona-fide reason, the benefit of exemption u/s 54EC should still be made available to the assessee. Referring to the decision of the Pune Bench of the Tribunal in the case of ITO vs. Phansalkar Suman 6 ITA No.4436/Del/2017 Jaishrikrishna vide ITA No.2118/PN/2012 order dated 27.12.2013, he submitted that the Tribunal in the said decision has held that the assessee 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 has got no merits in view of the decision of the Jurisdictional High Court wherein it has been held that the time given by the statute to invest Bonds u/s 54EC is 06 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. Accordingly, the order of the ld. CIT(A) allowing the benefit of deduction u/s 54EC was upheld and the grounds raised by the Revenue were dismissed.
10. He also referred to the decision of the Mumbai Bench of the Tribunal in the case of Cello Plast vs. DCIT vide ITA No.2200/Mum/2009 order dated 19.01.2010 which has been upheld by the Hon'ble Bombay High Court in the case of CIT vs. Cello Plast in ITA No.3731 of 2010 order dated 27.07.2012. He also relied on various other decisions.
11. Ld. DR on the other hand supported the order of the ld. CIT(A).
12. I have considered the rival arguments made by both the sides and perused the material available on record. The only issue to be decided in the instant appeal is regarding the benefit of deduction u/s 54EC on account of purchase of 7 ITA No.4436/Del/2017 Rural Electrification Bonds after the specified time. I find in the instant case the assessee sold the capital asset on 25.10.2006 and, therefore, for claiming deduction u/s 54EC, he should have made the investment on or before 25.04.2007 i.e. within six months from the date of earning of the capital gain. However, in the instant case the assessee has invested in Rural Electrification Bonds on 23.07.2007. The submission of the ld. counsel for the assessee that the Rural Electrification Bonds were not available between 31.03.2007 to 02.07.2007 could not be controverted by the ld. DR. Under these circumstances, it has to be adjudicated as to whether the assessee is entitled to deduction u/s 54EC when such bonds were not purchased during the time limit as prescribed u/s 54EC but were purchased subsequent to the date when such bonds were made available in the market.
13. I find the Pune Bench of the Tribunal in the case of Phansalkar Suman Jaikrishna (supra) under identical facts and circumstances has allowed the claim of deduction u/s 54EC by observing as under :-
"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 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 8 ITA No.4436/Del/2017 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 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 9 ITA No.4436/Del/2017 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 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 10 ITA No.4436/Del/2017 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." 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."
14. Since in the instant case the facts are identical to the facts decided by the Pune Bench of the Tribunal to which I am a party, therefore, following the said decision I hold that the assessee is entitled to deduction u/s 54EC of the I.T. 11 ITA No.4436/Del/2017 Act. In view of the above discussions, the grounds raised by the assessee are allowed.
15. In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open Court on this 16th March, 2018.
Sd/-
(R. K. PANDA) ACCOUNTANT MEMBER Dated: 16-03-2018.
Sujeet Copy of order to: -
1) The Appellant
2) The Respondent
3) The CIT
4) The CIT(A)
5) The DR, I.T.A.T., New Delhi
By Order
//True Copy//
Assistant Registrar
ITAT, New Delhi