Income Tax Appellate Tribunal - Pune
Sanjeet Rajendra Gugale,, Pune vs Deputy Commissioner Of Income Tax,, ... on 9 March, 2018
आयकर अपीलीय अिधकरण,
अिधकरण पुणे यायपीठ "बी
बी"
बी पुणे म
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "B", PUNE
ी डी.
डी क णाकरा राव , लेखा सद य
एवं ी िवकास अव थी,
अव थी याियक सद य के सम
BEFORE SHRI D.KARUNAKARA RAO, AM
AND SHRI VIKAS AWASTHY, JM
आयकर अपील सं. / ITA No.386/PUN/2017
िनधा रण वष / Assessment Year : 2013-14
Sanjeet Rajendra Gugale
Plot No.5, Nirmal Baug,
Muktangan High School,
Parvati, Pune - 411009
PAN : AGDPG9744L .... अपीलाथ /Appellant
Vs.
DCIT, Circle-5,
Pune .... यथ / Respondent
अपीलाथ क ओर से / Appellant by : Shri Pramod Shingte
थ की ओर से / Respondent by : Shri Mukesh Jha, JCIT
सुनवाई क तारीख / घोषणा क तारीख /
Date of Hearing : 07.03.2018 Date of Pronouncement: 09.03.2018
आदेश / ORDER
PER D. KARUNAKARA RAO, AM :
This appeal is filed by the assessee against the order of CIT(A)-8, Pune, dated 29-11-2016 for the Assessment Year 2013-14.
2. The grounds raised by the assessee are extracted as under:
"1. The Ld.CIT(A) erred in confirming the action of the AO in confirming the deduction u/s.54EC to Rs.50 lakhs, as against the deduction of Rs. One Crore claimed by the appellant u/s.54EC of the Act.
2. The Ld.CIT(A) failed to appreciate that the investments in the bonds u/s.54EC of the Act were made Rs.50 lakhs each in two different financial years.
3. It is submitted that in the facts and circumstances of the case, and in law, no such rejection of the claim was called for."2
3. Briefly stated relevant facts are that the assessee is engaged in the production and trading of Furniture and Interior design. Assessee filed the return of income declaring income of Rs.63,24,200/-. During the year, assessee earned capital gains on sale of lands. On this account, the assessee earned capital gains of Rs.1,46,10,643/-. While the sum of Rs.1 crore was invested in specified NHAI bonds in two instalments in two financial years and claimed deduction u/s.54EC of the Act. The balance of gains was duly offered to tax as per the provisions. The said sum of Rs. One crore was invested by the assessee in the bonds in two instalments of Rs.50 lakhs each. Relevant dates includes that the lands were sold on 08-12-2012 and therefore, the due date for investment in the bonds is 07-06-2013, i.e. six months from the date of transfer of assets. Assessee invested Rs.50 lakhs on 26-02- 2013 (A.Y. 2013-14) and another sum of Rs.50 lakhs was invested on 27-05-2013 (A.Y. 2014-15), i.e. two financial years. Assessee claimed deduction u/s.54EC of the Act in respect of the said investment of Rs. One Crore. Relying on the provisions of Ist proviso to section 54EC of the Act, Ld. Counsel for the assessee justified the claim and explained that the expression 'that the investment made. . . . . in the long term specified assets by an assessee during any financial year does not exceed Rs.50 lakhs'. Thus, the assessee interpreted that the same does not provide any restriction for claiming the deduction so long as the investment has not exceeded a sum of Rs.50 lakhs in the financial year. In the instant case, assessee complied with the said restriction of investing Rs.50 lakhs in a financial year and however utilized two financial years for investment in the specified bonds. Further, referring to the second proviso restricting the maximum ceiling of Rs.50 lakhs in any of the financial years which has come into the statute only by Finance (No.2) Act, 2014. w.e.f.01-04-2015, Ld. AR submitted that 3 these provisions are inapplicable to the assessment year under consideration. However, rejecting the same, AO restricted the deduction to only Rs.50 lakhs only and denied the benefit to the other lot of investment of Rs.50 lakhs made in the financial year relevant to the A.Y. 2014-15.
4. During the First Appellate proceedings, this issue was agitated by the assessee. The expression 'that the investment made. . . . . in the long term specified assets by an assessee during any financial year does not exceed Rs.50 lakhs' was discussed at length before the order of the AO was confirmed by the CIT(A) dismissing the appeal of the assessee. In Para No.8, CIT(A) discussed the Tribunal orders in the case of ACIT Vs. Rajkumar Jain & Sons (HUF) 19 taxmann 27, CIT Vs. C. Jaichander 370 ITR 0579 (Mad.), CIT Vs. Podar Cement Pvt. Ltd. 226 ITR 625, CIT Vs. Gold Coin Health Food Pvt. Ltd., Godrej & Boyce Mfg. Co. Ltd. Vs. DCIT and Another 328 ITR 0081 and CIT Vs. Apar Industries Ltd. 323 ITR 0411 before rejecting the arguments of the assessee. Although the CIT(A) acknowledged the favourable judgment of Madras High Court in the case of C. Jaichander 370 ITR 0579 (Mad.) the CIT(A) hypertechnically distinguishing the judgment stating that the said judgment is merely relevant for the legal proposition on the prospective nature of the amendment to section 54EC of the Act. Referring to the clarificatory amendments brought in by the Finance (No.2) Act, 2014, CIT(A) attributed the same to the then existing provisions of Ist proviso before dismissing the appeal of the assessee.
5. Aggrieved with the same, the assessee is in appeal before us with the grounds extracted above.
6. Before us, it is the case of assessee before us that the expression 'that the investment made. . . . . in the long term specified assets by an 4 assessee during any financial year does not exceed Rs.50 lakhs' does not take away the right of the assessee to invest the capital gains in subsequent financial years. Further, referring to the amendments, Ld. Counsel for the assessee argued that the judgment in the case of C. Jaichander (supra) has clearly established the principle allowing the assessee to make a claim of deduction u/s.54EC of the Act accepting Rs.50 lakhs of the capital gains in subsequent assessment years. Further, referring to the amended provisions of section 54EC of the Act, Ld. Counsel for the assessee submitted that the interpretation of the AO and the CIT(A) are legally unsustainable as the said amendment is merely prospective in nature in both in language and in spirit. The subsequent amendments cannot be applied to the events of the past when it comes to the claim of deductions which constitutes a beneficiary provision.
7. On the other hand, the case of the Revenue revolves around the literal interpretation of the said expression 'that the investment made. . . . . . . in the long term specified assets by an assessee during any financial year does not exceed Rs.50 lakhs'.
8. We heard both the parties on this legal issue and perused the orders of the Revenue and other orders of the Tribunal cited by the CIT(A) in general and the judgment of Madras High Court in the case of C. Jaichander (supra) in particular. It is an admitted fact that the second proviso to section 54EC of the Act has come into statute subsequent to the A.Y. 2013-14. The applicability of these provisions to the assessment year under consideration is ruled out in view of the judgment of Madras High Court in the case of C. Jaichander (supra). ITO Vs. Smt. Bala R. Venkitachalam 71 taxmann.com 219 (Pune-Trib.), ITO Vs. Ms. Rania Faleiro 33 taxmann.com 611 (Panaji-Trib.) and other 5 cases have been relied on by the assessee and all of them supports the case of the assessee.
8.1 Regarding the core issue on hand, it is our view that the provisions of the Ist proviso needs to be interpreted independent of the contents of the 2nd proviso, which operates prospectively only. Therefore, considering the judgment of Hon'ble Madras High Court in the case of C. Jaichander (supra), we are of the view that the assessee is entitled to the claim of deduction u/s.54EC of the Act on the entire investment of Rs.1 crore in the NHAI bonds made in two financial years. 8.2 Further, we find this view is supported by the order of Tribunal in the case of ITO Vs. Smt. Bala R. Venkitachalam - ITA No.321/PUN/2015 for A.Y. 2010-11, dated 30-06-2016 where similar issue of allowability of deduction in respect of the capital gains invested in two financial years came up for adjudication and the appeal of the Revenue was dismissed. The finding given by the Tribunal in Para No.9 is extracted as under :
"9. The issue arising in the present appeal is against the claim of deduction under section 54EC of the Act, under which deduction is provided against the income from long term capital gains in case the investment is made in specified assets within time frame of six months from the date of sale of asset. The said section also provides a cap on the investment to be made in the bonds to the extent of Rs.50 lakhs in any financial year. As per the mandate of the said section and the proviso thereunder, where the assessee makes an investment of Rs.50 lakhs in the specified bonds within time frame of six months from the date of sale, in any financial year, then the benefit of said section is to be allowed to the assessee. In case, the period of six months falls within two financial years, then the question which arises for adjudication is whether the assessee can claim the aforesaid deduction under section 54EC of the Act to the extent of Rs.50 lakhs in each of the financial year totaling Rs.1 crore, where the investment is made in the aforesaid bonds in two financial years separately but within period of six months from the date of sale of assets. This issue arose for consideration before the Hon'ble High Court of Madras in CIT Vs. C. Jaichandar (supra) and later in CIT Vs. Coromandel Industries Ltd. (2015) 370 ITR 586 (Mad) have laid down that the exemption granted under the proviso to section 54EC(1) of the Act should be construed not transactionwise but financial year wise, wherein if the assessee was able to invest sum of Rs.50 lakhs each in two different financial years, within period of six months from the date of transfer of capital assets, the said deduction was allowable to the assessee. The Hon'ble High Court of Madras in CIT Vs. C. Jaichandar 6 (supra) has held that as per the mandate of section 54EC(1) of the Act, time limit for investment is six months and benefit that flows from the first proviso is that if the assessee makes investment of Rs.50 lakhs in any financial year, it would have benefit of section 54EC(1) of the Act. The Hon'ble High Court further held that however, to remove the ambiguity in the above said provisions, legislature by Finance (No.2) Act, 2014 w.e.f. 01.04.2015 had inserted proviso after existing proviso to sub- section (1) of section 54EC of the Act. The second proviso, as per which the investment made by the assessee in long term capital gains specified assets out of capital gains arising from transfer of one or more original assets, during the financial year in which the original asset or assets are transferred and in subsequent financial years, does not exceed Rs.50 lakhs. The said amendment was held to be applicable from assessment year 2015-16 and subsequent assessment years. The Hon'ble High Court thus, categorically held that the investment made on or after 01.04.2007 in long term specified assets by an assessee during any financial year should not exceed Rs.50 lakhs. owever, the benefit that flows from the proviso was that where the assessee makes investment of Rs.50 lakhs in any financial year, it could have the benefit of section 54EC(1) of the Act. Applying the aforesaid proposition to the facts of the present case, where the assessee had invested Rs.50 lakhs in REC bonds i.e. specified assets as provided under section 54EC of the Act on 28.02.2010 i.e. in financial year 2009-10 and Rs.22,50,000/- on 30.04.2010 i.e. in financial year 2010-11 as against the capital gains arising of Rs.72,49,401/- on the transfer of long term capital gains i.e. sale of shares on 21.01.2010 falling in financial year 2009-10, the assessee is entitled to the benefit provided by the proviso under section 54EC of the Act and consequently, the order of CIT(A) merits to be upheld. Dismissing the grounds of appeal raised by the Revenue, the appeal of the Revenue is dismissed." Similar view was followed by the Tribunal in the cases of Shri Bimal Desai and Smt. Kinna Patel - ITA Nos. 40 and 41/PUN/2016 for the A.Y. 2012-13 dated 31-10-2017. Content of Para Nos. 10 to 12 are relevant and the same are extracted below for the sake of completeness of this order :
"10. Similar issue of claim of deduction under section 54EC of the Act arose before the Pune Bench of Tribunal in the case of ITO Vs. Smt. Bala R. Venkitachalam (supra) and relying on the ratio laid down by the Hon'ble High Court of Madras in CIT Vs. C. Jaychander (supra) and later in CIT Vs. Coromandel Industries (2015) 370 ITR 586 (Mad), the Tribunal held that the assessee was entitled to claim deduction under section 54EC of the Act. The Tribunal also referred to the amendment made by the Finance (No.2) Act, 2014 w.e.f. 01.04.2015 by which proviso was inserted after existing proviso to section 54EC(1) of the Act, which was referred to by the Hon'ble High Court of Madras and it was held by the Hon'ble High Court that second proviso was held to be applicable from assessment year 2015-16 and subsequent assessment years. The relevant findings of the Tribunal are as under:-
"9. The issue arising in the present appeal is against the claim of deduction under section 54EC of the Act, under which deduction is provided against the income from long term capital gains in case the investment is made in specified assets within time frame of six months from the date of sale of asset. The said section also provides a cap on the investment to be made in the bonds to the 7 extent of Rs.50 lakhs in any financial year. As per the mandate of the said section and the proviso thereunder, where the assessee makes an investment of Rs.50 lakhs in the specified bonds within time frame of six months from the date of sale, in any financial year, then the benefit of said section is to be allowed to the assessee. In case, the period of six months falls within two financial years, then the question which arises for adjudication is whether the assessee can claim the aforesaid deduction under section 54EC of the Act to the extent of Rs.50 lakhs in each of the financial year totaling Rs.1 crore, where the investment is made in the aforesaid bonds in two financial years separately but within period of six months from the date of sale of assets. This issue arose for consideration before the Hon'ble High Court of Madras in CIT Vs. C. Jaichandar (supra) and later in CIT Vs. Coromandel Industries Ltd. (2015) 370 ITR 586 (Mad) have laid down that the exemption granted under the proviso to section 54EC(1) of the Act should be construed not transactionwise but financial year wise, wherein if the assessee was able to invest sum of Rs.50 lakhs each in two different financial years, within period of six months from the date of transfer of capital assets, the said deduction was allowable to the assessee. The Hon'ble High Court of Madras in CIT Vs. C. Jaichandar (supra) has held that as per the mandate of section 54EC(1) of the Act, time limit for investment is six months and benefit that flows from the first proviso is that if the assessee makes investment of Rs.50 lakhs in any financial year, it would have benefit of section 54EC(1) of the Act. The Hon'ble High Court further held that however, to remove the ambiguity in the above said provisions, legislature by Finance (No.2) Act, 2014 w.e.f. 01.04.2015 had inserted proviso after existing proviso to sub- section (1) of section 54EC of the Act. The second proviso, as per which the investment made by the assessee in long term capital gains specified assets out of capital gains arising from transfer of one or more original assets, during the financial year in which the original asset or assets are transferred and in subsequent financial years, does not exceed Rs.50 lakhs. The said amendment was held to be applicable from assessment year 2015-16 and subsequent assessment years. The Hon'ble High Court thus, categorically held that the investment made on or after 01.04.2007 in long term specified assets by an assessee during any financial year should not exceed Rs.50 lakhs. However, the benefit that flows from the proviso was that where the assessee makes investment of Rs.50 lakhs in any financial year, it could have the benefit of section 54EC(1) of the Act. Applying the aforesaid proposition to the facts of the present case, where the assessee had invested Rs.50 lakhs in REC bonds i.e. specified assets as provided under section 54EC of the Act on 28.02.2010 i.e. in financial year 2009-10 and Rs.22,50,000/- on 30.04.2010 i.e. in financial year 2010-11 as against the capital gains arising of Rs.72,49,401/- on the transfer of long term capital gains i.e. sale of shares on 21.01.2010 falling in financial year 2009-10, the assessee is entitled to the benefit provided by the proviso under section 54EC of the Act and consequently, the order of CIT(A) merits to be upheld. Dismissing the grounds of appeal raised by the Revenue, the appeal of the Revenue is dismissed."
11. In view of the ratio laid down by the Hon'ble High Court of Madras, which undoubtedly, is not the jurisdictional High Court but the said view has persuasive value and has been applied by the Pune Bench of Tribunal in another case and hence, we find no merit in the observations of the CIT(A) in this regard. Accordingly, we reverse the findings of the CIT(A) and hold that the amendment by the Finance (No.2) Act, 2014 w.e.f. 01.04.2015 by which proviso has been inserted after the 8 proviso to section 54EC(1) of the Act is to be applied prospectively from assessment year 2015-16 onwards. Accordingly, the year under appeal being assessment year 2012-13, the assessee is entitled to claim the deduction under section 54EC of the Act at Rs.1 crore i.e. on account of investment made in the financial year in which the asset was sold at Rs.50 lakhs and further deduction of Rs.50 lakhs which was made in the subsequent financial year, though within period of six months from the date of sale of asset. Accordingly, we allow the claim of assessee and direct the Assessing Officer to allow the deduction under section 54EC of the Act at Rs.1 crore. The ground of appeal raised by the assessee is thus, allowed.
12. In the case of Bimal Desai, the first ground of appeal is identical to the ground of appeal No.1 raised in Smt. Kinna Patel and applying the same principle, we hold that the assessee is entitled to claim deduction under section 54EC of the Act at Rs.1 crores."
8.3 From the above, it is evident that the expression 'any financial year' is explained as including 'more than one financial year' for the assessment year under consideration and the judgment of Hon'ble Madras High Court in the case of C. Jaichander (supra) and the order of Pune Bench of the Tribunal in the case of ITO Vs. Smt. Bala R. Venkitachalam 71 taxmann.com 219 (Pune-Trib.) were rightly relied while deciding the issue in favour of the assessees.
Therefore, the reasoning given by the CIT(A) in our opinion is unsustainable in law. In view of the above, we are of the opinion that the order of CIT(A) is required to be reversed. Accordingly, the grounds raised by the assessee are allowed.
9. In the result, appeal of the assessee is allowed.
Order pronounced in the open court on this 09th day of March, 2018.
Sd/- Sd/-
(VIKAS AWASTHY) (D. KARUNAKARA RAO)
याियक सद य /JUDICIAL MEMBER लेखा सद य/ ACCOUNTANT MEMBER
पुणे Pune; दनांक Dated : 09th March, 2018
सतीश
9
आदेश क
ितिलिप अ ेिषत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2.
यथ / The Respondent
3. The CIT(A)-8, Pune
4. CIT-8, Pune
5. िवभागीय ितिनिध, आयकर अपीलीय अिधकरण, "B Bench" Pune;
6. गाड फाईल / Guard file.
आदेशानुसार/ BY ORDER,स
स यािपत ित //True Copy//
//True Copy// Senior Private Secretary
आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune