Kerala High Court
Fr. Joseph Vilengetil vs Union Of India (Uoi) And Ors. on 22 March, 1990
Equivalent citations: [1990]186ITR63(KER)
JUDGMENT K.A. Nayar, J.
1. Even though very many questions have been raised in the original petition, the short question argued before me at the time of hearing of the case is whether the benefit of Section 54E of the Income-tax Act is available to the petitioner in the circumstances of this case 4.12 acres of land situate in Kadama Village at Kanayanoor Taluk belonging to the petitioner were acquired under the Kerala Land Acquisition Act by the Revenue Divisional Officer, Fort, Cochin, for the construction of the new Dairy Plant at Tripunithura. Advance possession was taken on November 19, 1982, under Section 19 of the Act. The transfer took place under that section. The compensation payable for the acquisition was paid to the petitioner in two instalments. An advance payment of Rs. 3,11,065 was made on March 11, 1983 and, out of this, an amount of Rs. 3,10,300 was invested by the petitioner on August 20, 1983, in the National Rural Development Bonds (Second Issue). The award in respect of the land was passed on March 31, 1984 for an amount of Rs. 7,37,215.58 and, after deducting the advance payment, the balance of Rs. 4,26,150.58 was paid to the petitioner on April 30, 1984 and, within six months therefrom, that is, on July 28, 1984, the petitioner invested the entire amount in the specified units of the Unit Trust of India.
2 For the assessment year 1983-84, i.e., for the previous year ending March 31, 1983, the petitioner submitted a return of income under the head "Other sources" showing an amount of Rs. 200 and an amount of Rs. 3,11,200 was disclosed as long-term capital gains claimed as exempt under Section 54E of the Income-tax Act. The Income-tax Officer rejected the claim for the benefit of Section 54E on two grounds, namely, the amount has not been invested in the specified securities within six months from the date of transfer which, according to him, was November 19, 1982, and that the investments made in the National Rural Development Bonds (Second Issue) and the Unit Trust were not specified securities as on November 19, 1982. Section 54E as it stood before its amendment with effect from April 1, 1984, gives certain benefits to the assessees in respect of the capital gains arising from the transfer of a capital asset if the asses-see invests the same in specified assets within a period of six months after the date of such transfer. The Taxation Laws (Amendment) Act, 1984, added a proviso with effect from April 1, 1984, as under :
"Provided further that in a case where the transfer of the original asset is by way of compulsory acquisition under any law and the full amount of compensation awarded for such acquisition is not received by the assessee on the date of such transfer, the period of six months referred to in this sub-section shall, in relation to so much of such compensation as is not received on the date of the transfer, be reckoned from the date immediately following the date on which such compensation is received by the assessee."
3. This amendment took effect from April 1, 1984, and will have effect with effect from 1984-85 normally. Since the petitioner in this case invested the amount within six months of the date of receipt of the compensation in specified securities, the petitioner contended that he is entitled to get the benefit of Section 54E of the Act. The Income-tax Officer, by exhibit P-1, denied this benefit on the ground that the date of the transfer is November 19, 1982, and the amount of compensation ought to have been deposited by him in specified securities within six months from that date. In fact, more than half of the amount of compensation was paid to the petitioner only on April 30, 1984 and, therefore, the contention of the petitioner was that he could not have deposited the amount which he did not receive. The petitioner, therefore, challenges exhibit P-1 order in this original petition and prays for a declaration that the six months mentioned in Section 54E is six months from the date of receipt of the compensation and the proviso introduced by the Taxation Laws (Amendment) Act, 1984, to interpret the date of transfer in the case of persons who did not receive compensation under compulsory acquisition as the date from which the compensation has been paid to such persons is declaratory. In other words, the date of transfer should be reckoned as the date immediately following the date on which such compensation is received by the assessee and he gets six months' time for getting the benefit of Section 54E of the Act. The petitioner's contention is that this amendment is declaratory in nature as any other interpretation would mean a direction to the assessee to do something impossible in law and in fact. In other words, one cannot deposit an amount which one has not received in specific security. The law does not require to do any impossibility to obtain the benefit of a statute.
4. Even though the position has been clarified by the proviso, it should be interpreted that this benefit would be available to the petitioner for the year 1984-85 also. The High Court of Andhra Pradesh in S. Gopal Reddy v. CIT [1990] 181 ITR 378, held that, under the provisions of Section 54E of the Act, what is to be invested in specified assets is "the consideration or any part thereof" and unless the consideration is received, or accrues, there is no question of investing it. The court further held that the second proviso to Sub-section (1) of Section B4E inserted with effect from April 1, 1984, stating that, in the case of compulsory acquisition of property under a statute, if the full amount of compensation awarded for such acquisition is not received by the assessee on the date of such transfer, the period of six months referred to in Sub-section (1) shall, in relation to so much of such compensation as is not received on the date of the transfer, be reckoned from the date on which such compensation is received by the assessee should be deemed to have prevailed even prior to April, 1984, i.e., with effect from the date of the enactment of Section 54E. Any other interpretation would make Section 54E unworkable and would result in denying the benefit given to the assessees under Section 54 E. Therefore, exhibit P-1, in so far as it construes the date of transfer as November 19, 1982, for getting the benefit of Section 54 E, is erroneous.
5. Then the next question is whether the petitioner has invested the amount in specified securities. The National Rural Development Bonds (Second Issue), 1983, has been notified as a specified security in pursuance of sub Clause (iii) of Clause (c) of Explanation 1 to Sub-section (1) of Section 54E of the Income-tax Act, 1961. Therefore, the investment made by the petitioner on August 26, 1983, in the National Rural Development Bonds (Second Issue), 1983, is an investment in a specified security. The second investment is made on July 28, 1984. That is in the special series of units issued under the Capital Gains Unit Scheme, 1983, of the Unit Trust of India. This also has been notified as a specified security by Notification No. G. S. R. 804(E), dated October 27, 1983 (see [1983] 144 ITR (St) 63).
6. In the circumstances of the case, the petitioner is entitled to succeed in this original petition Exhibit, P. 1 is, therefore, quashed. The second respondent is directed to rework the benefit, available to the petitioner in the light of this judgment.
7. The original petition is allowed as above. No costs.