Income Tax Appellate Tribunal - Bangalore
Mr. Daryl Mario Mathias , Mangalore vs Assessee on 28 August, 2013
IN THE INCOME TAX APPELLATE TRIBUNAL
BANGALORE BENCH "C"
BEFORE SHRI GEORGE GEORGE K, JUDICIAL MEMBER AND
SHRI JASON P. BOAZ, ACCOUNTANT MEMBER
I.T.(I.T) A. No.1402/Bang/2012
(Assessment Year : 2009-10)
Mr. Daryl Mario Mathias,
2-88/6, Sushant, Guru Nagar,
Konchady Post, Mangalore-575 005 .... Appellant
PAN AAWPM 7919G
Vs.
Asst. Director of Income Tax (International Taxation),
Mangalore. ..... Respondent.
Appellant By : Shri Nitin J Shetty.
Respondent By : Shri A. Sundara Rajan.
Date of Hearing : 28.8.2013.
Date of Pronouncement : 4.10.2013.
O R D E R
Per Shri Jason P. Boaz :
This appeal by the assessee is directed against the order of the Commissioner of Income Tax (Appeals), Mysore dt.1.6.2012 for Assessment Year 2009-10.
2. The facts of the case, in brief, are as under :
2.1 The assessee, a non-resident individual, working in the Merchant Navy filed his return of income for Assessment Year 2009-10 on 26.5.2009, declaring total income 2 ITA No.1402 /Bang/12 of Rs.69,69,490. This included Long Term Capital Gains (LTCG) of Rs.61,99,663 arising on sale of an immovable property situated at No.79, Padavu Village of Mangalore Taluk, Dakshina Kannada District, Karnataka by Regd. Sale Deed dt.24.11.2008 for a total consideration ofRs.1,74,00,000. This property was purchased by the assessee vide Regd. Sale Deed dt.27.8.2004 for a consideration of Rs.12,00,000. The return of income was processed u/s. 143(1) of the Income Tax Act, 1961 ('the Act' in short) and the case was subsequently taken up for scrutiny. The assessment was completed by an order under section 143(3) of the Act on 23.12.2011 wherein the LTCG on sale of this property was recomputed at Rs.1,11,99,634 as against Rs.61,99,663 declared by the assessee in the return of income for the period under consideration. This was due to the Assessing Officer's action in restricting the assessee's eligible exemption under section 54EC of the Act to Rs.50 lakhs as against the assessee's claim of Rs.1 Crore invested in National Highway Authority of India Bonds (NHAI Bonds) in Nov., 2008 and Rural Electrification Corporation Bonds (REC Bonds) in May, 2009. 2.2 Aggrieved by the order of assessment for Assessment Year 2009-10 dt.23.12.2011, the assessee preferred an appeal before the learned CIT(Appeals), Mysore who dismissed the assessee's appeal by his order dt.1.6.2012. 3.0 Aggrieved by the order of the CIT (Appeals), Mysore dt.1.6.2012, for Assessment Year 2009-10, the assessee is now in appeal before us. The grounds 3 ITA No.1402 /Bang/12 raised by the assessee before run into 12 pages, are narrative, argumentative and inter alia appear to include submissions also. When this was pointed out to the learned Authorised Representative, he submitted before us that the only issue of grievance to the assessee in this appeal was the restriction of the exemption under section 54EC of the Act to Rs.50 lakhs by the authorities below as against exemption of Rs.1 Crore claimed by the assessee. We will, therefore, only adjudicate the issue of the eligible exemption under section 54EC of the Act.
4.1 The learned Authorised Representative, in support of the assessee's claim for exemption of Rs.1 Crore under section 54EC of the Act placed reliance on the decision of the co-ordinate bench of this Tribunal in the case of Vivek Jairazbhoy V DCIT (ITA No.236/Bang/2012 dt.14.12.2012) wherein on similar facts i.e. investment of Rs.50 lakhs each in specified securities was made in two different financial years, but within a period of six months from the date of sale, it was held that the assessee is entitled to exemption of Rs.1 Crore as the six month period for investment in specified securities involved two financial years. It was submitted by the learned Authorised Representative that in coming to this finding the co-ordinate bench of the ITAT in the case of Vivek Jairazbhoy (supra) followed the decision of the ITAT, Ahmedabad in the case of Aspi Ginwala & Others V ACIT (ITA Nos.3226 & 3227/Ahd/2011 dt.30.3.2012) wherein on similar facts i.e. investments of Rs.50 lakhs each was made in two 4 ITA No.1402 /Bang/12 different financial years but within the period of six months from the date of sale, it was held in para 8 thereof that the assessee is entitled to exemption of Rs.1 Crore, as the six month period for investment in specified securities involved two financial years. It was submitted by the learned Authorised Representative that the facts of the case on hand were identical to the cited cases of the Tribunal viz. Vivek Jairazbhoy (supra) and Aspi Ginwala (supra) and therefore this issue being covered in favour of the assessee, the assessee is entitled to and ought to be allowed exemption of Rs.1 Crore as the said investments amounting to Rs.1 Crore were made in two different financial years but within six months from the date of sale.
4.2 Per contra, the learned Departmental Representative supported the orders of the authorities below and before us also placed reliance on an earlier judgment, of the ITAT, Jaipur Bench in the case of ACIT V Raj Kumar Jain & Sons (HUF) (ITA No.648/JP/2011 dt.30.1.2012) wherein on similar facts, the Tribunal was of the view that a liberal interpretation will lead to discrimination adversely affecting those who sell property in October to March of the same financial year. In this view of the matter, they came to the conclusion that for investment to be made within six months, the exemption under section 54EC of the Act is to be restricted to Rs.50 lakhs only.
5 ITA No.1402 /Bang/124.3.1 We have heard both parties and their contentions on the issue of the exemption under section 54EC of the Act. The learned Authorised Representative has filed a paper book containing a synopsis of the issue involved, cited, relied and placed on record certain judicial decisions and CBDT Circulars etc. in support of the assessee's case. The learned Departmental Representative has also placed on record copies of certain judicial decisions in support of the stand of Revenue.
4.3.2 The assessee, in the relevant period sold an immovable property situated at No.79, Padavu Village, Mangalore, Dakshin Kannada District by Registered Sale Deed dt.24.11.2008 for a consideration of Rs.1,74,00,000. As per the details on record, the Assessing Officer noted that the assessee invested a sum of Rs.50 lakhs in NHAI Bonds on 30.11.2008 and a further sum of Rs.50 lakhs in REC Bonds on 31.5.2009. The assessee computed the Long Term Capital Gains on sale of this property at Rs.61,99,633 after claiming exemption of Rs. 1 Crore under section 54EC of the Act.
The Assessing Officer observed that the sale of immovable property was on 24.11.2008 which pertained to the period relevant to Assessment Year 2009-10 and in this view of the matter restricted the exemption under section 54EC of the Act to Rs.50 lakhs invested on 30.11.2008 in NHAI Bonds. In respect of further sum of Rs.50 lakhs invested in May, 2009 (i.e. Rs.30 lakhs by cheque dt.12.5.2009 and Rs.20 lakhs by cheque dt.22.5.2009), the Assessing Officer noting that this investment pertained 6 ITA No.1402 /Bang/12 to the period relevant to Assessment Year 2010-11 which was another financial year, did not consider the same for exemption under section 54EC of the Act.
4.3.3 On appeal by the assessee, the learned CIT (Appeals) dismissed the assessee's appeal by order dt.1.6.2012, holding at para 3.2 and 3.3 on pages 5 & 6 thereof as under :
" 3.2 I have considered the issue raised by the Assessing Officer and the arguments of the appellant. During the course of hearing, it was explained by the appellant that the deposits were made on 12.5.2009 and 22.5.2009 which is within 6 months but the allotment of bonds is later. Reliance was placed on ITAT (Ahmedabad) in Aspi Ginwala Vs. ACIT 2012 (4) TMI 195 (TRI). In this case, CBDT Circular No.3/2008 was cited. In the CBDT circular, it is clearly explained that in view of limited number of bonds available the purpose of imposition of restriction ofRs.50,00,000 is to give equitable distribution of limited number of bonds. Hon'ble ITAT Jaipur A Bench in ACIT Vs. Sri Raj Kumar Jain & Sons (HUF) addressing the issue whether as per section 54EC, investment within 6 months is investment for that particular FY in which transfer has taken place and said period of 6 months would not include some part of subsequent FY and whether in view of the above, only investment of Rs.50,00,000 made on 31.3.2008 for the FY 2007-08, it was held by Hon'ble Tribunal in favour of the Department. In this case, like in the case of the appellant Rs.50,00,000 was invested on 31.3.2008 and another Rs.50,00,000 was invested on 10.6.2008, the assessee claimed exemption under section 54EC for the entire Rs.1 Crore while that Assessing Officer restricted the deduction toRs.50,00,000. On appeal, the CIT (Appeals) held that investment of Rs.50,00,000 each had been made during 2 FY's and total investment is made within 6 months and hence allowed the exemption which was reversed by Hon'ble Tribunal.
3.3 I am completely in agreement with the findings of the Hon'ble Tribunal and accordingly hold that the appellant is not eligible for the exemption claimed for the 2nd investment over and above Rs.50,00,000.
Hence the appeal is dismissed."
7 ITA No.1402 /Bang/124.3.4 From the facts on record it is seen that the assessee, in the period under consideration, sold an immovable property situated at No.79, Padavu Village, Mangalore on 24.11.2008 for a consideration of Rs.1,74,00,000. As per the details on record, it is seen that the assessee invested a sum of Rs.50 lakhs on 30.11.2008 in NHAI Bonds. A further sum of Rs.50 lakhs has invested by the assessee in Rural Electrification Corporation Bonds (REC Bonds) in May, 2009, the details of which are :
Rs. 30 lakhs by cheque dt.12.5.2009 of SBI, Kankanady Branch and Rs.20 lakhs by cheque No.0312802 dt.22.5.2009 of SBI, Kankanady Branch. Thus it is clear that in all the assessee had invested an amount of Rs.1 Crore out of the sale consideration in Bonds issued by NHAI and REC Ltd. within six months from the date of sale of the said property, which fact is not disputed by the authorities below. In the return of income filed for Assessment Year 2009-10, the assessee computed the LTCG arising on the sale of the said property at Padavu Village, Mangalore at Rs.61,99,663 after claiming exemption of Rs.1 Crore under section 54EC of the Act on account of the investments in REC and NHAI Bonds. As brought out in para 4.3.2 and 4.3.3 of this order (supra) the exemption under section 54EC was restricted to Rs.50 lakhs by both the orders of Assessing Officer and the learned CIT (Appeals) relying on the proviso to section 54EC of the Act, on the CBDT Circular No.3/2008 and on the decision of the Jaipur Bench of 8 ITA No.1402 /Bang/12 the ITAT in the case of ACIT V Sri Raj Kumar Jain & Sons (HUF) (2012) 19 Taxmann.com 27 (JP).
4.4.1 The issue now before us for adjudication is whether the proviso to section 54EC of the Act restricts the exemption to Rs.50 lakhs or does it merely restrict the investment that can be made in a single financial year to Rs.50 lakhs ? 4.4.2 As pointed out by the learned Authorised Representative, on similar facts as in the case on hand, a co-ordinate bench of this Tribunal in the case of Vivek Jairazbhoy V DCIT in its order in ITA No.236/Bang/2012 dt.14.12.2012, held that the assessee is entitled to exemption of Rs.1 Crore under section 54EC of the Act as the six months period for investment in specified securities involved two financial years. The operational portion of the aforesaid order of the Tribunals (supra) where this issue has been considered in detail at paras 9.5 to 10.3 at pages 14 to 19 thereof is extracted and reproduced hereunder :
" 9.4 The issues now before us for adjudication are the following :
(i) Whether the proviso to section 54EC of the Act restricts the exemption to Rs.50 lakhs or does it merely restrict the investment that can be made in a single financial year to Rs.50 lakhs ?
(ii) If the answer to the above is that it is the investment that is restricted and not the exemption, then in view of the fact that NHAI had allotted the Bonds only on 30.6.2008 in respect of the second investment of Rs.50 lakhs, which is beyond the period of six months from the date of sale of property, can it be said that the second investment of Rs.50 lakhs is said to have been made outside the period of six months and no exemption is to be allowed under section 54EC of the Act in respect of the same.9 ITA No.1402 /Bang/12
9.5 The learned counsel for the assessee has placed reliance on the decision of the ITAT, Ahmedabad Bench in the case of Aspi Ginwala & Others Vs. ACIT in ITA Nos.3226 & 3227/Ahd/2011 dt.30.3.2012 wherein on similar facts i.e investment of Rs.50 lakhs each was made in two different financial years but within the period of six months from the date of sale, it was held in para 8 of the said order that the assessee is entitled to exemption of Rs.1 Crore as the six months period for investment in eligible investments involved in two financial years.
9.6 The learned Departmental Representative however placed before us an earlier judgment, contrary to the decision of the Ahmedabad Bench of the ITAT, rendered by the ITAT, Jaipur Bench in the case of ACIT Vs. Raj Kumar Jain & Sons in ITA No.648/JP/2011 dt.30.1.2012 wherein the Tribunal on similar facts, was of the view that a liberal interpretation will lead to discrimination adversely affecting those who sell a property at any time from April to September of a financial year vis-à-vis those who sell property in the period October to March of the same financial year. In this view of the matter, they came to the conclusion that for the investment to be made within a period of six months, the exemption under section 54EC of the Act is to be restricted to Rs.50 lakhs only.
9.7 The learned counsel for the assessee placed reliance on circular No.3/2008 dt.12.3.2008 issued by CBDT, being an explanatory note on the provisions relating to Direct Taxes in Finance Act, 2007. In the said para 28.2 thereof the reason for it to set a limit on the quantum of investment by a person in a financial year, reads as under :
" 28.2 The quantum of investible bonds issued by NHAI and REC being limited, it was felt necessary to ensure that the benefit was available to all the investors. For this purpose, it was necessary to ensure that the limited number of bonds available for subscription is also available for small investors. Therefore, with a view to ensure equitable distribution of benefits amongst prospective investors, the government decided to impose a ceiling on the quantum of investment that could be made in such bonds. Accordingly, the said section has been amended so as to provide for a ceiling on investment by an assessee in such long-term specified assets. Investments in such specified assets to avail exemption under section 54EC, on or after 1st day of April, 2007 will not exceed fifty lakh rupees in a financial year."10
ITA No.1402 /Bang/12
It is clear from the Circular no.3/2008 of CBDT (supra) that the Government only intended to restrict the investment in a particular financial year and thus has fixed a limit of Rs.50 lakhs as permissible investment in a particular financial year. It also appears clear that the Government did not intend to restrict the maximum amount of exemption permissible under section 54EC of the Act. The fact that the Legislature has consciously used the words "in a financial year" in the proviso to section 54EC of the Act also fortifies the same. If the Legislature wanted to restrict the exemption itself to Rs.50 lakhs it could have simply dispensed with using the words "in a financial year."
9.8 The judicial decisions relied upon by the learned counsel for the assessee also supports the stand of the assessee. The Hon'ble Apex Court while deciding the case of Vikrant Tyres Ltd Vs. First ITO reported in 247 ITR 821 have already laid down the law on interpreting of statutes by holding thereof that :-
" It is settled principle in law that the courts while construing Revenue Acts have to give a fair and reasonable construction to the language of a statute without leaning to one side or the other, meaning thereby that no tax or levy can be imposed on a subject by an Act of Parliament without the words of the statute clearly showing an intention to lay the burden on the subject. In this process, the courts must adhere to the words of the statute and the so called equitable construction of those words of the statute is not permissible. The task of the court is to construe the provisions of the taxing enactments according to the ordinary and natural meaning of the language used and then to apply that meaning to the facts of the case and in that process if the tax payer is brought within the net he is caught, otherwise he has to go free."
In the case of CWT Vs. Hashmatunnisa Begum reported in 176 ITR 98 (SC), the Hon'ble Apex Court held that while interpreting statutes, literal construction has to be applied regardless of results and that only in a situation where two views are reasonably possible, should reference be given to that view which promotes constitutionality and not where the statute can be read only in a particular way.
The following decisions of the Hon'ble Apex Court have laid down the proposition that provisions for deduction, exemption or relief are to be construed liberally in order to advance the objective and not to frustrate it.
(i) CIT Vs. Gwalior Rayon Silk Manufacturing Co. Ltd. (196 ITR 149)(SC) 11 ITA No.1402 /Bang/12
(ii) CIT Vs. Vegetable Products Ltd. ( 88 ITR 192)
(iii) Bajaj Tempo Ltd. Vs. CIT (196 ITR 188)(SC) Taking into consideration the overall facts and circumstances of the case, the CBDT's Circular No.3/2008, and the principles laid down by the Hon'ble Apex Court for interpreting statutes, we are of the considered view that it would be in the fitness of things, to follow the decision of the ITAT, Ahmedabad Bench in the case of Aspi Ginwala & Others (supra) relied on by the assessee and hold that the assessee is entitled to total deduction under section 54EC of the Act spread over a period of two financial years @ Rs.50 lakhs each on investments made in specified instruments within a period of six months from the date of sale of the property.
10.1 We now proceed to address the issue at (ii) as laid out in para 9.4 (supra). As per facts on record, the assessee had issued a cheque for Rs.50 lakhs to NHAI for allotment of Bonds that was encashed by NHAI on 9.6.2008. The sale of the said property took place on 14.12.2007 and the six months period ended on 13.6.2008. NHAI, however, as evident from the record, has allotted the bonds only on 30.6.2008 which is after the six month period. The learned CIT(Appeals) held that the date of allotment is what is to be considered for reckoning the six months period and the same (viz. 30.6.2008) being beyond the period of six months, in the instant case, has denied the exemption claimed under section 54EC of the Act for the second investment of Rs.50 lakhs.
10.2 The assessee has placed reliance on a decision of the ITAT, Bombay Bench in the case of Kumarpal Amrutlal Doshi Vs. DCIT in ITA No.1523/Mum/2010 dt.9.2.2011 wherein the Tribunal relying on the decision of the Hon'ble Apex Court in the case of CIT Vs. Ogale Glass Works Ltd (25 ITR 529) has held that payment by cheque subsequently realized on the cheque being honoured and encashed relates back to the date of receipt of the cheque and in law the date of payment is the date of delivery of the cheque. In the cited case the assessee therein had issued a cheque to NABARD on 9.2.2006 which was within the period of six months as specified in section 54EC. The cheque got encashed on 15.2.2006 which was after a period of six months. The Tribunal held that the date of payment is the date of tender of the cheque i.e. 9.2.2006. In the instant case of the assessee, the cheque dt.4.6.2008 issued by the assessee for NHAI Bonds was encashed by NHAI on 9.6.2008 which is before the expiry of the period of six months (i.e. 13.6.2008) and therefore the assessee in the present case is on an even 12 ITA No.1402 /Bang/12 better footing than the case relied upon by the learned counsel for the assessee.
10.3 Further, in the case of Aspi Ginwala & Others (supra) cited earlier in this order, the assessee was unable to invest in Bonds within a period of six months as the issue was not open and did so the moment the same was made open to public and thus the allotment was made after the statutory period of six months. The ITAT, Ahmedabad Bench, relying on an earlier decision of the ITAT, Mumbai in the case of Ram Agarwal Vs. JCIT reported in 81 ITD 163 held that the assessee therein was prevented by sufficient cause from investing within the statutorily permitted period of six months and allowed the assessee exemption under section 54EC of the Act in respect of the said investment. In the present case before us, the assessee has made payment for the investment in NHAI which was encashed on 9.6.2008 well within the statutorily permitted period of six months from the date of sale of the property (i.e. upto 13.6.2008). What is to be reckoned here is the date of payment and not the date of allotment as the same is not in the control of the assessee. In this view of the matter, we hold that the date of payment (i.e. date of encashment of cheque) is to be reckoned for calculating the six month period and since in this case the date of payment / encashment being well within the period of six months, the assessee is entitled to exemption under section 54EC of the Act even on the second investment of Rs.50 lakhs made in Bonds issued by NHAI. It is ordered accordingly. "
Respectfully following the aforesaid decision of the co-ordinate bench of this Tribunal in the case of Vivek Jairazbhoy in ITA No.236/Bang/2012 dt.14.12.2012, we hold that the assessee in the case on hand is entitled to exemption of Rs.1 Crore under section 54EC of the Act, as the six month period from the date of sale i.e. 24.11.2008, for investment in eligible specified securities involved two financial years and the investments of Rs.50 lakh each in NHAI Bonds was made on 30.11.2008 and in REC Bonds were made in May, 2009 (viz. Rs.30 lakhs on 12.5.2009 and Rs.20 lakhs on 13 ITA No.1402 /Bang/12 22.5.2009) which is within six months from the date of sale of the said property. The Assessing Officer is directed to allow the exemption under section 54EC of the Act accordingly.
5. In the result, the assessee's appeal is allowed.
Order pronounced in the open court on 4th October, 2013.
Sd/- Sd/-
(GEORGE GEORGE K) (JASON P BOAZ)
Judicial Member Accountant Member
*Reddy gp
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