Income Tax Appellate Tribunal - Ahmedabad
Jyotindra H. Shodhan vs Income Tax Officer on 3 July, 2003
Equivalent citations: [2003]87ITD312(AHD), (2003)81TTJ(AHD)1
JUDGMENT
A.L. Gehlot, A.M.
1. The Hon'ble President, ITAT has constituted this Special Bench to dispose of the appeal filed by assessee raising the following ground : "Whether benefit under Section 54E of IT Act is allowable to assessee where he invested Rs. 1,89,400 in 3 Year National Rural Development Bond (III Series) on 20th Feb., 1987, within six months from date of receipt of final receipt of sale consideration whereas the properties were sold and transferred vide sale deed executed and registered on 7th Aug., 1982."
2. The relevant facts of the case are that the assessee had sold two plots of land vide sale deed executed and registered on 7th Aug., 1992, for Rs. 8,98,775. The original assessment made under Section 143(3) was set aside by the CIT(A) vide order dt. 28th Aug., 1989, and the AO was directed to make a fresh assessment in accordance with the directions given in the said order of CIT(A). The AO completed the fresh assessment vide order dt. 31st March, 1992. In this fresh assessment, the assessee has claimed deduction under Section 54E of the Act on the basis of investment of Rs. 1,89,400 made in NRDB on 20th Feb., 1987, within six months of the receipt of final instalment.
3. The AO rejected the said claim made for deduction under Section 54E on the ground that no such deduction was allowed by the AO under Section 54E while passing the original assessment order under Section 143(3) nor the learned CIT(A) has given any direction in his appellate order dt. 28th Aug., 1989, for considering the assessee's claim under Section 54E. The AO also observed that the assessee has not invested or deposited Rs. 1,89,400--part of the net sale consideration in any specified asset within six months from the date of transfer.
4. The learned CIT(A) did not agree with AO regarding entertaining the claim of the assessee. He admitted claim of the assessee but on merit, he confirmed the view taken by the AO holding that the assessee is not entitled for deduction under Section 54E though giving a different reason viz, that the investment in National Rural Development Bonds was notified as specified asset for the transfer made during the period from 28th Feb., 1979 to 1st March; 1983. As the appellant has not invested the money in this specified asset within the stipulated period, he therefore, held that the conditions of investment specified under Section 54E of the Act have not been fulfilled.
5. The learned authorised representative submitted that full and final account of sale consideration, Rs. 1,89,470 received on 25th Oct., 1986, and same was invested in National Rural Development Bond on 20th Feb., 1987, within six months from its receipt. He further submitted that the amount was received late due to litigation. The thrust of the arguments of the learned authorised representative is on two aspects, first is that the CIT(A) grossly erred in arriving at the conclusion that the assessee has not invested the money in National. Rural Development Bonds which has been notified as specified assets for the transfer of assets made during the period from 28th Feb., 1979 to 1st March, 1983. The contention of the learned authorised representative is that it was not possible to invest in these Bonds when those were not in existence on the date of receipt of amount of sale consideration i.e., 20th Feb., 1987. The second aspect of the arguments of learned authorised representative is that the specified 6 months period in Section 54E is to be reckoned from date of receipt of sale consideration. The learned authorised representative drew our attention on p. 2 para 3 of an earlier decision of Tribunal in the case of Gokul J. Shodhan--ITA No. 1117/Ahd/94, asst. yr. 1984-85, order dt. 29th Dec., 2000, and the case of Jyotindra Shodhan (HUF) v. ITO--ITA No. 525/Ahd/95 for asst. yr. 1984-85 dt. 10th Feb., 2001. He contended that on identical facts, the arguments of assessee was accepted by the Tribunal and exemption under Section 54E was granted. In that case the Tribunal followed an earlier decision of Tribunal Ahmedabad Bench in the case of Smt. Harkhaben C. Patel v. ITO (1984) 19 TTJ (Ahd) 403 in which it has been held that the benefit of Section 54E should be given to the assessee in case the investment in the specified securities has been made within a period of six months from the date of receipt of sale proceeds. The learned Departmental Representative further submitted that the above view is fully supported by the judgment of the Hon'ble Gujarat High Court in the case of Shantaben Govindlal Patel v. CIT (2001) 249 ITR 682 (Guj).
6. The learned authorised representative referred to CBDT Circular No. 359 dt. 10th May, 1983 and contended that when it has been stated by the CBDT to allow exemption in cases where earnest money or the advance received is invested in specified assets before the date of transfer of assets, then on the same basis, the amount invested within 6 months from the date of receipt should also be accepted. The CBDT has relaxed that condition in view of purpose and spirit of the section.
7. The learned authorised representative further submitted that with a view to augment Government deposits in specified investments, the legislature has thought it fit to enact the provisions which encourage assessees, who may be liable to pay tax on capital gains, to make specified deposits and investments for seeking exemption from tax on capital gains. These provisions were inserted as an incentive to the assessee for seeking exemption from payment of tax on capital gain. The learned authorised representative further submitted that, while interpreting the provisions, full effect is required to be given to the legislative intention of encouraging assessee, liable to tax for capital gains, to make specified investments and deposits and thereby augment Government revenue. For this purpose, when the assessee received the amount and the same has been deposited in specified securities within six months, the benefit of Section 54E is allowable to the assessee, The learned authorised representative has also placed reliance on following decisions :
(i) ITO v. H.P. Vishweswaraiah (2001) 250 ITR 863 (Kar)
(ii) S. Gopal Reddy v. CIT (1990) 181 ITR 378 (AP)
(iii) CIT v. Smt. Roda Mistry (1998) 231 ITR 12 (AP)
8. The alternative submission of the learned authorised representative is that if an interpretation of taxing provision is ambiguous and is reasonably capable of more than one interpretation, that interpretation which is beneficial to the assessee has to be accepted. In support of this contention, the learned authorised representative relied upon the following judgments of the Hon'ble apex Court :
(i) CIT v. Gwalior Rayon Silk Mfg. Co. Ltd (1992) 196 ITR 149 (SC)
(ii) CIT v. Shahzada Nand & Sons and Ors. (1966) 60 ITR 392 (SC)
(iii) CIT v. Naga Hills Tea Co. Ltd. (1973) 89 ITR 236 (SC)
(iv) CED v. R. Kanakasabai and Ors. (1973) 89 ITR 251 (SC)
(v) Saroj Aggarwal v. CIT (1985) 156 ITR 497 (SC)
(vi) CIT v. Natu Hansraj (1976) 105 ITR 43 (Guj)
(vii) CIT v. J.H. Gotala (1985) 156 ITR 323 (SC)
9. The learned Departmental Representative, on the other hand, submitted that the Department has not accepted the decision of Tribunal in the case of Gokul J. Shodhan and appeal has been filed before the High Court. The learned Departmental Representative has also submitted that the date of last instalment received as per AO, p. 4 of AO's order is 21st Sept., 1985, and investment was made after the stipulated period on 20th Feb., 1987. In respect of decisions cited by the learned authorised representative, the learned Departmental Representative submitted that these decisions are not applicable for the case under consideration as facts are different; these cases are related to issue of compulsory acquisition. He further submitted that in the case under consideration, there is no compulsory acquisition. It is a case of sale through agreement. The learned Departmental Representative submitted that the language of section is very clear that the assessee who wants to avail the benefit of Section 54E, should deposit sale consideration within stipulated period of 6 months from date of transfer. The learned Departmental Representative referred to a judgment of Hon'ble Kerala High Court in the case of Smt. K. Sarala Devi v. CIT (1996) 222 ITR 211 (Ker) in support of his contentions.
10. We have considered the rival contentions of the parties, perused the records and gone through the decisions cited. The controversy to be decided by us is whether for the purpose of allowing deduction under Section 54E of the IT Act, the period of six months is to be reckoned from the date of transfer or from the date of final receipt of sale consideration. Separate provisions have been provided in IT Act for both the situations. The relevant provisions in respect of both the situations are reproduced as below :
(a) Where the period of six months is to be reckoned from the date of transfer "54E(1) Where the capital gain arises from the transfer of a capital asset, not being a short term capital asset (the capital asset so transferred being hereafter in this section referred to as the original asset) and the assessee has, within a period of six months after the date of such transfer, invested or deposited the whole or any part of the net consideration in any specified asset (such specified asset being hereafter in this section referred to as the new asset), the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say......."
(b) Where the period of six months to be reckoned from the date of receipt
(i) Second proviso to Section 54E(1) [inserted by the Taxation Laws (Amendment) Act, 1984, w.e.f. 1st April, 1984], "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 subsection 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."
(ii) Section 54E(3) (inserted by the Finance Act, 1978 w.e.f. 1st April, 1978) "Where the transfer of the original asset is by way of compulsory acquisition under any law or where the full value of the consideration for the transfer of the capital asset is determined or approved by the Central Government or the Reserve Bank of India, and the compensation awarded for such acquisition or, as the case may be, the full value of the consideration so determined or approved is enhanced by any Court, Tribunal or other authority, then so much of the capital gain, computed under Section 48 by taking the compensation or consideration as so enhanced as the full value of the consideration received or accruing as a result of such transfer, as is attributable to the enhancement of the compensation or consideration (hereafter in this sub-section referred to as the undisputed capital gain) shall, if the assessee has, within a period of six months after the date of receipt of the additional compensation or, as the case may be, the additional consideration, invested or deposited the whole or any part of such additional compensation or consideration in any specified asset (hereafter in this section referred to as the relevant asset), be dealt with in the following manner, that is to say,"
(iii) Section 155(7A) (Inserted by the Finance Act, 1978, with retrospective effect from 1st April, 1974) "Where in the assessment for any year, the capital gain arising from the transfer of a capital asset, being a transfer by way of compulsory acquisition under any law, or a transfer the consideration for which was determined or approved by the Central Government or the Reserve Bank of India, is computed under Section 48 and the compensation for such acquisition or the consideration for such transfer is enhanced or further enhanced by any Court, Tribunal or other authority, the computation or, as the case may be, computations made earlier shall be deemed to have been wrongly made and the ITO shall notwithstanding anything contained in this Act, recompute in accordance with Section 48 the capital gain arising from such transfer by taking the compensation or the consideration as enhanced or further enhanced, as the case may be, to be the full value of the consideration received or accruing as a result of such transfer and shall make the necessary amendment; and the provisions of Section 154, shall, so far as may be, apply thereto, the period of four years specified in Sub-section (7) of that section being reckoned from the end of the previous year in which the additional compensation or consideration was received by the assessee."
(iv) 155(10B) (inserted by the Finance Act, 1978, w.e.f. 1st April, 1978) "Where in the assessment for any year, a capital gain arising from the transfer, being a transfer by way of compulsory acquisition or a transfer the consideration for which was determined or approved by the Central Government or the Reserve Bank of India, of any capital asset, not being a short term capital asset, is charged to tax and if the compensation or, as the case may be, consideration for such transfer is enhanced or further enhanced, as the case may be, by any Court, Tribunal or other authority, and within a period of six months after the receipt of the additional compensation or consideration, the assessee invests or deposits the whole or any part of the additional compensation or consideration in any specified asset referred to in Expln. 1 of Sub-section (1) of Section 54E, the ITO shall amend the order of assessment so as to exclude the amount of capital gain not chargeable to tax under the provisions of Sub-section (3) of Section 54E; and the provisions of Section 154 shall, so far as may be, apply thereto, the period of four years specified in Sub-section (7) of that section being reckoned from the end of the previous year in which the additional compensation or consideration was received by the assessee."
(v) Section 54H [Inserted by the Finance (No. 2) Act, 1991, w.e.f. 1st Oct., 1991].
"Notwithstanding anything contained in Sections 54, 54B, 54D 54EC and 54F, where the transfer of the original asset is by way of compulsory acquisition under any law and the amount of compensation awarded for such acquisition is not received by the assessee on the date of such transfer, the period for acquiring the new asset by the assessee referred to in those sections or, as the case may be, the period available to the assessee under those sections for depositing or investing the amount of capital gain in relation to such compensation as is not received on the date of the transfer, shall be reckoned from the date of receipt of such compensation :"
11. On the basis of above legal background, where reckoning date is specifically provided as the date of receipt of the consideration, the period of six months is to be counted from such date of receipt. Conversingly, wherever it is not so specifically provided to be reckoned from the date of receipt, it cannot be imported into the provisions of Section 54E(1), particularly when a contrary intention is expressed namely, the period of six months is to be reckoned from the date of transfer in contrast to the date of receipt.
12. Let us now examine the decisions cited by the learned authorised representative. In the case of ITO v. H.P. Vishwesaraiah (supra) the Hon'ble Karnataka High Court held that the assessee is entitled to exemption under Section 54E(3) of IT Act where enhanced compensation on account of compulsory acquisition of land was received after omission of Section 54E(3). The relevant observations are reproduced from page 866 as under :
"Held, that the amount of enhanced compensation had been deposited or invested after 1st April, 1978, and if there was full compliance with other provisions of Section 54E(3) and Section 155(10B) of the Act, the assessee could legitimately be allowed to claim exemption from tax on capital gains. The legislature in giving retrospective effect to Section 155(7A) which enables the tax authorities to recompute the capital gains tax on the enhanced amount of compensation subsequently awarded and received by the assessee, and giving prospective operation to Section 155(106) and Section 54E(3), could legitimately have no intention to deny the benefit of exemption from tax to the assessee willing to make deposits and investments in the "specified assets". It is only in respect of those cases where the assessee has not availed of the benefit of exemption from tax by a specified deposit or investment that it became necessary to confer power on the authorities to recompute tax on capital gains on the enhanced amount of compensation."
12A. The facts and relevant observations of Hon'ble Andhra Pradesh High Court in the case of S. Gopal Reddy v. CIT (supra), from the relevant headnote are reproduced as below :
"Under the provisions of Section 54E of the IT Act, 1961, 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 second proviso to Sub-section (1) of Section 54E inserted w.e.f. 1st April, 1984, states 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. It would be consistent with reason to construe this proviso as being merely clarificatory. In other words, the provision made by the second proviso to Sub-section (1) of Section. 54E should be deemed to have prevailed even prior to 1st April, 1984, i.e., with effect from the date of the enactment of Section 54E.
Land belonging to the assessee was compulsorily acquired by the State in January, 1978. The compensation was received by the assessee in August, 1980. The assessee received Rs. 66,605 and in February, 1981, he invested a sum of Rs. 50,000 out of the said compensation in a fixed deposit in a bank and claimed relief under Section 54E in respect of such amount. The ITO rejected the said claim on the ground that the deposit was not made within six months from the date of the transfer, i.e., 10th Jan., 1978. His view was confirmed on appeal by both the appellate authorities. On a reference :
Held, that, on the facts and in the circumstances of the case, the assessee was entitled to relief under Section 54E in respect of the sum of Rs. 50,000 placed in the fixed deposit in February, 1981."
13. In the case of CIT v. Smt. Roda Mistry (supra) the relevant observations of Andhra Pradesh High Court are reproduced as below :
"Held, affirming the decision of the Tribunal, that the rectification of the assessment in the light of the subsequent event of accrual of additional capital gain by way of enhanced compensation cannot be a one-sided measure. While verifying or re-doing the assessment, the beneficial provision introduced by the legislature with a definite purpose should also be kept in view. Sections 54E(3), 155(7A), 155(10B) should be read together harmoniously in order to effectuate the purpose of the law. There is no warrant to confine the provision contained in Section 54E(3) of the IT Act only to the additional compensation received in respect of the acquisitions that take place after the introduction of the provisions. Such a narrow interpretation is not warranted, either going by the language of the section or by having recourse to the purposive interpretation. The words "within six months after the date of receipt of additional compensation" cannot be qualified by the limitation that the additional compensation so received should relate to a future acquisition. Sub-section (10B) of Section 155 has been introduced to effectuate the relief granted by Section 54E(3) as a part of fiscal policy. Therefore, the provisions of Sections 54E(3) and 155(10B) were applicable in the case of the assessee for the asst. yr. 1975-76 though these sections were inserted by the Finance Act, 1978, and applicable w.e.f. 1st April, 1978."
14. The Hon'ble Gujarat High Court in the case of Shantaben Govindlal Patel v. CIT (supra) "Held, that the amount of enhanced compensation had been deposited or invested after 1st April, 1978, and if there was full compliance with other provisions of Section 54E(3) and Section 155(10B) of the Act, the assessee could legitimately be allowed to claim exemption from tax on capital gains. The legislature in giving retrospective effect to Section 155(7A) which enables the tax authorities to recompute the capital gains tax on the enhanced amount of compensation subsequently awarded and received by the assessee, and giving prospective operation to Section 155(106) and Section 54E(3), could legitimately have no intention to deny the benefit of exemption from tax to the assessee willing to make deposits and investments in the "specified assets". It is only in respect of those cases where the assessee has not availed of the benefit of exemption from tax by a specified deposit or investment that it became necessary to confer power on the authorities to recompute tax on capital gains on the enhanced amount of compensation."
15. In the above judgments the facts pertained to compulsory acquisition of assets and compensation was subsequently enhanced and received. These cases pertained to applicability of sections where the period of six months to be reckoned from the date of receipt of sale consideration. Therefore, the above judgments are distinguishable on facts.
16. The other cases cited by the learned authorised representative relate to the principles enunciated by the apex Court that where the language of taxing provision is ambiguous or capable of more meaning than one, then the Court has to adopt that interpretation which favours the assessee. These decisions do not help the assessee in view of clear provision of Section 54E(1) of IT Act. There is no ambiguity in the statutory provision related to the controversy under consideration. Section 54E(1) clearly provides that the capital gain arises from a transfer of a long term capital asset and the assessee has within a period of six months after the date of such transfer invested or deposited sale consideration in any specified assets the capital gain shall be dealt with in accordance with provisions (a) and (b) of Section 54E(1). The investment or deposit in specified assets within the stipulated period is a mandatory requirement of the section for getting benefit from tax on capital gain. This view is supported by the judgment of the Hon'ble Gujarat High Court in the case of Smt. Shantaben P.Gandhi v. CIT (1981) 129 ITR 218 (Guj) wherein, on identical set of facts, construction of new house property was completed on 31st March, 1968, long before the transfer of assets, i.e., 20th March, 1970, though the assessee paid a substantial portion of the cost of construction and obtained possession of new assets on 31st March, 1970, that is to say on the day on which transfer took place and the conveyance was executed, it has been held that in the instant case the assessee could not be said to have constructed the new house property within a period of two years after the date of the transfer of the capital assets which has resulted in the capital gains.
17. From the aforesaid discussion, it is very clear that an assessee who desire to avail benefit of Section 54E, must strictly satisfy all those conditions which are provided therein. One of the condition of the section is that assessee is to deposit whole or any part of the net consideration in any specified assets within a period of six months after the date of transfer. There is no dispute about the facts that the transfer in the present case took place when sale deed was executed and registered on 7th Aug., 1982, and the investment of Rs. 1,89,904 is made by assessee in National Rural Development Bonds on 20th Feb., 1987, i.e., after the stipulated period of 6 months from the date of transfer. Further, this case does not fall under the proviso to Section 54E(1) whereof the period of six months is allowed to be reckoned from the date of receipt instead of date of transfer. The case of assessee being not a case of compulsory acquisition of property, the benefit granted under the proviso would not be available to the assessee. The contention of the assessee that this stipulated period of six months which is to be reckoned from the date of receipt of consideration is not acceptable. In view of clear language of Section 54E(1), the alternative submission, that the view beneficial to the assessee is to be accepted, is also not acceptable.
18. Under the facts and circumstances of the case under consideration, we are of the considered view that benefit of Section 54E(1) is not allowable to the assessee as the investment/deposit in the specified asset has not been made by the assessee within the statutory stipulated period of six months from the date of transfer.
19. In the result, the appeal of the assessee is dismissed.