Income Tax Appellate Tribunal - Mumbai
Acit 20(2), Mumbai vs Prem A Devidayal, Mumbai on 14 December, 2017
आयकर अपील य अ धकरण, मुंबई यायपीठ,'आई',मुंबई।
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, 'I' MUMBAI ी जो ग दर संह, या यक सद य एवं ी मनोज कुमार अ वाल, लेखा सद य, के सम Before Shri Joginder Singh, Judicial Member, and Shri Manoj Kumar Aggarwal, Accountant Member ITA No.3184/Mum/2016 Assessment Year:2011-12 Tulika Devi Dayal (Legal heir) JCIT-17(1), Late Mr. Prem A. Devidayal, बनाम/ Mumbai C/o-Devidayal Sales Ltd.
Gupta Mills Compund, Vs. Darukhana, Reay Road, Mumbai-400010 ( नधा$%रती /Assessee) (राज व /Revenue) PAN. No.AAEPD1068K ITA No.3193/Mum/2016 Assessment Year:2011-12 ACIT-20(2), Tulika Devi Dayal (Legal heir) Room No.217, 2nd Floor, बनाम/ Late Prem A. Devidayal, Piramal Chambers, C/o-Devidayal Sales Ltd. Lalbaug, Parel, Vs. Gupta Mills Compund, Mumbai-400012 Darukhana, Reay Road, Mumbai-400010 (राज व /Revenue) ( नधा$%रती /Assessee) PAN. No.AAEPD1068K 2 ITA Nos.3184 & 3193/Mum/2016 Late Mr. Prem A Devidayal
नधा$%रती क ओर से / Assessee by Ms. Vaishali Mehta राज व क ओर से / Revenue by Shri Ram Kumar Tiwari-DR ु वाई क' तार(ख / Date of Hearing:
सन 14/12/2017
आदे श क' तार(ख /Date of Order: 14/12/2017
आदे श / O R D E R
Per Joginder Singh(Judicial Member)
The assessee as well as Revenue is in appeal against the impugned orders dated 24/02/2016 of the Ld. First Appellate Authority, Mumbai. First, we shall take up the appeal of the Revenue (ITA No.3193/Mum/2016), wherein, only ground raised pertains to allowing the benefit u/s 54EC of the Income Tax Act, 1961 (hereinafter the Act) ignoring the fact that investment made of Rs.50 lakhs each of different two Financial Years within a period of six months should not be eligible for such deduction u/s 54E of the Act.
2. During hearing, the Ld. DR, Shri Ram Kumar Tiwari, defended the addition made by the Assessing Officer by contending that the legislative intent was different, therefore, the Ld. Commissioner of Income Tax (Appeal) erred in granting relief to the assessee. On the other hand, Ms. Vaishali Mehta, ld. counsel for the assessee, invited our 3 ITA Nos.3184 & 3193/Mum/2016 Late Mr. Prem A Devidayal attention to the amendment made by the Finance Act 2014, which is applicable to and from Assessment Year 20015-16, whereas, the case of the assessee is of Assessment Year 2011-12, wherein, the limit was Rs.50 Lakhs per Financial Year. Reliance was placed upon the decision of Hon'ble Madras High Court in COMMISSIONER OF INCOME-TAX v. COROMANDEL INDUSTRIES LTD. 370 ITR 586 (Mad.) and in COMMISSIONER OF INCOME TAX vs. C. JAICHANDER 370 ITR 579 (Mad.).
2.1. We have considered the rival submissions and perused the material available on record. We find that the aforesaid issue is covered in favour of the assessee by the decision in the case of Bharatkumar M Jain (HUF) & Manekchand G Jain, (ITA No.169 & 170/Mum/2015) Order dated 07/09/2016 of the Mumbai Bench of the Tribunal, wherein, one of us (Judicial Member) is signatory to the order. The relevant portion from the aforesaid order is reproduced hereunder for ready reference and analysis:-
"Both these appeals are by the different assessee, closely related to each other, having common grounds of appeal. The assessees are aggrieved by the impugned orders both 4 ITA Nos.3184 & 3193/Mum/2016 Late Mr. Prem A Devidayal dated 04/09/2014 of the ld. First Appellate Authority, Mumbai.
2. During hearing, the ld. counsel for the assessee, Shri D.B. Sanghavi, did not press grounds number 1.1 and 1.2 of both appeals with respect to confirming the action of the Assessing Officer, while framing assessment u/s 147 read with section 143(3) of the Act, thus, the impugned grounds number 1.1 and 1.2 of both the appeals are dismissed as not pressed.
3. The only surviving ground in both the appeals is with respect to confirming the deduction u/s 54EC of the Act, amounting to Rs.50 lakh as against the claimed deduction of Rs.1 crore, by the assessee. The crux of argument advanced on behalf of the assessee is that the impugned issue is covered by the decision from Hon'ble Madras High Court in the case of CIT vs C. Jaichandar (2015) 275 CTR 222 (Mad.); (2015) 370 ITR 579(Mad.), CIT vs Coromandal Industries Ltd. (2015) 370 ITR 586 (Mad.), Ms. Lilavati M. Sayani vs Income Tax Officer (2014) 151 ITD
659)(Mum.), Dr. Kumar M. Dhawale vs ACIT (ITA No.7585/Mum/2012) order dated 09/01/2015, M/s JNR Securities Broking Ltd. (ITA No.6987/Mum/2013) order dated 08/07/2015 and Shri Vivek Jairazbhoy vs CIT (ITA No.236/Bang/2012) dated 14/12/2012. This factual matrix was not controverted by the ld. DR, Shri Sunil Kumar Agarwal.
3.1. We have considered the rival submissions and perused the material available on record. We find that the Tribunal vide order dated 09/06/2016 in the case of ACIT vs Prakash Gunaji Sawardekar ITA 5 ITA Nos.3184 & 3193/Mum/2016 Late Mr. Prem A Devidayal No.6642/Mum/2014, on identical issue held as under:-
"The Revenue is aggrieved by the impugned order dated 07/07/2014 of the ld. First Appellate Authority, Mumbai, on the ground that the Ld. Commissioner of Income Tax (Appeal) did not appreciate the fact that as per amendment by the Finance Act, 2007, as per proviso to section 54EC of the Act, the investment made on or after 01/04/2007, in the long term specified asset, during any financial year does not exceed Rs.50,00,000/-.
2. During hearing, the ld. DR, Dr. Darsi Suman Patnam, defended the addition made by the Assessing Officer, whereas, none was present for the assessee in spite of issuance of notice, thus, we have no option but to proceed ex-parte, qua the assessee, and tend to dispose of this appeal on the basis of material available on record.
2.1. We have considered the submissions of the ld. DR and perused the material available on record. The facts, in brief, are that the assessee is a retired senior citizen, was connected with marketing consultancy in the field of pharmaceutical industry, was having its office at 102B Atlanata, Hirachandani Estate, Thane. The ld. Assessing Officer made the addition of Rs.51,34,710/- while framing assessment u/s 143(3) of the Act on account of decline of exemption claimed u/s 54E of the Act amounting to Rs.50 lakhs. On appeal, before the Ld. Commissioner of Income Tax (Appeal), the addition was deleted against which the Revenue is in appeal before this Tribunal.
2.2. If the observation made in the assessment order, leading to addition made to the total income, conclusion drawn in the impugned order, material available on record, assertions made by the ld. departmental counsel, if kept in juxtaposition and analyzed, under the facts discussed hereinabove, we find that the assessee sold shares leading to capital gains of Rs.1,11,63,450/- and out of this amount rupees One crore was invested in REC Bonds on two dates namely Rs.50 lakh on 31/03/2009 and remaining Rs.50 lakh on 31/05/2009. The ld. Assessing Officer disputed the allowability of claimed exemption u/s 54EC of the Act, amounting to rupees One crore when the maximum limit for making investment u/s 54EC of the Act was Rs.50 lakhs only. The stand of the assessee was that no restriction is specified for investing Rs.50 lakh each in two different 6 ITA Nos.3184 & 3193/Mum/2016 Late Mr. Prem A Devidayal financial years, therefore, the Assessing Officer allowed the exemption only upto Rs.50 lakh and disallowed for the remaining Rs.50 lakh. While doing so, the Assessing Officer referred to notification number 380 of 2006 dated 22/12/2006, issued by CBDT, restricting the investment in bonds to a sum of Rs.50 lakh per person. Reference was also made to the decision from Hon'ble Madras High Court in Areba T & D India Ltd. vs ACIT 177 Taxman 192. The Ld. Commissioner of Income Tax (Appeal) deleted the addition on the plea that the assessee has fulfilled the condition enshrined in section 54EC of the Act as the investment was made on two different financial years. Before coming to any conclusion, we are reproducing hereunder the relevant provision of section 54EC of the Act:-
Capital gain not to be charged on investment in certain bonds.
54EC. (1) Where the capital gain arises from the transfer of a long-term capital asset (the capital asset so transferred being hereafter in this section referred to as the original asset) and the assessee has, at any time within a period of six months after the date of such transfer, invested the whole or any part of capital gains in the long-term specified asset, the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say,--
(a) if the cost of the long-term specified asset is not less than the capital gain arising from the transfer of the original asset, the whole of such capital gain shall not be charged under section 45;
(b) if the cost of the long-term specified asset is less than the capital gain arising from the transfer of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of acquisition of the long-term specified asset bears to the whole of the capital gain, shall not be charged under section 45 :
Provided that the investment made on or after the 1st day of April, 2007 in the long-term specified asset by an assessee during any financial year does not exceed fifty lakh rupees :
[Provided further that the investment made by an assessee in the long-term specified asset, from 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 the subsequent financial year does not exceed fifty lakh rupees.] (2) Where the long-term specified asset is transferred or converted (otherwise than by transfer) into money at any time within a period of three years from the date of its acquisition, the amount of capital gains arising from the transfer of the original asset not charged under section 45 on the basis of the 7 ITA Nos.3184 & 3193/Mum/2016 Late Mr. Prem A Devidayal cost of such long-term specified asset as provided in clause (a) or, as the case may be, clause (b) of sub-section (1) shall be deemed to be the income chargeable under the head "Capital gains" relating to long-term capital asset of the previous year in which the long-term specified asset is transferred or converted (otherwise than by transfer) into money.
Explanation.--In a case where the original asset is transferred and the assessee invests the whole or any part of the capital gain received or accrued as a result of transfer of the original asset in any long-term specified asset and such assessee takes any loan or advance on the security of such specified asset, he shall be deemed to have converted (otherwise than by transfer) such specified asset into money on the date on which such loan or advance is taken.
(3) Where the cost of the long-term specified asset has been taken into account for the purposes of clause (a) or clause (b) of sub-section (1),--
(a) a deduction from the amount of income-tax with reference to such cost shall not be allowed under section 88 for any assessment year ending before the 1st day of April, 2006;
(b) a deduction from the income with reference to such cost shall not be allowed under section 80C for any assessment year beginning on or after the 1st day of April, 2006. Explanation.--For the purposes of this section,--
(a) "cost", in relation to any long-term specified asset, means the amount invested in such specified asset out of capital gains received or accruing as a result of the transfer of the original asset;
(b) "long-term specified asset" for making any investment under this section during the period commencing from the 1st day of April, 2006 and ending with the 31st day of March, 2007, means any bond, redeemable after three years and issued on or after the 1st day of April, 2006, but on or before the 31st day of March, 2007,--
(i) by the National Highways Authority of India constituted under section 3 of the National Highways Authority of India Act, 1988 (68 of 1988); or
(ii) by the Rural Electrification Corporation Limited, a company formed and registered under the Companies Act, 1956 (1 of 1956), and notified by the Central Government in the Official Gazette for the purposes of this section with such conditions (including the condition for providing a limit on the amount of investment by an assessee in such bond) as it thinks fit:
Provided that where any bond has been notified before the 1st day of April, 2007, subject to the conditions specified in the notification, by the Central Government in the Official Gazette 8 ITA Nos.3184 & 3193/Mum/2016 Late Mr. Prem A Devidayal under the provisions of clause (b) as they stood immediately before their amendment by the Finance Act, 2007, such bond shall be deemed to be a bond notified under this clause; (ba) "long-term specified asset" for making any investment under this section on or after the 1st day of April, 2007 means any bond, redeemable after three years and issued on or after the 1st day of April, 2007 by the National Highways Authority of India constituted under section 3 of the National Highways Authority of India Act, 1988 (68 of 1988) or by the Rural Electrification Corporation Limited, a company formed and registered under the Companies Act, 1956 (1 of 1956).
2.2. If the aforesaid provision is analyzed, it deals with capital gains not to be charged on investment in certain bonds. Sub-section (1) speaks where the capital gain arises from the transfer of long term capital asset and the assessee has any time within a period of six months, after the date of such transfer, invest, the whole or any part of the capital gains in the long term specified asset, the capital gain shall be dealt with in accordance with the provisions of the section. The position has been clarified with insertion of explanation which speaks about 'cost in relation to any long term specified asst', means the amount invested in such specified asset out of the capital gains received or accruing as a result of the transfer of the original asset, meaning thereby, the date of receipt or accruing are the important dates for making investment.
The impugned amount was invested in REC bond by the assessee in two different financial years. The provision section 54EC provides for exemption from tax to long term capital gain, provided the same is invested in the specified bonds, decided by the Government. Our view find supports from the decision from Hon'ble jurisdictional High Court in Cello Plast (2012) 24 taxman.com 111 (Bom.) to the effect that law does not compel a man to do that which he cannot possibly perform. Even otherwise, section 54EC prescribes that exemption shall be available if the investment is made in the specified bonds within a period of six months, thus, the assessee, possibly can make the investment of the amount within the specified period, when it is received by the assessee. The intent and purpose of section 54EC is the date, when the assessee actually collects/receives the sale consideration and thereafter makes investment within six months and that is the date of transfer, thus, the spirit of the legislation is very much clear. The investment can only be made when any amount is actually received by the assessee. In fact, date of receipt by the assessee/investor and date of deposit for obtaining the prescribed bonds are important dates. Suppose, the required bonds are not available with a particular bank/institution and 9 ITA Nos.3184 & 3193/Mum/2016 Late Mr. Prem A Devidayal are issued at a later stage, the date of deposit of the amount in the bank or the institution, as the case may be, are the relevant dates for getting the benefit of exemption u/s 54EC of the Act. For the purpose of section 54EC, the date of investment is to be regarded as the dates of investment/ the payment received by the authorized bank. It is noted that section 54EC of the Act has no restriction if the specified investment of Rs.50 lakh is made in two different financial years. The ratio laid down by the Mumbai Bench of the Tribunal in ITO vs Mr. Baldwin D.Fernandes (ITA No.5229/Mum/2013) order dated 19/10/2015, the Chennai Bench of the Tribunal in Smt. Sriram Indubai vs ITO, (ITA NO.1950/Mds/2012), order dated 31/01/2013. Thus, we are of the view, the exemption u/s 54EC of the Act is available to an assessee, if the long term capital gains, earned by the assessee, is invested in the specified long term asset and such investment is made within six months from the date of transfer of such long term asset. As per the proviso to section 54EC, the investment in any Financial Year is restricted to Rs.50 lakh and since the assessee has made the investment of Rs.50 lakh each in different two Financial Years but within six month from the date of transfer of the asset,. The decision from Ahmedabad Bench of the Tribunal in Aspi Ginwala vs ACIT (2012) 044 (II) ITCL 0488; ITA No.3226 and 3227/Ahd/2011. Considering the totality of facts, we find no infirmity in the conclusion drawn by the Ld. Commissioner of Income Tax (Appeal).
Finally, the appeal of the Revenue is dismissed." 3.2. If the aforesaid decision of the Tribunal, wherein, one of us (Judicial Member), is signatory to the order, deliberated upon the issue in length and place reliance upon various judicial decisions and finally dismissed the appeal of the Revenue. Even otherwise, on a plain reading of section 54EC(1) of the Act, it restrict the time limit, for the period of investment after the property is sold, to six months. There is no cap on the investment to be made in bonds. The first proviso to section 54EC(1) of the Act specifies the quantum of investment and it states that the investment so made on or after 01/04/2007 in the long term specified asset by an assessee during any Financial Year does not exceed fifty 10 ITA Nos.3184 & 3193/Mum/2016 Late Mr. Prem A Devidayal lakh rupees. In other words, as per the mandate of section 54EC(1) of the Act, the time limit for investment in six months and the benefit that flows from the first proviso is that if the assessee makes the investment of Rs.50 lakh in any Financial Year, it would have the benefit of section 54EC(1) of the Act. The legislature noticing the ambiguity in the provision, by Finance (No.2) Act 2014, w.e.f 01/04/2015 inserted after the existing proviso to sub section (1) of section 54EC of the Act, a second proviso, which reads as under:-
"provided further that the investment made by an assessee in the long term specified asset, from capital gains arising from transfer of one or more original assets, during the Financial Year in which the original asset or assets are transferred in any subsequent Financial Year does not exceed 50 Lakhs rupees"
3.3. In any event, from a reading of section 54EC(1) and the first proviso, it is clear that the time limit for investment is six months from the date of transfer and even if such investment falls under two Financial Year the benefit, claimed by the assessee, cannot be denied. It would have made a difference, if the restriction on the investment in bonds to Rs.50 lakhs is incorporated in section 54EC(1) of the Act itself. However, the ambiguity has been removed by this legislature w.e.f 01/04/2015 in relation to Assessment year 2015-16 and the subsequent years. For better understanding of the issue, it would be appropriate to refer to section 54EC (1) of the Act, which reads as under:-
54EC. (1) Where the capital gain arises from the transfer of a long-term capital asset (the capital asset so transferred being hereafter in this section referred to as the original asset) and 11 ITA Nos.3184 & 3193/Mum/2016 Late Mr. Prem A Devidayal the assessee has, at any time within a period of six months after the date of such transfer, invested the whole or any part of capital gains in the long-term specified asset, the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say,--
(a) if the cost of the long-term specified asset is not less than the capital gain arising from the transfer of the original asset, the whole of such capital gain shall not be charged under section 45;
(b) if the cost of the long-term specified asset is less than the capital gain arising from the transfer of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of acquisition of the long-term specified asset bears to the whole of the capital gain, shall not be charged under section 45 :
Provided that the investment made on or after the 1st day of April, 2007 in the long-term specified asset by an assessee during any financial year does not exceed fifty lakh rupees :
[Provided further that the investment made by an assessee in the long-term specified asset, from 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 the subsequent financial year does not exceed fifty lakh rupees.] 3.4. Thus, on plain reading of the abovesaid provision, we are of the view that section 54EC(1) of the Act restricts the time limit for the period of investment after the property has been sold to six months. There is no cap on the investment to be made in bonds. The first proviso to section 54EC(1) of the Act, specifies the quantum of investment and it states that the investment so made on or after 01/04/2007 in the long term specified asset, by an assessee, during any Financial Year does not exceed fifty lakhs rupees. The notes on clauses, Financial Bill 2014 and the memorandum explaining the provisions in Finance (No.2) Bill 2014, reads as under:-
"Clause 23 of the Bill seeks to amend section 54EC of the Income-tax Act relating to capital gain not to be charged on investment in certain bonds. The existing provisions contained in sub-section (1) of 12 ITA Nos.3184 & 3193/Mum/2016 Late Mr. Prem A Devidayal section 54EC provide that where capital gain arises from the transfer of a long-term capital asset and the assessee has within a period of six months invested the whole or part of capital gains in the long-term specified asset, the proportionate capital gains so invested in the long-term specified asset out of total capital gain shall not be charged to tax. The proviso to the said sub-section provides that the investment made in the long-term specified asset during any financial year shall not exceed fifty lakh rupees.
It is proposed to insert a proviso below first proviso in said sub- section (1) so as to provide that the investment made by an assessee in the long-term specified asset, from 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 the subsequent financial year does not exceed fifty lakh rupees.
This amendment will take effect from 1st April, 2015 and will, accordingly, apply in relation to assessment year 2015-16 and subsequent years. Memorandum: Explaining the provisions in the Finance (No.2) Bill. 2014:
Capital gains exemption on investment in Specified Bonds. The existing provisions contained in sub-section (1) of section 54EC of the Act provide that where capital gain arises from the transfer of a long-term capital asset and the assessee has, at any time within a period of six months, invested the whole or any part of capital gains in the long-term specified asset, out of the whole of the capital gain, shall not be charged to tax. The proviso to the said subsection provides that the investment made in the long-term specified asset during any financial year shall not exceed fifty lakh rupees.
However, the wordings of the proviso have created an ambiguity. As a result the capital gains arising during the year after the month of September were invested in the specified asset in such a manner so as to split the investment in two years i.e., one within the year and second irf the next year but before the expiry of six months. This resulted in the claim for relief of one crore rupees as against the intended limit for relief of fifty lakhs rupees.
Accordingly, it is proposed to insert a proviso in sub-section (1r so as to provide that the investment made by an assessee in the long-term specified asset, out of capital gains arising from transfer of one or more original asset, during the financial year in which the original asset or assets are transferred and in the subsequent financial year does not exceed fifty lakh rupees. This amendment will take effect from 1st April, 2015 and will, accordingly, apply in relation to assessment year 2015-16 and subsequent assessment years."13 ITA Nos.3184 & 3193/Mum/2016
Late Mr. Prem A Devidayal 3.5. From the above, it can be inferred that the intention of the legislature probably appears to be that this amendment should be for the Assessment year 2015-16 to avoid unwanted litigation of the previous years. In any event, from the reading of section 54EC(1) and the first proviso, it is clear that the time limit for investment in six months from the date of transfer and even if such investment falls under two Financial Years, the benefit claimed by the assessee cannot be denied. Our view find supports from the decision from Hon'ble Madras High Court in CIT vs C. Jaichandar (2015) 370 ITR 579 (Mad.), decision of the Tribunal in ACIT vs M/s JNR Securities Broking Ltd. (ITA No.6987/Mum/2013) order dated 08/07/2015 and various other decisions mentioned in the preceding paras of this order. Thus, it is concluded that, prior to amendment, the time limit of Rs.50 lakhs as prescribed u/s 54EC of the Act is per year and if the assessee invest Rs.50 lakh each in two different years, otherwise fulfilling other conditions of section 54EC, such appellant will be entitle to the benefit of Rs.1 crore and not merely Rs. 50 lakhs. In the case of the assessee, the capital gains arose on account of two distinct capital asset, arising from two distinct and separate agreements, one vide agreement dated 28/04/2008 and another vide agreement dated 14/10/2008, therefore, there are two separate computation of capital gains, for each assets. The assessee while computing capital gains has sought reinvestment benefit by investing, in the bonds prescribe u/s 54EC of the Act on 30/09/2008 against capital gain on 28/04/2008 and on 09/04/2009 against 14 ITA Nos.3184 & 3193/Mum/2016 Late Mr. Prem A Devidayal capital gain on 14/10/2008, therefore, the case of the assessee is clear, consequently, in view of the foregoing decision this ground of the assessee, in both appeals, is allowed.
Finally, both the appeals are partly allowed." 2.2. If the observation made in the assessment order, leading to addition made to the total income, conclusion drawn in the impugned order, material available on record, assertions made by the ld. respective counsel, and the aforesaid order of the Tribunal, if kept in juxtaposition and analyzed, in the present appeal before us, the assessee declared income of Rs.21,12,86,700/- in the return filed on 30/07/2011, which was revised to Rs.30,45,47,320/-. The assessee claimed deduction u/s 54EC of Rs.1 crore by way of investment in REC Bonds. The Ld. Assessing Officer restricted the deduction to Rs.50 lakhs u/s 54EC of the Act as against Rs.1 crore claimed by the assessee. It is noteworthy that the assessee made investment of Rs.1 crore in REC bonds i.e. Rs.50 lakh on 31/03/2011 and the remaining Rs.50 lakh on 30/04/2011. The assessee claimed the deduction of total investment u/s 54EC of the Act. The Ld. Assessing Officer following first proviso to section 54(1) restricted the deduction to Rs.50 lakh.
15 ITA Nos.3184 & 3193/Mum/2016
Late Mr. Prem A Devidayal 2.3. On appeal before the Ld. Commissioner of Income Tax (Appeal), the decision from the Tribunal and another decision in the case of CIT vs C. Jaichandar (supra) was followed and allowed the full deduction, which is under challenge before this Tribunal. We find that Mumbai Bench of the Tribunal made an elaborate discussion including the amendment made by the Finance Act, 2014 (applicable to and from Assessment Year 2015-16) and analyzed the provision of section 54EC of the Act and thereafter reached to a particular conclusion. Even otherwise, the issue in hand is squarely covered by the decisions (supra) from Hon'ble Madras High Court. In any event, from a reading of section 54EC(1) and the first proviso, it is clear that the time limit for investment is six months from the date of transfer and even if such investment falls under two Financial Year the benefit, claimed by the assessee, cannot be denied. It would have made a difference, if the restriction on the investment in bonds to Rs.50 lakhs is incorporated in section 54EC(1) of the Act itself. However, the ambiguity has been removed by the legislature w.e.f 01/04/2015 in relation to Assessment year 2015-16 and the subsequent years. For better 16 ITA Nos.3184 & 3193/Mum/2016 Late Mr. Prem A Devidayal understanding of the issue, it would be appropriate to refer to section 54EC (1) of the Act, which reads as under:-
54EC. (1) Where the capital gain arises from the transfer of a long-term capital asset (the capital asset so transferred being hereafter in this section referred to as the original asset) and the assessee has, at any time within a period of six months after the date of such transfer, invested the whole or any part of capital gains in the long-term specified asset, the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say,--
(a) if the cost of the long-term specified asset is not less than the capital gain arising from the transfer of the original asset, the whole of such capital gain shall not be charged under section 45;
(b) if the cost of the long-term specified asset is less than the capital gain arising from the transfer of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of acquisition of the long-term specified asset bears to the whole of the capital gain, shall not be charged under section 45 :
Provided that the investment made on or after the 1st day of April, 2007 in the long-term specified asset by an assessee during any financial year does not exceed fifty lakh rupees :
[Provided further that the investment made by an assessee in the long-term specified asset, from 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 the subsequent financial year does not exceed fifty lakh rupees.] 2.4. Thus, on plain reading of the abovesaid provision, we are of the view that section 54EC(1) of the Act restricts the time limit for the period of investment after the property has been sold to six months. There is no cap on the investment to be made in bonds. The first proviso to section 54EC(1) of the Act, specifies the quantum of investment and it states that 17 ITA Nos.3184 & 3193/Mum/2016 Late Mr. Prem A Devidayal the investment so made on or after 01/04/2007 in the long term specified asset, by an assessee, during any Financial Year does not exceed fifty lakhs rupees. The notes on clauses, Financial Bill 2014 and the memorandum explaining the provisions in Finance (No.2) Bill 2014, reads as under:-
"Clause 23 of the Bill seeks to amend section 54EC of the Income-tax Act relating to capital gain not to be charged on investment in certain bonds. The existing provisions contained in sub-section (1) of section 54EC provide that where capital gain arises from the transfer of a long-term capital asset and the assessee has within a period of six months invested the whole or part of capital gains in the long-term specified asset, the proportionate capital gains so invested in the long-term specified asset out of total capital gain shall not be charged to tax. The proviso to the said sub-section provides that the investment made in the long-term specified asset during any financial year shall not exceed fifty lakh rupees.
It is proposed to insert a proviso below first proviso in said sub- section (1) so as to provide that the investment made by an assessee in the long-term specified asset, from 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 the subsequent financial year does not exceed fifty lakh rupees.
This amendment will take effect from 1st April, 2015 and will, accordingly, apply in relation to assessment year 2015-16 and subsequent years. Memorandum: Explaining the provisions in the Finance (No.2) Bill. 2014:
Capital gains exemption on investment in Specified Bonds. The existing provisions contained in sub-section (1) of section 54EC of the Act provide that where capital gain arises from the transfer of a long-term capital asset and the assessee has, at any time within a period of six months, invested the whole or any part of capital gains in the long-term specified asset, out of the whole of the capital gain, shall not be charged to tax. The proviso to the said subsection provides that the investment made in the long-term specified asset during any financial year shall not exceed fifty lakh rupees.
However, the wordings of the proviso have created an ambiguity. As a result the capital gains arising during the year 18 ITA Nos.3184 & 3193/Mum/2016 Late Mr. Prem A Devidayal after the month of September were invested in the specified asset in such a manner so as to split the investment in two years i.e., one within the year and second irf the next year but before the expiry of six months. This resulted in the claim for relief of one crore rupees as against the intended limit for relief of fifty lakhs rupees.
Accordingly, it is proposed to insert a proviso in sub-section (1r so as to provide that the investment made by an assessee in the long-term specified asset, out of capital gains arising from transfer of one or more original asset, during the financial year in which the original asset or assets are transferred and in the subsequent financial year does not exceed fifty lakh rupees. This amendment will take effect from 1st April, 2015 and will, accordingly, apply in relation to assessment year 2015-16 and subsequent assessment years."
2.5. From the above, it can be inferred that the intention of the legislature probably appears to be that this amendment should be for the Assessment year 2015-16 to avoid unwanted litigation of the previous years. In any event, from the reading of section 54EC(1) and the first proviso, it is clear that the time limit for investment in six months from the date of transfer and even if such investment falls under two Financial Years, the benefit claimed by the assessee cannot be denied. Our view find supports from the decision from Hon'ble Madras High Court in CIT vs C. Jaichandar (2015) 370 ITR 579 (Mad.), decision of the Tribunal in ACIT vs M/s JNR Securities Broking Ltd. (ITA No.6987/Mum/2013) order dated 08/07/2015 and various other decisions mentioned in the preceding paras of this 19 ITA Nos.3184 & 3193/Mum/2016 Late Mr. Prem A Devidayal order. Thus, it is concluded that, prior to amendment, the time limit of Rs.50 lakhs as prescribed u/s 54EC of the Act is per year and if the assessee invest Rs.50 lakh each in two different years, otherwise fulfilling other conditions of section 54EC, thus assessee will be entitle to the benefit of Rs.1 crore and not merely Rs. 50 lakhs. Thus, the limit of Rs.50 lakh under the first proviso is not per assessee but per Financial Year. So far as, the amendment made by the Finance Act, 2014 is w.e.f. 01/04/2015 i.e. Assessment Year 2015-16 onwards and cannot be held to be retrospective. Thus, we hold that the assessee is entitle to deduction u/s 54EC of the Act as claimed by him and does not restrict the addition as has been done by the Ld. Assessing Officer. The stand of the Ld. Commissioner of Income Tax (Appeal) is, therefore, affirmed, resulting into dismissal of the appeal of the Revenue.
3. Now, we shall take the appeal of the assessee (ITA No.3184/Mum/2016), wherein, the ground raised pertains to confirming the disallowance of Rs.1,27,29,172/- by treating it as a non-qualifying expenditure u/s 48 of the Act. The crux of the argument is that the entire expenses were paid by the 20 ITA Nos.3184 & 3193/Mum/2016 Late Mr. Prem A Devidayal assessee and the whole purpose was sale of shares of existing shareholders, for which the payment was agreed at 2% of the value. It was contended that the assessee made the payment of Rs.1,27,29,172/- through banking channel which should be allowed as expenses u/s 48 of the Act. Our attention was invited to the client agreement dated 27/05/2008 executed between Devidayal Sales Ltd. and M/s Avendus Capital Pvt. Ltd. (pages 1 to 5 of the papr book) alonwith the copies of invoices raised by M/s Avendus Capital Pvt. Ltd. (page-6 & 7 of the paper book) and also details of professional fees paid to M/s Avendus Capital Pvt. Ltd. along with the bank statement of the assessee evidencing the payment (pages 8 to 12 of the paper book). Reliance was placed upon the decision in the case of Mrs. Usharani Raghunathan vs CIT (2012) 53 SOT 84 from the Chennai Bench of the Tribunal, order dated 10/05/2012.
3.1. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that the assessee, an individual, was a co-promoter of Devidayal Sales Ltd. and as on 1st April, 2010 was holding 914,543 equity shares of Rs.10 each therein. The assessee 21 ITA Nos.3184 & 3193/Mum/2016 Late Mr. Prem A Devidayal sold 6,96,743 shares during the year under assessment to Arysta Life Sciences and executed with professional efforts of M/s Avendus and M/s Khetan and Co. who claimed to have facilitated and enabled the entire sale/transaction of the shares. The assessee offered the tax as long term capital gain on sale of the shares by reducing the cost from sale consideration incurred by him in making the payments to M/s Avandus and Khetan & Company aggregating to Rs.1,74,18,575/-. The Ld. Assessing Officer held that these fees of various services rendered to DSL and that these expenses could be claimed by DSL but not by the assessee and accordingly he disallowed the claim of expenses. The stand of the Ld. Assessing Officer was affirmed in appeal by the First Appellate Authority. Before this Tribunal, claimed that the amount was paid through banking channel and thus so far as payment is concerned there is no dispute. We have also perused the observation made in para 5.1.1 of the impugned order. Considering the totality of facts and the assertion made by the Ld. counsel for the assessee, we are of the view that the whole issue needs reexamination by the Ld. Assessing Officer, afresh. The Ld. Assessing Officer is directed 22 ITA Nos.3184 & 3193/Mum/2016 Late Mr. Prem A Devidayal to examine the claim of the assessee for which due opportunity of being heard be provided and the true facts may be brought on record. The Ld. Assessing Officer is to also to examine the fact and the clauses mentioned in client agreement dated 27/05/2008 (alongwith the scope of work and other attendant facts) between Devidayal Sales Ltd. and Avandus Capital Pvt. Ltd. and genuineness of payment claimed to be made by the assessee. The assessee is also directed to furnish necessary evidence to substantiate the claim, thus, this appeal of the assessee is allowed for statistical purposes.
Finally, the appeal of the Revenue is dismissed and appeal fo the assessee is allowed for statistical purposes.
This Order was pronounced in the open court in the presence of Ld. representatives from both sides at the conclusion of hearing on 14/12/2017.
Sd/- Sd/-
(Manoj Kumar Aggarwal) (Joginder Singh)
लेखा सद#य / ACCOUNTANT MEMBER या$यक सद#य /JUDICIAL MEMBER
मब
ुं ई Mumbai; *दनांक Dated : 14/12/2017
f{x~{tÜ? P.S/. न.स.
23 ITA Nos.3184 & 3193/Mum/2016
Late Mr. Prem A Devidayal
आदे श क %$त'ल(प अ)े(षत/Copy of the Order forwarded to :
1. अपीलाथ. / The Appellant (Respective assessee)
2. /0यथ. / The Respondent.
3. आयकर आय1 ु त(अपील) / The CIT, Mumbai.
4. आयकर आय1 ु त / CIT(A)- , Mumbai,
5. 3वभागीय / त न ध, आयकर अपील(य अ धकरण, मब ुं ई / DR, ITAT, Mumbai
6. गाड$ फाईल / Guard file.
आदे शानस ु ार/ BY ORDER, स0या3पत / त //True Copy// उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील य अ धकरण, मब ुं ई / ITAT, Mumbai