TMI Blog2008 (9) TMI 510X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of the court was delivered by P. P. S. Janarthana Raja J.- The writ petitions are filed by the petitioners seeking the relief of issuance of writ of declaration declaring that the conditions occurring in Notification No. 380 of 2006 F. No. 142/09/ 2006-TPL dated December 22, 2006, along with the words "subject to the following conditions, namely," issued by the Central Board of Direct Taxes are ultra vires section 54EC of the Income-tax Act, 1961, and arbitrary and violative of articles 14 and 265 of the Constitution of India and consequently unenforceable. 2. Since the issue involved in both the writ petitions is one and the same, they are taken up together and disposed of by a common judgment. 3. The brief facts are as follows : W. P. No. 1524 of 2007 : 4. The petitioner is a company incorporated under the Companies Act, 1956, engaged in the business of transmission and distribution including manufacturing relays, circuit breakers, power transformers, distribution transformers and switch gear (transmission and distribution business (T D business). Earlier the petitioner company was also engaged in non T D business comprising manufacture of industrial motors, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal gain worked out to Rs. 10,18,67,615 after setting off the long-term capital loss of the earlier years amounting to Rs. 1,78,27,854. W. P. No. 11506 of 2007 : 5. The petitioner is engaged in the business of film production, distribution besides owning of studio and laboratory. The petitioner was a allottee/ lessee and in possession of an industrial unit constructed on lease hold plot No. 6 situated in Block FC of sector 126A, within New Okhla Industrial Development Area (Noida) District Gautam Nagar, Uttar Pradesh, admeasuring 16571 sq. mts and a covered area of 2389.54 sq. mts. The said industrial lease hold plot was allotted in favour of the petitioner by lease deed dated March 21, 1988, and duly registered in the office of the Sub Registrar, Noida. The said Noida authority granted permission to the petitioner to transfer the leasehold rights of the said property in favour of M/s. Bennett Coleman Company Limited by Transfer Memorandum No. 10271, dated November 17, 2006. The petitioner, by agreement dated December 21, 2006, has transferred the leasehold rights of the said property in favour of Bennett Coleman and Company for a total sale consideration of Rs.42.13 crores. Ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fication is arbitrary and violative of article 14 of the Constitution of India creating an invidious distinction between the assessees similarly situated and governed by the same assessment year, effecting the same type of transaction and being subjected to an identical gain. The denial of the benefit of the provisions of section 54EC of the Act to the petitioners by the notification is plainly irrational and discriminatory. The petitioners further contended that the notification takes away the exemption which is conferred under section 54EC of the Act. Therefore, the impugned notification issued by the Central Government is illegal and without any basis and justification. Hence, the same has to be quashed. Learned counsel for the petitioners relied on a number of judgments of the Supreme Court reported in CIT v. British Paints India Ltd., [1991] 188 ITR 44 (SC) ; [1992] Suppl. 1 SCC 55, K. T. Moopil Nair v. State of Kerala, AIR 1961 SC 552, State of Andhra Pradesh v. Nalla Raja Reddy, AIR 1967 SC 1458, New Manek Chowk Spinning and Weaving Mills v. Ahmedabad Municipality, AIR 1967 SC 1801, State of Kerala v. Haji K. Kutty Naha, AIR 1969 SC 378, Khandige Sham Bhat v. Agrl. ITO [19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng-term specified asset", which reads as follows : "(i) on or after the 1st day of April, 2000, by the National Bank for Agriculture and Rural Development established under section 3 of the National Bank for Agriculture and Rural Development Act, 1981 (61 of 1981), or by the National Highways Authority of India constituted under section 3 of the National Highways Authority of India Act, 1988 (68 of 1988) ; (ii) on or after the 1st day of April, 2001, by the Rural Electrification Corporation Limited, a company formed and registered under the Companies Act, 1956 (1 of 1956) ; (iii) on or after the 1st day of April, 2002, by the National Housing Bank established under sub-section (1) of section 3 of the National Housing Bank Act, 1987 (53 of 1987), or by the Small Industries Development Bank of India established under sub-section (1) of section 3 of the Small Industries Development Bank of India Act, 1989 (39 of 1989)." 10. From a reading of the above, it is clear that "long-term specified asset" means any bond redeemable after three years and issued on or after April 1, 2000, by the National Bank for Agriculture and Rural Development established under section 3 of the N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Authority of India and which are notified by the Central Government in the Official Gazette. 13. Both the petitioners wanted to invest in the said bonds. But at that time there was no availability of notified bonds in the market. 14. Therefore, it was not possible to make any investment by the petitioners. Representations were made by the assessees to the Central Board of Direct Taxes. Two more notifications in Nos. 963 and 964 dated June 29, 2006, were issued specifying the bond amount, which reads as follows ([2003] 284 ITR (St.) 11) : "By Notification No. S.O. 963(E), dated June 29, 2006, the Central Government has notified the bonds for an amount of rupees one thousand five hundred crores (redeemable after three years) to be issued by the National Highways Authority of India constituted under section 3 of the National Highways Authority of India Act, 1988 (68 of 1988), during the financial year 2006-07 as 'long-term specified asset' for the purpose of section 54EC. S. O. 964(E). In exercise of the powers conferred by sub-clause (ii) of clause (b) of the Explanation to section 54EC of the Income-tax Act, 1961 (43 of 1961), the Central Government herby notifies the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 54EC of the Income-tax Act, 1961, in the Official Gazette, vide Notification No. S.O. 963(E), dated June 29, 2006, or Notification No. S. O. 964(E), dated June 29, 2006 shall not be allotted any bonds notified as 'long-term specified asset' by this notification. (ii) a person who is not covered by clause (i), shall not be allotted the bonds notified as 'long-term specified asset'by this notification, for any amount which exceeds the amount of fifty lakhs rupees as reduced by the aggregate of the investment, if any, made by him in the bonds notified as 'long-term specified asset' by the Central Government for the purposes of section 54EC of the Income-tax Act, 1961. In the Official Gazette, vide Notification No. S.O. 963(E), dated June 29, 2006, or Notification No. S.O. 964(E), dated June 29, 2006." 17. From a bare reading it is clear that notification is issued under the power conferred by sub-clause (ii) of clause (b) of Explanation to section 54EC of the Act. The Central Government further notifies the bonds to be issued by the Rural Electrification Corporation Limited during the period from 26th day of September, 2006, to 21st March, 2007, for an amount of Rs. 3,500 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be a bond notified under this clause." 20. It is clear from the amendment that "long-term specified asset" means any bond redeemable after three years and issued on or after April 1, 2006, but on or before March 31, 2007. Investments have to be made during the period commencing from April 1, 2006, and ending on March 31, 2007. The bonds are to be issued by the National Highways Authority of India constituted under section 3 of the National Highways Authority of India Act, 1988, or by the Rural Electrification Corporation Limited, a company formed and registered under the Companies Act, 1956. Further, it also enables the Central Government to notify in the Official Gazette for the purpose of this section with such conditions including the condition for providing a limit on the amount of investment by the assessee in such bonds. It means that the Central Government can notify the conditions as it thinks fit. The proviso has also been inserted after clause (b) for the purpose of validating the bonds notified before April 1, 2007, under the provisions of clause (b) as they stood immediately before the amendment by the Finance Act. The said amendment takes effect retrospectively from ..... X X X X Extracts X X X X X X X X Extracts X X X X
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