TMI Blog2023 (10) TMI 185X X X X Extracts X X X X X X X X Extracts X X X X ..... there was no advance money received and the applicability of CBDT Circular No.359 (F. No.207/8/82.IT) dated 10.05.1983 was not brought on record wherein it is claimed that as section 54E contemplated investment of the net consideration in specified assets for a minimum period and as the earnest money/advance as a part of the sale consideration, if executed in the specified assets before the date of sale deed, the amount so invested would qualify for deduction under section 54E. Although this circular is issued in relation to section 54E, however it should be equally applicable to section 54EC of the Act also. Therefore, based on these facts and circumstances of the case, we allow ground No. 1 raised by the assessee. Disallowance u/s 54F considering it as investment in more than one residential house - As contented assessee owns only one house at the Oberoi Palace Housing Society in this name at the time of the sale and other two properties are owned jointly with others and therefore it is not required to be considered for the purpose of condition of section 54F - HELD THAT:- Hon`ble Madras High Court in case of Dr. (Smt.) P. K. Vasanthi Rangarajan [ 2012 (7) TMI 563 - MADRAS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontest his case. Therefore, without delving much deeper into the merits of the case, in the interest of justice, we restore the matter back to the file of assessing officer for de novo adjudication and pass a speaking order after affording sufficient opportunity of being heard to the assessee, who in turn, is also directed to contest his stand forthwith. For statistical purposes, ground raised by the assessee is allowed. - SHRI PAWAN SINGH, JM DR. A. L. SAINI, AM For the Appellant : Shri Rasesh Shah, CA For the Respondent : Shri Vinod Kumar, Sr. DR ORDER PER DR. A. L. SAINI, AM: Captioned appeal filed by the assessee, pertaining to Assessment Year (AY) 2014-15, is directed against the order passed by the Learned Commissioner of Income Tax (Appeals)-3, Surat [in short the ld. CIT(A) ], dated 12.09.2019, which in turn arises out of an assessment order passed by Assessing Officer under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ), dated 29.03.2023. 2. The grounds of appeal raised by the assessee are as follows: 1. That the CIT(A) erred in confirming disallowance u/s 54EC of Rs. 50,00,000/- being investm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowable to qualify for u/s 54EC of the Act. However, the assessing officer rejected the contention of the assessee and the claim of assessee for deduction under section 54EC of the Act, was restricted Rs. 50,00,000/- as against Rs. 1,00,00,000/- claimed in the return of income, holding that if assessee purchased bond prior of date of sale of property, exemption under section 54EC is not available. This way, assessee disallowed exemption u/s 54EC of the Act to the tune of Rs. 50,00,000/-. 6. Aggrieved by the order of Assessing Officer, the assessee carried the matter in appeal before the Ld. CIT(A), who has confirmed the action of the Assessing Officer. Aggrieved by the order of Ld. CIT(A), the assessee is in further appeal before us. Shri Rasesh Shah, Learned Counsel for the assessee at the outset submitted that assessee has raised the additional ground in respect of deduction under section 54EC of the Act which is kind of a sub-ordinate ground emanating from the main ground of the assessee, which is reproduced below: On the facts and circumstances of the case as well as law on the subject, the learned assessing officer has erred in passing assessment order after full sc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f we assume that the two views are possible, the view which is in the favour of the assessee should be adopted in view of the Supreme Court decision in the case of CIT vs. Vegetable Products Ltd. [1973] 88 ITR 192 (SC). 11. The amendment has been made in S. 54EC by Finance Act (No. 2) 2014 w.e.f. 01.04.2015. As per this, the deduction u/s 54EC is allowable only upto Rs. 50,00,000/- as per the second proviso to S. 54EC(1). However, this proviso was inserted w.e.f. 01.04.2015 and therefore it is not applicable to A.Y. 2014-15. The reliance is placed on the decision of the Madras High Court in case of CIT vs Coramandel Industries Ltd. cited supra. 12. The case cited of Ahd ITAT is distinguished and not applicable to the facts of present case in view of the fact that in Ahd bench case there was no advance money received and the applicability of CBDT Circular No.359 (F. No.207/8/82.IT) dated 10.05.1983 was not brought on record wherein it is claimed that as section 54E contemplated investment of the net consideration in specified assets for a minimum period and as the earnest money/advance as a part of the sale consideration, if executed in the specified assets before the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trification Corporation Bonds in the financial year 2007-2008 and Rs. 50,00,000/- in National Highways HAI Bond in the financial year 2008-2009. 3.3 The Assessing Officer held that the assessee can take the benefit of investment in specified bonds to a maximum of Rs. 50,00,000/- only under Section 54EC(1) of the Act and accordingly, held that the other sum Rs. 50,00,000/- invested over and above the ceiling prescribed does not qualify for exemption in terms of the Act. 3.4 The appeal preferred by the assessee did not find favour with the Commissioner of Income Tax (Appeals), who confirmed the order of the Assessing Officer in this regard. Calling into question the said order, the assessee preferred appeal to the Tribunal. The Tribunal held that the exemption granted under provisio to Section 54EC(1) of the Act should be construed not transaction-wise, but financial year-wise. It further held that if an assessee is able to invest a sum of Rs. 50,00,000/- each in two different financial years, within a period of six months from the date of transfer of the capital asset, it cannot be said to be inadmissible. The relevant portion of the said order reads as under: 8. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period from the date of transfer of capital asset, assessee was definitely eligible to claim exemption upto Rs. 1 Crore. The same view has been taken by Ahmedabad Bench of this Tribunal in the case of Aspi Ginwala Others v. ACOT (52 SOT 16). We are, therefore, of the opinion that the assessee has to succeed in this appeal. Claim of the assessee for exemption upto Rs. 1 Crore has to be allowed in accordance with Section 54EC of the Act. 3.5 Assailing the said order dated 31.1.2013 made in I.T.A.No.1950/Mds/2012 passed by the Tribunal, the department filed T.C.(A) No. 533 of 2014 raising the substantial questions of law, referred supra. 3.6 Subsequently, another co-ordinate bench of the Tribunal, by placing reliance on the above said order dated 31.1.2013 made in I.T.A.No.1950/Mds/2012 in the case of Smt. Sriram Indubal v. ITO [2013] 32 taxmann.com 118 (Channai - Trib.), allowed the appeal filed by the assessee (C. Jaichander) in I.T.A. No. 456/Mds/2013, by order dated 1.11.2013. Aggrieved by the said order, the department filed T.C.(A) No.419 of 2014 raising the substantial questions of law, referred supra. 4. We have heard Mr. J. Narayanasamy, learned Senior S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecifies the quantum of investment and it states that the investment so made on or after 1.4.2007 in the long-term specified asset by an assessee during any financial year does not exceed fifty lakh rupees. In other words, as per the mandate of Section 54EC(1) of the Act, the time limit for investment is six months and the benefit that flows from the first proviso is that if the assessee makes the investment of Rs. 50,00,000/- in any financial year, it would have the benefit of Section 54EC(1) of the Act. 8. The legislature noticing the ambiguity in the above said provision, by Finance (No. 2) Act, 2014, with effect from 1.4.2015, 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 and in the subsequent financial year does not exceed fifty lakh rupees. 9. At this juncture, for better clarity, it would be appropriate to refer to the Notes on Clauses - Fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... within the year and second in 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 (1) 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 1 st April, 2015 and will, accordingly, apply in relation to assessment year 2015-16 and subsequent assessment years. 10. The legislature has chosen to remove the ambiguity in the proviso to Section 54EC(1) of the Act by inserting a second proviso with effect from 1.4.2015. The memorandum explaining the provisions in the Finance (No. 2) Bill, 2014 also states that the same will be applicable from 1.4.2015 in relation to assessment year 2015-16 and the subsequent years. The intention of the legislature probably appears to be that this amendment should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 raised by the assessee. 12. In the result, ground No. 1 raised by the assessee is allowed. 13. Ground No. 2 raised by the assessee relates to disallowance u/s 54F of Rs. 48,96,993/- considering it as investment in more than one residential house, in spite of the fact that the assessee owned another residential house jointly. 14. Succinct facts qua ground No.2 are that during the assessment proceedings the assessing officer observed that assessee had claimed deduction u/s 54F of the Act to the tune of Rs. 48,96,993/-. The assessing officer held that assessee is not entitled to the deduction u/s 54F of the Act as assessee owned more than one house. The assessee submitted reply before the assessing officer stating that assessee is joint owner in other houses, therefore he is entitled to claim deduction u/s 54F of the Act. However, the assessing officer rejected the contention of the assessee and observed that as per the details submitted by the assessee, the assessee owned 3 properties and therefore the claim of the assessee was rejected u/s 54F of the Act at Rs. 48,96,993/-. 15. On appeal, ld CIT(A) confirmed the action of the assessing officer. Aggrieved, the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e could be owner of one house at the time of the sale. Here in the case of the assessee he was sole owner of only one house and other houses under the joint ownership are not required to be considered as per the judgment of the Hon'ble Madras High Court in case of Dr. (Smt.) P. K. Vasanthi Rangarajan (supra). 19. We also note that on the identical facts, the Coordinate Bench of ITAT Mumbai, in the case of Ashok G. Chauhan, [2019] 105 taxmann.com 204 (Mumbai - Trib.) held that where Assessing Officer rejected assessee's claim for deduction under section 54F of the Act, on ground that at time of sale of capital asset, assessee was owner of more than one residential house properties, in view of fact that one residential property was co-jointly owned in name of assessee and his wife and he could not be treated as 'absolute owner' of said property, deduction under section 54F could not be denied to him. We note that Hon`ble Supreme Court in the case of CIT vs. Vegetable Products Ltd, 88 ITR 192(SC) held that if two reasonable constructions of a taxing provision are possible that construction which favours the assessee must be adopted. Therefore, respectfully following ..... X X X X Extracts X X X X X X X X Extracts X X X X
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