TMI Blog2009 (10) TMI 631X X X X Extracts X X X X X X X X Extracts X X X X ..... g the order dated May 18, 2004, in I. T. A. No. 835/Bang/2002 before it, had answered these questions erroneously and consequently it also erro- neously allowed the appeal of the assessee and to correct the judgment in the present appeal. "(i) Whether the Tribunal was correct in holding that the com- pensation received by the assessee on June 30, 1997, and July 15, 1997, and invested the same in UTI Monthly Income Scheme on July 5, 1997, and July 15, 1997, in respect of acquisition which had taken place in 1992 would be exempted from capital gains tax under section 54EA of the Act despite this section being made applicable as per sec- tion 54H of the Act with effect from April 1, 1999, i.e., for the assess- ment year 1999-2000 and not for the current assessment year ? (ii) Whether the Assessing Officer was correct in holding that the compensation received during the current assessment year should be brought to tax under the head 'Capital gains' in accordance with sec- tion 45(5) of the Income tax Act ?" 2. The assessee is a real estate businessman involved in buying and selling of property and in the course of the same, had entered into an agreement executed in his favo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or consideration is reduced by any court, tribunal or other authority, such assessed capital gain of that year shall be recomputed by taking the compensation or con- sideration as so reduced by such court, tribunal or other authority to be the full value of the consideration. Explanation.-For the purpose of this sub-section,- (i) in relation to the amount referred to in clause (b), the cost of acquisition and the cost of improvement shall be taken to be nil ; (ii) the provisions of this sub-section shall apply also in a case where the transfer took place prior to the 1st day of April, 1988 ; (iii) where by reason of the death of the person who made the transfer, or for any other reason, the enhanced compensation or con- sideration is received by any other person, the amount referred to in clause (b) shall be deemed to be the income, chargeable to tax under the head 'Capital gains', of such other person." 5. The assessee filed the returns of income for this assessment year declaring the income of Rs. 58,32,220. 6. Having regard to the considerable amount of income, the Revenue thought it fit to take up the return for scrutiny, by issue of notice under sec- ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h specified securities, he shall be deemed to have converted (otherwise than by transfer) such specified securities into money on the date on which such loan or advance is taken. (3) Where the cost of the specified securities has been taken into account ; for the purposes of clause (a) or clause (b) of sub-section (1), a rebate with reference to such cost shall not be allowed under sec- tion 88. Explanation.-For the purposes of this section,- (a) 'cost', in relation to any specified securities, means the amount invested in such specified securities out of the net consideration received or accruing as a result of the transfer of the original asset ; (b) 'net consideration', in relation to the transfer of a capital asset, means the full value of the consideration received or accruing as a result of the transfer of the capital asset as reduced by the expenditure incurred wholly and exclusively in connection with such transfer." 8. In respect of the entire additional compensation the assessee claimed relief by showing that the assessee had invested such enhanced compen- sation on July 5, 1997, and July 15, 1997, by purchase of units issued by the Unit Trust of India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g aggrieved, appealed to the first appellate authority namely, the Commissioner of Income tax (Appeals). 13. The first appellate authority rejected the claim made by the assessee claiming a benefit under section 54EA of the Act, though reliance was placed on behalf of the assessee on many decided cases. The first appellate authority was of the view that, as on the date of transfer that is, during the year 1992, the said provisions of section 54EA were not even available on the statute book, and, therefore, the question of claiming the benefit of sec- tion 54EA by the assessee never arose and, therefore, dismissed the appeal and affirmed the assessment order. 14. The assessee carried the matter further to the Income-tax Appellate Tribunal and met with sweet success. 15. The Income-tax Appellate Tribunal ventured to examine and place importance on the provisions of section 54EA of the Act in preference to the provisions of sub-section (5) of section 45 of the Act and found that, if the receipt of enhanced compensation on the three dates, namely, June 30, 1997, July 15, 1997, and November 6, 1997, are to be taken as amounts received and taxable only during the assessment y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fit under this provision. 16. Accordingly, the Tribunal allowed the appeal of the assessee, set aside the orders of the Assessing Officer and the first appellate authority and directed the Assessing Officer to conclude the assessment and for conse- quential tax liability, being determined on the premise that the assessee was entitled to the benefit of section 54EA in respect of the investments made in buying the units on the three dates as referred to above. 17. It is aggrieved by this order of the Tribunal, the present appeal by the Revenue. 18. We have heard Sri Aravind, learned standing counsel for appellant- Revenue and Sri Parthasarathi, learned counsel for the respondent- assessee. 19. The submission of Sri Aravind, learned standing counsel for the Reve- nue, with reference to the statutory provisions of section 54A and 54H, particularly by drawing our attention to the date, from which the provi- sions of section 54EA were introduced on the statute book, the date from which the provisions of section 54H is on the statute book and more importantly the date from which section 54H included within the provisions of sections 54EA and 54EB, which was brought into fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e benefit and likewise the Tribunal has also committed an error in referring to the provisions of subA-section (5) of section 45 which again is akin to a deemed provision in the sense that the amount received by way of enhanced compensation/additional compen- sation, which otherwise, in the normal course may not be assessable with reference to the date of transfer and in the corresponding assessment year, is now taken to be the income of the assessment year relevant for the date of receipt of enhanced compensation and a deemed provision like this, by which an income otherwise assessable in the year of transfer is taken to be assessable in the year of receipt of the additional compensation cannot be extended or imported while understanding the provisions of section 54EA of the Act and a possibility of taking note of the date of receipt of the enhanced compensation for assessment in the corresponding assessment year should be confined to the provisions of section 45 and not imported to section 54EA and for this reason also the Tribunal is in error in drawing sustenance and making a reference to the provisions of sub-section (5) of section 45 of the Act for disturbing the view taken b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r that by a process of interpretation section 54EA is planted into the body of section 54H even before the Legislature had actually done that. 26. Sri Parthasarathi would submit that even on a principle of interpreta- tion, while interpreting the taxing statute at that, a pragmatic, practical interpretation should be resorted to, an interpretation which could advance the object and even can promote equity and justice should be preferred to a technical approach or a pedantic approach and even in a situation giving rise to a resultant absurdity that should be avoided and in support of his submission has placed strong reliance on the judgment of a Division Bench of this court in the case of ITO v. H. P. Vishweswaraiah reported in [2001] 250 ITR 863 (Karn). 27. With reference to the facts of this case, learned counsel pointed out that similar situation had arisen earlier before this court in the context of under- standing a provision of the Act, particularly section 54E of the Act and the provision again being for conferring concession or benefit to an assessee and what happened there was while transfer had taken place during the time when the statutory provisions were on the sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee in the welfare activities undertaken by the State for such activities. 30. If an assessee bona fide has made such investment in terms of the statutory provisions in the normal course, the assessee should get the benefit and the tenor of the judgment of this court in Vishweswaraiah's case [2001] 250 ITR 863 (Karn), is to extend the benefit of this nature to an assessee who has bona fide made reinvestment, than to deny the benefit or concession by taking a too technical view of the matter. 31. We are quite conscious that if we approach the present situation too technically in the background of the statutory provisions as was prevalent and as has been very emphatically made clear by Sri Aravind, learned standing counsel for the Department, on the dates relevant for the assess- ment year 1998-99 section 54H of the Act did not contain reference to the provisions of section 54EA of the Act and, therefore, section 54H is of no avail for the present assessee for the assessment year 1998-99 and this aspect if one should go by it, the provisions of section 54H alone is the correct legal position. 32. But the matter does not end with that. We are essentially concerned with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 54EA, 54EB being on the statute book. It is only the duty of the court to effectuate this provision and if need be by a process of interpretation and if the interpretation as is urged by Sri Aravind, learned standing counsel for the Department is to be accepted, it is an interpretation not for furthering the object of introduction of section 54EA which is not only to provide the benefit to the assessee but also to ensure an investment of the kinds specified in the modes so that funds being available to the Government for rehabilitation, welfare and developmental work, but to the contrary. 36. We are of the clear view that an interpretation to extend the benefit intended by the Legislature should definitely be preferred to an interpre- tation to deny the benefit by resorting to technical interpretation. 37. Though the Tribunal might not have expressed precisely as we have indicated in this judgment, but the tenor of the approach and the conclu- sion of the Tribunal is not different and it is for this reason, we are not inclined to disturb the judgment of the Tribunal, but affirm it and on the matter of interpretation we do indicate that the provisions of section 54EA is avai ..... X X X X Extracts X X X X X X X X Extracts X X X X
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