TMI Blog2018 (2) TMI 713X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 assessee, we are of the view that the whole issue needs reexamination by the AO, afresh. AO is directed 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. AO 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. - ITA No.3184/Mum/2016 And ITA No.3193/Mum/2016 - - - Dated:- 14-12-2017 - Shri Joginder Singh, Judicial Member And Shri Manoj Kumar Aggarwal, Accountant Member For The Assessee : Ms. Vaishali Mehta For The Revenue : Shri Ram Kumar Tiwari-DR ORDER Per Joginder Singh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 50 lakh as against the claimed deduction of ₹ 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 No.6642/Mum/2014, on identical issue held as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer allowed the exemption only upto ₹ 50 lakh and disallowed for the remaining ₹ 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 ₹ 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 capi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sset 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upports 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of ₹ 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 ₹ 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 subsection (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 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d.), 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 ₹ 50 lakhs as prescribed u/s 54EC of the Act is per year and if the assessee invest ₹ 50 lakh each in two different years, otherwise fulfilling other conditions of section 54EC, such appellant will be entitle to the benefit of ₹ 1 crore and not merely ₹ 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 capital gain on 14/10/2008, therefore, the case of the assessee is clear, consequently, in view of the foregoing decision this ground of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng 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 investmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 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 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 ₹ 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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