9911796707
TMI Blog2002 (10) TMI 67X X X X Extracts X X X X X X X X Extracts X X X X ..... bed in that section within a period of six months from the date of transfer. Section 54E(1) of the Act prior to the amendment of 1992 stood as under "54E. (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, within a period of six months after the date of such transfer, invested or deposited the whole or any part of the net consideration in any specified asset (such specified asset being hereafter in this section referred to as the new 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 new asset is not less than the net consideration in respect of the original asset, the whole of such capital gain shall not be charged under section 45; (b) if the cost of the new asset is less than the net consideration in respect 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 new asset bears to the net consideration shall not be charged under section 45 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to accept its recommendation. Taxable capital gains will be computed by allowing the cost of the asset to be adjusted for general inflation before deducting from the sale proceeds. The adjustment factor for each year will be notified by the Central Government. The long-term capital gains thus computed will be taxed at 20 per cent. in the case of individuals and Hindu undivided families, 40 per cent., in the case of companies, firms, associations of persons and bodies of individuals, and 30 per cent., in the case of others. The new system will favour those whose capital gains accrue over a longer period, while those making capital gains over a shorter period will pay a higher tax. This is as it should be. The cut off date for valuation is also being shifted from 1st April, 1974, to 1st April, 1981. With these changes, I propose to withdraw the standard deduction in computing taxable capital gains and also the exemptions under section 54E for capital gains invested in specified assets and section 53 in respect of capital gains arising from sale of residential house." Clause 30 of the Finance Bill, 1992, proposed the following amendments in section 54E(1) of the Act: "30. Amendment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from capital gains tax on the advance, if he had received the advance and invested or deposited the same in a specified asset as prescribed, before February 29, 1992. Any advance or earnest money received and invested or deposited between March 1, 1992 and March 31, 1992, was not exempted. The petitioner's contention is that by restricting the benefit of exemption of capital gains tax to assessees who received the advance and invested or deposited the same in specified asset up to February 29, 1992, the Legislature has discriminated the said assessees as compared to the assessees who received and invested or deposited such advance in specified asset during the period March 1, 1992 to March 31, 1992. Thus, according to the petitioner, two identically situated assessees have been discriminated in the same fiscal year which violates article 14 of the Constitution of India. Learned counsel for the petitioner contends that either the benefit of exemption be extended up to March 31, 1992, or sub-section (1C) as a whole be done away with. The submission is that this sub-section did not find place in the Finance Bill, 1992, and without any discussion in the Finance Minister's speech dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd deposits made prior to February 29, 1992. In case the assessee had received the advance prior to February 29, 1992, but had not made the investment or deposit prior to that date, he would not have got the benefit of this sub-section. The rationale, that the sub-section gave the benefit of exemption from capital gains tax to the assessees who had received the advance and deposited the same prior to February 29, 1992, is, that the assessees had notice on February 29, 1992, when the Budget was presented that the Legislature had withdrawn the exemption of capital gains tax. In case the argument of the assessee that the date of February 29, 1992, should be read as March 31, 1992, is taken to be correct, there was a possibility of the provision being misused by the assessees, who could after February 29, 1992, and before March 31, 1992, receive substantial advance against the proposed sale of capital assets and invest the same in specified assets even though the transfer was to take place after March 31, 1992. This would have been against the intent and object of restructuring of taxation of capital gains. A reading of the amended section 54E(1) of the Act and the newly inserted sub-s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... simplification, this provision also stands withdrawn from assessment year 1993-94. The provisions of section 54E will be available for all sales made before April 1, 1992, if the whole or any part of the net consideration is invested in specified assets within six months after the date of such transfer.... 35.11 An assessee could invest or deposit in any specified assets from out of the amount received as advance money and get the benefit or exemption under section 54E as and when long-term capital gains arise on transfer of the capital asset. It may so happen that some assessees may have invested or deposited in the specified assets as prescribed in-section 54E from Out Of advance money received before the presentation of the budget. In order to give protection to such deposits or investments, it has been provided that these investments or deposits will be eligible for the purpose of exemption from tax under section 54E whenever long-term capital gains arise out of transfer of the capital asset on a date after March 31, 1992, provided such investments had been made on or before February 29, 1992. Thus, the provisions of section 54E will be enforced in respect of only such cases w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estoppel against the exercise of legislative powers. The Legislature can never be precluded from exercising its legislative functions by resorting to the doctrine of promissory estoppel. Reference in this respect is made to an authoritative pronouncement of the apex court reported in State of Kerala v. Gwalior Rayon Silk Manufacturing (Weaving) Co. Ltd., AIR 1973 SC 2734; [1974] 1 SCR 671. The next contention of the petitioner is that, as the Finance Act, 1992, was notified on May 14, 1992, it could not be made retrospective by restricting the benefit of exemption from capital gains tax up to February 29, 1992. The amendment of section 54E(1), withdrawing the exemption of capital gains tax, is with effect from April 1, 1992, which is in fact prospective and not retrospective. The reason for inserting sub-section (1C) and restricting the benefit of capital gains tax exemption on advance received by an assessee prior to February 29, 1992, has already been explained above and it cannot be argued that the insertion of the date February 29, 1992, in the said sub-section is retrospective. In any case, it is settled law that a tax legislation is a policy matter and it is for Parliament ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the manner in which legislation should be made. In fact the powers of Parliament to pass legislation having retrospective effect is fairly conceded by learned counsel for the petitioner. The challenge is mainly on the ground that it violates article 14 of the Constitution as restricting the benefit of exemption of long-term capital gains on advance received and deposited prior to February 29, 1992, is arbitrary and not justified. The contention is that by inserting the date of February 29, 1992, in section 54E(1C) of the Act, the assessees, who received and invested the advance or earnest money prior to February 29, 1992, and the class of assessees, who received and invested such advance after February 29, 1992, and prior to March 31, 1992, are discriminated, though they fall in the same fiscal year. In this respect, we have already discussed above that sub-section (1C) in fact is a beneficial provision and has been introduced to protect those assessees who had received advance or earnest money and had already invested or deposited the same in specified assets before the presentation of the budget, i.e., February 29, 1992, as up to that date they did not have any notice that exe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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