TMI Blog2003 (7) TMI 255X X X X Extracts X X X X X X X X Extracts X X X X ..... A). The Assessing Officer completed the fresh assessment vide order dated 31-3-1992. In this fresh assessment, the assessee has claimed deduction under section 54E of the Act on the basis of investment of Rs. 1,89,400 made in NRDB on 20th February, 1987, within six months of the receipt of final instalment. 3. The Assessing Officer rejected the said claim made for deduction under section 54E on the ground that no such deduction was allowed by the Assessing Officer under section 54E while passing the original assessment order under section 143(3) nor the learned CIT(A) has given any direction in his appellate order dated 28-8-1989 for considering the assessee's claim under section 54E. The Assessing Officer also observed that the assessee has not invested or deposited Rs. 1,89,400 part of the net sale consideration in any specified asset within six months from the date of transfer. 4. The learned CIT(A) did not agree with Assessing Officer regarding entertaining the claim of the assessee. He admitted claim of the assessee but on merit, he confirmed the view taken by the Assessing Officer holding that the assessee is not entitled for deduction under section 54E though giving a di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o CBDT Circular No. 359 dated 10-5-1983 and contended that when it has been stated by the CBDT to allow exemption in cases where earnest money or the advance received is invested in specified assets before the date of transfer of assets, then on the same basis, the amount invested within 6 months from the date of receipt should also be accepted. The CBDT has relaxed that condition in view of purpose and spirit of the section. 7. The ld. AR further submitted that with a view to augment Government deposits in specified investments, the Legislature has thought it fit to enact the provisions which encourage assessees, who may be liable to pay tax on capital gains, to make specified deposits and investments for seeking exemption from tax on capital gains. These provisions were inserted as an incentive to the assessee for seeking exemption from payment of tax on capital gain. The ld. AR further submitted that while interpreting the provisions full effect is required to be given to the Legislative intention of encouraging assessee, liable to tax for capital gains, to make specified investments and deposits and thereby augment Government revenue. For this purpose, when the assessee recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontroversy to be decided by us is whether for the purpose of allowing deduction under section 54E of the IT Act, the period of six months is to be reckoned from the date of transfer or from the date of final receipt of sale consideration. Separate provisions have been provided in IT Act for both the situations. The relevant provisions in respect of both the situations are reproduced as below: (a) Where the period of six months is to be reckoned from the date of transfer "54E(1). Where the capital gain arises from the transfer of a capital asset, not being a short 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,..." (b) Where the period of six months to be reckoned from the date of receipt. (i) Second proviso to section 54E(1) [ins ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urther enhanced by any court, Tribunal or other authority, the computation or, as the case may be, computations made earlier shall be deemed to have been wrongly made and the Income-tax Officer shall notwithstanding anything contained in this Act, recompute in accordance with section 48 the capital gain arising from such transfer by taking the compensation or the consideration as enhanced or further enhanced, as the case may be, to be the full value of the consideration received or accruing as a result of such transfer and shall make the necessary amendment; and the provisions of section 154, shall, so far as may be, apply thereto, the period of four years specified in sub-section (7) of that section being reckoned for the end of the previous year in which the additional compensation or consideration was received by the assessee." (iv) 155(10B): (inserted by the Finance Act, 1978 w.e.f. 1-4-1978) "Where in the assessment for any year, a capital gain arising from the transfer, being a transfer by way of compulsory acquisition or a transfer the consideration for which was determined or approved by the Central Government or the Reserve Bank of India, of any capital asset, not bein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emption under section 54E(3) of IT Act where enhanced compensation on account of compulsory acquisition of land was received after omission of sec. 54E(3). The relevant observations are reproduced from page 866 as under: "Held, that the amount of enhanced compensation had been deposited or invested after April 1, 1978, and if there was full compliance with other provisions of section 54E(3) and section 155(10B) of the Act, the assessee could legitimately be allowed to claim exemption from tax on capital gains. The Legislature in giving retrospective effect to section 155(7A) which enables the tax authorities to recompute the capital gains tax on the enhanced amount of compensation subsequently awarded and received by the assessee, and giving prospective operation to section 155(10B) and section 54E(3), could legitimately have no intention to deny the benefit of exemption from tax to the assessee willing to make deposits and investments in the "specified assets". It is only in respect of those cases where the assessee has not availed of the benefit of exemption from tax by a specified deposit or investment that it became necessary to confer power on the authorities to recompute ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capital gain by way of enhanced compensation cannot be a one-sided measure. While verifying or re-doing the assessment, the beneficial provision introduced by the Legislature with a definite purpose should also be kept in view. Sections 54E(3), 155(7A), 155(10B) should be read together harmoniously in order to effectuate the purpose of the law. There is no warrant to confine the provision contained in section 54E(3) of the Income-tax Act only to the additional compensation received in respect of the acquisitions that take place after the introduction of the provisions. Such a narrow interpretation is not warranted, either going by the language of the section or by having recourse to the purposive interpretation. The words "within six months after the date of receipt of additional compensation- cannot be qualified by the limitation that the additional compensation so received should relate to a future acquisiton. Sub-section (10B) of section 155 has been introducted to effectuate the relief granted by section 54E(3) as a part of fiscal policy. Therefore, the provisions of sections 54E(3) and 155(10B) were applicable in the case of the assessee for the assessment year 1975-76 though ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osit in specified assets within the stipulated period is a mandatory requirement of the section for getting benefit from tax on capital gain. This view is supported by the judgment of the Hon'ble Gujarat High Court in the case of Smt. Shantaben P. Gandhi v. CIT [1981] 129-ITR-218 (Guj.) wherein, on identical set of facts, construction of new house property was completed on 31st March, 1968, long before the transfer of assets, i.e. 20-3-1970, though the assessee paid a substantial portion of the cost of construction and obtained possession of new assets on March 31st, 1970, that is to say on the day on which transfer took place and the conveyance was executed, it has been held that in the instant case the assessee could not be said to have constructed the new house property within a period of two years after the date of the transfer of the capital assets which has resulted in the capital gains. 17. From the aforesaid discussion, it is very clear that an assessee who desire to avail benefit of section 54E, must strictly satisfy all those conditions which are provided therein. One of the condition of the section is that assessee is to deposit whole or any part of the net considerati ..... X X X X Extracts X X X X X X X X Extracts X X X X
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