2017 (11) TMI 395 - HC - Income Tax

Entitled to the exemption from Capital Gain Tax s/s 54EC - delayed investment - eligible investment in the Infrastructure Bonds of National Highway Authority of India, albeit with the delay of about six months - exercise of discretion in condoning the said delay of six months under Section 119 (2)(b) - Held that - The present case is one of such nature, where the Court finds that the substantial conditions for claiming the exemption from capital gain tax stood satisfied and the prescribed investment was made by the assessee in the Bonds of the National Highways Authority, for the minimum lock-in period of three years also is an undisputed fact, and therefore, the delay in making such investment of six months deserved to be condoned, in view of the fact that, the assessee- petitioner, a Doctor by profession was traveling from India to USA a long distance country where she normally resided and came to India not only to meet her family members, but to sell the immoveable property belonging to her and sought to avail the genuine exemption from such tax liability upon making the investment in the prescribed investment in the form of Bonds of Infrastructure which she did make in the National Highways Authority. In these circumstances, this Court is inclined to allow this petition. The same is accordingly allowed. The impugned order vide Annexure-A passed by the respondent, Central Board of Direct Taxes on 26-01-2014 is set aside and the assessee is held entitled to the exemption from Capital Gain Tax under Section 54 EC of the Act and the respondent authority or the authorities below Central Board for Direct Taxes are directed to give effect to such exemption to the assessee and pass necessary consequential orders in this regard.

Issues Involved:
1. Condonation of delay under Section 119(2)(b) of the Income Tax Act, 1961.
2. Interpretation and application of "genuine hardship" under Section 119(2)(b).
3. Strict versus liberal interpretation of exemption provisions in tax statutes.

Issue-wise Detailed Analysis:

1. Condonation of Delay under Section 119(2)(b) of the Income Tax Act, 1961:

The petitioner, Dr. Sujatha Ramesh, sought condonation of a six-month delay in making an eligible investment in Infrastructure Bonds to claim exemption from Capital Gain Tax under Section 54EC of the Income Tax Act, 1961. The Central Board of Direct Taxes (CBDT) refused to condone the delay, citing that the petitioner had 57 days between her two visits to the USA to make the investment and could have done so even in her absence through modern banking facilities. The CBDT concluded that the case did not meet the "genuine hardship" requirement under Section 119(2)(b) and rejected the application.

2. Interpretation and Application of "Genuine Hardship" under Section 119(2)(b):

The petitioner argued that her short stay of 57 days in India did not provide sufficient time to make the investment. She relied on several High Court decisions, which emphasized that "genuine hardship" should be construed liberally. The courts have held that the term "genuine hardship" includes genuine difficulty and should be interpreted to avoid unjust outcomes. The petitioner cited cases where courts ruled that technicalities should not defeat substantive justice, and delays should be condoned if they do not result from deliberate or negligent actions.

3. Strict Versus Liberal Interpretation of Exemption Provisions in Tax Statutes:

The respondent argued that exemption provisions in tax statutes should be strictly construed and that the petitioner could have made the investment electronically even when not physically present in India. The respondent relied on the Supreme Court's decision in State of Jharkhand vs. Ambay Cements, which held that exemptions should be strictly interpreted, and mandatory requirements should be followed precisely. However, the court noted that while the CBDT's reasons were not whimsical or arbitrary, a judicious and holistic view of the facts should have led to condoning the delay. The court emphasized that the CBDT's approach should balance revenue interests with equitable and judicious considerations.

Judgment:

The court allowed the petition, setting aside the CBDT's order and holding the petitioner entitled to the exemption from Capital Gain Tax under Section 54EC. The court directed the authorities to give effect to the exemption and pass necessary consequential orders. The court highlighted that the substantial conditions for claiming the exemption were met, and the delay of six months was not abnormally large. The court emphasized that the CBDT should exercise its wide discretionary powers under Section 119(2)(b) equitably, balancing the facts of each case.

Conclusion:

The court's decision underscores the importance of a balanced and equitable approach in interpreting tax exemption provisions and condoning delays, particularly when the substantive conditions for exemption are met. The judgment reinforces the principle that technicalities should not defeat substantive justice, and authorities should exercise their discretionary powers judiciously to avoid genuine hardship.

← Previous Next →