2003 (7) TMI 255 - AT - Income Tax

Summary

Issues Involved:

1. Whether the benefit under section 54E of the IT Act is allowable to the assessee for investment in National Rural Development Bond within six months from the date of receipt of the final sale consideration.
2. Whether the period of six months for investment should be reckoned from the date of transfer or the date of receipt of sale consideration.
3. Interpretation of section 54E and related provisions in the context of compulsory acquisition and voluntary sale.
4. Applicability of judicial precedents and CBDT circulars in interpreting section 54E.

Detailed Analysis:

1. Allowability of Benefit under Section 54E:

The primary issue is whether the assessee is entitled to the benefit under section 54E of the IT Act for investing Rs. 1,89,400 in National Rural Development Bond (NRDB) within six months from the date of receipt of the final sale consideration. The assessee sold two plots of land on 7-8-1982 and received the final installment of the sale consideration on 25-10-1986, which was invested in NRDB on 20-2-1987. The Assessing Officer (AO) and CIT(A) both rejected the claim for deduction under section 54E, citing that the investment was not made within six months from the date of transfer.

2. Period of Six Months: Date of Transfer vs. Date of Receipt:

The controversy hinges on whether the six-month period for investment should be reckoned from the date of transfer (7-8-1982) or the date of receipt of the final installment (25-10-1986). The assessee argued that the period should be counted from the date of receipt due to litigation delays. However, the AO and CIT(A) held that the statutory period of six months should be reckoned from the date of transfer, not the date of receipt.

3. Interpretation of Section 54E and Related Provisions:

The Tribunal examined the provisions of section 54E and related sections like 54E(3), 155(7A), and 155(10B), which provide for reckoning the six-month period from the date of receipt in cases of compulsory acquisition. However, these provisions are specific to compulsory acquisition and not applicable to voluntary sales. The Tribunal noted that section 54E(1) clearly specifies the period of six months to be reckoned from the date of transfer, and this cannot be extended to voluntary sales.

4. Applicability of Judicial Precedents and CBDT Circulars:

The assessee relied on various judicial precedents and CBDT Circular No. 359, arguing for a beneficial interpretation. However, the Tribunal distinguished these cases as they pertained to compulsory acquisition scenarios. The Tribunal emphasized that the clear language of section 54E(1) mandates the investment within six months from the date of transfer, and there is no ambiguity requiring a beneficial interpretation.

Conclusion:

The Tribunal concluded that the benefit under section 54E is not allowable to the assessee as the investment was not made within the statutory period of six months from the date of transfer. The appeal of the assessee was dismissed, affirming the decisions of the AO and CIT(A).

Result:

The appeal of the assessee is dismissed.