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TMI Blog1991 (6) TMI 122X X X X Extracts X X X X X X X X Extracts X X X X ..... ins was modified in 1977 in several directions. One of the changes made was to provide for exemption from income-tax on long-term capital gains if the sale proceeds of any asset were re-invested within six months in certain preferred assets. Since asset owners secure capital gains largely through no effort on their own part, this exemption confers an unfair advantage on asset holders as compared to income earners and thus contributes to the disparity in society. I, therefore, propose to withdraw this exemption of capital gains in respect of transfers made after 28th February, 1979. This measure will yield an additional revenue of Rs. 14 crores annually. Since, however, advance tax is not payable in respect of capital gains, there will be no accretion to revenue during the year 1979-80. " Accordingly, clause 7 of the Finance Bill, 1979 states as follows : " Clause 7: Nothing in this Section shall apply to or in relation to any capital gain arising from any transfer of a capital asset made after 28th day of February, 1979. " However, when the bill was made into an Act, the actual amendment took the following form : " 8. Amendment of section 54E.--In section 54E of the Income- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s deposited on 19-6-1979 also for a period of 5 years. 5. On these facts, the assessee claimed that the transfer had taken place before 1-3-1979 and, therefore, the fixed deposit in the Canara Bank fulfilled the condition required for abatement of tax on capital gains under section 54E. The ITO, however, rejected this claim on the ground that the date of registration is the date of transfer and since the transfer of assets took place after 28-2-1979, investment in National Rural Development Bonds was required to claim the abatement. This was confirmed on appeal. 6. In the further appeal before us it was contended on behalf of the assessee relying an the statement of law in the case of T.V. Kalyanasundaram Pillai v. Karuppa Mooppanar AIR 1927 PC 42 which was re-stated by the Supreme Court in the case of Hammadh Ammal v. Avadiappa Pathar [1991] 1 SCC 715, that after registration the document operates from the date of execution and therefore it must be accepted that the sale deed executed on 28-2-1979, even though registered in March 1979, effectively transferred the original asset before 1-3-1979 and, accordingly, the investment of the proceeds in fixed deposit in a bank was elig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... archand Jainarain Agarwal v. Union of India [1983] 142 ITR 410 that section 269C is attracted only on the date of registration and it will not be avoided even if the sale was executed prior to the coming into force of the section but registration effected after it came into force, by arguing that the transfer operated from the earlier date of execution of the sale deed. This Tribunal has followed this principle in the case of GTO v. S.E.S. Muruganandam [1990] 32 ITD 148 (Mad.) to which one of us (J.M.) was a party. 9. It is because of this uncertain position that the assessee wrote a letter dated 5-5-1979 to the CBDT requesting that he should be advised whether he will be assessed with reference to the date of execution of the document or the date of registration of the document so that he can make the appropriate investment. However, the CBDT gave a reply on 13-3-1980, long after the period of six months available from the date of transfer for investment, stating that the Board does not give advance rulings on legal issues. This is inexplicable when the CBDT has issued a circular instructing the Officer of the Department to act in the following manner : "Officers of the depart ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stand on the 1st April of the assessment year. The Supreme Court has pointed out in the case of CIT v. Isthmiain Steamship Lines [1951] 20 ITR 572 that it is a cardinal principle of the tax law that the law to be applied is that in force in the assessment year unless otherwise provided expressly or by necessary implication. But the subject of the charge is not the income of the year of assessment, but refers to the transactions of the previous year. This is in contrast to the indirect levies under the Central Excise Customs enactments where the provisional Collection of Taxes Act, 1931 provides that upon declaration by Parliament, the imposition or increase of duty of customs or excise will have immediate effect upon presentation of Finance Bill, and such provisions will have the force of law and cease to have effect on the expiry of the 75th day, unless the Bill becomes an Act. These considerations have no relevance to the Income-tax Act which is a tax on the income of the previous year. Therefore, it prima facie appears that the selection of the date of the presentation of the Budget for modifying the mode of investment as a condition for eligibility for tax rebate was inapprop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not a case of provisional collection of tax where it could take effect from the date of the Bill. Under clause (5) of the General Clauses Act, the amendment can take effect only from the date specified in the Act or on receiving the assent of the President. Since the Finance Act, 1979, section 1 states that it shall be deemed to have come into force from 1-4-1979, this section comes into the statute from 1-4-1979. Of course, it states that in a case where the asset is transferred after 28th February, the investment must be in the National Rural Development Bonds. But this does not make the section retrospective as it could not operate during the period 1-3-1974 to 1-4-1974. Therefore, a person who made a transfer between 1-3-1979 and 1-4-1979 could not have acted in accordance with the amendment as he could not be sure that the provisions in the Bill would become an Act. In fact, this section was not even in the Bill so as to enable the taxpayer to anticipate it, because what was proposed in the Bill was different from what was enacted and the assessee could never have known when he entered into the transaction that a different reinvestment pattern would be required to get reli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arlier avenue without providing the new avenue for investment and thus create a vacuum not intended by the statute as it has reiterated the principle of exemption upon reinvesment. There is also a general proposition that an affirmative statute giving a new right does not of itself and of necessity destroy a previously existing right unless the intention is that the two rights should not exist together (see Broom's Legal Maxim, 10th Edn., p. 382). Even assuming in this case that it was not intended that the right to invest in National Rural Development Bonds and in nationalised banks were not intended to exist together, it cannot lead to the position that the right to invest in banks is taken away even before the right to invest in National Rural Development Bonds becomes effective. 17. It was pointed out on behalf of the Revenue that section 54E allowed a period of six months from the date of transfer to make the required reinvestment and since the National Rural Development Bonds were issued and available from 22-6-1979 within 6 months from 1-3-1979, the assessee could still have subscribed to it to obtain the relief. The assessee points out that the CBDT had not clarified the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ace effectively on 22-6-1979, investment in Nationalised Banks cannot be ignored in granting relief. In other words, section 8(a) effectively repealed the earlier section only on 22-6-1979 while 8(b) could be said to have conferred an additional right to invest in National Rural Bonds for those who were prepared to wait for the issue. In any event, the section itself was not in force before 1-4-1979 and there was no repeal of the earlier provisions between 1-3-1979 and 1-4-1979. From any point of view, in the present case, the transfer whether considered as having taken place on 28-2-1979 when the sale deed was executed or on 21-3-1979 when it was registered, was governed by the provisions of the Act as it stood on those dates, there being no effective substitution of the provisions of section 54E by then. The assessee cannot, therefore, be deprived of the right to invest in Nationalised banks and such investment cannot be disqualified for exemption. 18. The Supreme Court has observed in the case of CIT v. J.II. Gotla [1985] 156 ITR 323 that though equity and taxation are often strangers, attempts should be made that these do not remain always so and if a construction results in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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