9911796707
TMI Blog2012 (6) TMI 139X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts and circumstances of the case and in law the Ld. CIT(A) erred in directing the Assessing Officer to allow deduction u/s. 54EC in the hand of the minor daughter of the assessee before the income from long term capital gains is clubbed with the income of the assessee u/s. 64(1A) of the I. T. Act, 1961. 2. That on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in treating the minor as an assessee within the meaning of section 64(1A) read with section 2(7) of the I. T. Act, 1961 even for the Assessment Year 2007-08. 3. That on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in recording his opinion that the limit of Rs.50,00,000/- under section 54EC of the I. T. Act, 1961 is applicable for investment in eligible bonds with effect from 1st April, 2007. 3. We will take the facts from ITA No. 963/K/2011 in the case of Shri Shankar Sharma. Brief facts are that during the relevant previous year relevant to this assessment year assessee earned LTCG on sale of shares. The assessee's minor children viz. Master Keshab Sharma and Miss Shakshi Sharma, being beneficial owners of shares, earned LTCG on sale of beneficial shares. The as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order of Assessing Officer be restored and that of CIT(A) be cancelled. 5. On the other hand, Ld. counsel Shri S. M. Surana, appearing for assessee, first of all drew our attention to the provision of section 54EC of the Act prior to its amendment from 01.04.2007, which reads as under: "54EC Capital gain not to be charged on investment in certain bonds. "(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, at any time within a period of six months after the date of such transfer, invested the whole or any part of capital gains in the long-term specified 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 long-term specified asset is not less than the capital gain arising from the transfer of the original asset, the whole of such capital gain shall not be charged under section 45; (b) if the cost of the long-term specified asset is less than the capital gain arising from the transfer of the original asset, so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specified asset' by this notification, for any amount which exceeds the amount of fifty lakhs rupees as reduced by the aggregate of the investment, if any, made by him in the bonds notified as long-term specified asset' by the Central Government for the purposes of section 54EC of the Income-tax Act 1961 (43 of 1961) in the Official Gazette vide notification number S.O. 963(E), dated the 29th June, 2006 or notification number S.O. 964(E) dated the 29th June, 2006." He also referred to the Notification no. 143 of 2006 dated 29.06.2006 issued by Rural Electrification Corporation Ltd., which reads as under: "In exercise of the powers conferred by sub-clause (ii) of clause (b) of the Explanation to section 54EC of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby notifies the bonds for an amount of Rupees four thousand five hundred crores (redeemable after three years) to be issued by the Rural Electrification Corporation Limited, a company formed and registered under the Companies Act, 1956 (1 of 1956), during the financial year 2006-07 as long-term specified asset for the purpose of the said section." 6. In view of the above, Ld. Counsel for the assessee stated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed or established or incorporated with the object of deriving income, profits or gains" From the above definition of 'person' it is clear that in case minor is an assessable entity even though his income is clubbed u/s. 64(1) of the Act in the hands of his parents, he is to be considered separate than his parents who is also an individual and a person as per this definition. There was no limit in separately allotting bonds up to Rs. 50,00,000/- to each of such person nor there is any mentioned limiting the deduction to an assessee. Section 54EC (3) Explanation (b) of the Act, suggests that the conditions for providing a limit on the amount of investment by an assessee can be notified or could have been notified by the Central Govt. But in the notification relied on the by the AO as aforesaid, no limit of investment by an "assessee" is prescribed. But the condition for allotment of bonds to a single person is specified. In fact the issuing authority was fully aware of the notification and taking into account the fact that it was being issued to three different "persons" the allotment was made. The deduction or otherwise was not the subject matter of notification rather it was out o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill not apply." Further, Mumbai Bench of this Tribunal in the case of Smt. Babita P. Kanungo (supra), held as under: "From the above, we find that in computing total income of an assessee, all such income as arises or accrues to his minor child is to be clubbed. The words "all such income" in this section refer to total income and we are of the considered opinion that for giving effect to this section, first the total income of the minor children is to be computed and then such total income only of the minor children is to be clubbed with the income of the parent." We after going through provisions of the Act are of the view that capital gain which is the subject matter of this appeal is to be computed under Chapter IV-E of the Act. Section 54EC provides that capital gain not to be charged on investment on certain bonds. Therefore the investments made in certain bonds shall be outside the scope of capital gain for the purpose of computation of total income itself. It is not a deduction under Chap. VIA which comes into picture only after computing the total income and the deductions are being allowed from gross total income as per section 80A(l). As stated earlier for the purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act itself not to allow deductions before clubbing the income of the wife with that of her husband." This was the case where we find income was clubbed in the hands of her husband and where the revenue did not allow the standard deduction. The Hon'ble High Court held concurring with the Tribunal that the standard deduction is to be allowed. Further more in the case of Segu Harnath (supra), the Hon'ble A.P. High Court held "Where the assessee was a partner in a firm and his minor daughter was. admitted to the benefit of partnership in the firm and assessee borrowed funds and invested the same in the partnership firm in the name of his minor daughter, the interest payable by the assessee on capital borrowed by the assessee on behalf of the minor daughter was deductible under section 67(3) from the share income arising to the minor child and it was only the resultant income, after deduction which was to be included in the total income of the assessee under section 64(1) (iii)". The above judgment clearly shows that even if the income of the minor is clubbed with the income of the other individual, all the deductions are to be allowed while computation of income of the minor/spouse ..... 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