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TMI Blog2013 (7) TMI 417X X X X Extracts X X X X X X X X Extracts X X X X ..... pecified bonds as regards the capital gain arising from and out of a long term capital asset. For taking benefit under Section 54E, it is not necessary that one should first apply Section 70(3) and thereafter only, the assessee could invest the capital gain arising from the long term capital asset to any specified bond as specified under Section 54EC - Decided against Revenue. - Tax Case (Appeal) No.152 of 2010 - - - Dated:- 18-6-2013 - Chitra Venkataraman And K. B. K. Vasuki,JJ. For the Appellant : Mr. J. Narayanaswamy For the Respondents : Mr. R. Vijayaraghavan for M/s. Subbaraya Aiyar JUDGMENT (Judgment of the Court was delivered by Chitra Venkataraman,J.) The above Tax Case (Appeal) is filed at the instance of the Revenue against the order of the Income Tax Appellate Tribunal for the assessment year 2003-04 by raising following substantial question of law: "Whether, on the facts and circumstances of the case, the Tribunal was right in deciding that, first, the computation of capital gain has to be given effect to and then only apply the provisions of Section 70 of the Income Tax Act?" 2. It is seen from the facts narrated that the assessee herein mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion at all, the revision done was not sustainable in law. Consequently, the Tribunal set aside the order of the Commissioner of Income Tax (Appeals). Aggrieved by this, present appeal has been filed by the Revenue. 4. Before going into the contentions raised herein, the relevant provisions of Sections 45(1), 54EC and 70 of the Income Tax Act, relevant to the assessment years, have to be noted, which read as follows:- Capital gains. Section 45(1) Any profits or gains arising from the transfer of a capital asset effected in the previous year shall, save as otherwise provided in sections 54, 54B, 54D, 54E, 54 EA, 54 EB, 54F, 54G and 54H, be chargeable to income tax under the head "capital gains", and shall be deemed to be the income of the previous year in which the transfer took place. Capital gain not to be charged on investment in certain bonds. Section 54 EC (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 the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sections 54EA and 54EB and introduction of a new Section 54EC to ensure focussed investment of capital gains in agricultural finance and highway infrastructure. 30.1 Under the existing provisions, sections 54EA and 54EB of the Income Tax Act offer a basket of investment options to absorb taxable capital gains arising from transfer of long term capital assets. The notified instruments providing the roll-over to capital gains include shares, bonds, units and deposits of banks and various other instruments. The two sections were introduced in 1996 to give an incentive to the development of infrastructure. However, the objective has been diluted in the presence of a large number of varied and diverse instruments. Further, incentives to infrastructure are also available under other sections of the Income Tax Act such as sections 80-IA, 80-IB and 10(23G). In a regime of low tax rate on long term capital gains, there is very little justification for having such an omnibus basket of exemptions. Therefore, it has been decided to insert sun-set clauses to sections 54EA and 54EB limiting their application to transfers of long term capital asset made on or before 31st March 2000. Where the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ising out of a long term capital asset". 8. Contrast this with Section 54 which deals with capital gains arising on sale of property used for residence. Section 54 specifically provides that in the case of capital gains arising from the transfer of long term capital asset, being a residential house, exemption would be available if the assessee has purchased within a period of one year before or two years after the date on which the transfer took place, a residential house or within a period of three years after that date, constructed the residential house. Section 54(2) provides that the amount of capital gains not appropriated by the assessee towards the purchase of the new asset or purchase and construction of the new asset before the date specified in Section 54(1), shall be deposited in the specified Bank or institution and utilised in accordance with any scheme which the Central Government may notify. Section 54B deals with capital gain on transfer of land used for agricultural purposes not to be charged. Section 54D deals with Capital gain on compulsory acquisition of lands and buildings not to be charged. Section 54E deals with capital gain on transfer of capital assets no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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