9911796707
TMI Blog2014 (9) TMI 419X X X X Extracts X X X X X X X X Extracts X X X X ..... /-. The return was processed under section 143(1) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') and taken up for scrutiny by issue of notice under section 143(2) of the Act. The assessment was completed by an order dated 16/12/2010 determining the income from long term capital gains (LTCG) at Rs. 2,98,26,515/- by making the following disallowances:- (i) Indexed cost of improvement Rs. 53,47,235 (ii) Expenses incurred on transfer of property Rs. 35,00,000 (iii) Professional fees paid to Chartered Accountant Rs. 1,96,630 (iv) Rebate for reinvestment u/s 54EC Rs. 50,00,000 2.2 Aggrieved by the order of assessment, the assessee carried the matter in appeal before the CIT(A)-IV, Bangalore. The learned CIT(A) disposed off the assessee's appeal by order dated 21/12/2011 allowing the assessee partial relief of Rs. 10,00,000/-, being the amount paid to the Advocate for putting through the sale transaction out of the disallowed sum of Rs. 35,00,000/- mentioned at (ii) of the disallowances above. The learned CIT(A) confirmed the other disallowances mentioned at (i), (iii) and (iv) above. 3.0 Aggrieved by the order of the learned CIT(A) dated 21/12/2011 the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve. 10. In the view of the above and other grounds that may be urged at the time of the hearing of the appeal, the appellant prays that the appeal may be allowed in the interest of justice and equity." 4.0 We have heard both the parties on their respective contentions. The learned AR of the assessee has filed a paper book, compilation of 107 pages and also placed on record certain judicial decisions and copies of CBDT Circulars in support of the assessee's case. The learned DR has also placed on record copies of certain judicial decisions in support of the stand of Revenue. After consideration of the same, the issues in dispute will now be disposed off. 5.0 The grounds raised at Sl.No.1, 2, 9 and 10 (supra) are general in nature and therefore, no adjudication is called for thereon. 6.1 In the ground raised at S.Nos.3 & 4, the assessee has challenged the action of the authorities below in disallowing a sum ofRs.55,47,235 claimed as indexed cost of improvement while computing LTCG on sale of the said property at S.No.43/1, Kothanur village, K.R. Puram Hobli, Bangalore, without appreciating the fact that the assessee had actually incurred an amount of Rs. 12,13,075 as cost of impr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ain as to whether at the time of sale or transfer of the said property, any improvement to the property was in existence, we have perused both the sale deed 25.11.1981 whereby the assessee purchased the said property and sale deed dt.14.12.2007 whereby he sold the said property in the relevant period. On perusal thereof we find that when the property was purchased by the assessee on 25.11.1981 the said property was agricultural land with no structure thereon as admitted. We also find that according to the sale deed dt.14.12.2007 the said property continued to be agricultural land, but however notably find no mention therein of any bungalow / building being thereon or any details of improvements made thereto as claimed. We have also perused the valuation report dt.4.8.1999 (at pages 23 to 31 of the assessee's paper book) and find that this was made in regard to complaints and FIR's lodged with the Police Department by the father of the assessee and the valuation is stated to have been made based on documents and information furnished to the valuers by the owner. We also find that the assessee has not brought on record any evidence whatsoever to establish that he had in fact incu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le, holding that the same could not have been incurred in respect of the sale of the impugned property. It is the contention of the learned counsel for the assessee that the balance of Rs. 5 lakhs paid to Sri M. S. Narayan, Advocate be allowed as the time lag of 3 months should in no way affect the claim of the assessee and more so when no appeal has been preferred by revenue against the relief of Rs. 10 lakhs allowed by the learned CIT(Appeals). It is also submitted that the balance of Rs. 20 lakhs paid by cheques by the assessee to four different persons as commission @ Rs. 5 lakhs each be allowed as copies of receipts from these parties have been obtained and placed on record. 7.2 Per contra, the learned Departmental Representative supported the orders of the learned CIT(Appeals) on this issue. 7.3 We have heard both parties and carefully perused and considered the material on record. In the relevant period, the assessee claimed to have incurred amounts aggregating to Rs. 40 lakhs in connection with the sale / transfer of the said property, the details of which are as under : Sl.No. Name & Address Date of payment Amount paid in Rs. 1. V Saraswathi, NO.55, Kadirappa Road, C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... action of the learned CIT(Appeals) in disallowing the payment of Rs. 5 lakhs paid to Sri M.S. Narayan, Advocate on 12.3.2008 only on the ground that there was no rationale in making the said payment on 12.3.2008, almost six months after the sale of the asset for the reasons that - (i) the said payment of Rs. 5 lakhs is made on 12.3.2008 which is almost 3 months after the date sale and not 6 months as held by the learned CIT(Appeals) and (ii) the time lag of 3 months should in no way affect the claim of the assessee and it is not stipulated anywhere that every payment in connection with the transfer of asset is to be made only prior to the sale of the property. We, therefore, hold that the 4 payments of Rs. 5 lakhs each made by the assessee to Sri M.S. Narayan, Advocate aggregating to Rs. 20 lakhs are incurred in connection with the sale / transfer of the said property and are to be allowed as a deduction under section 48 of the Act while computing the LTCG on sale of the said property. It is ordered accordingly. 7.3.3 As regards the other amounts aggregating to Rs. 20 lakhs paid @ Rs. 5 lakhs each to 4 different persons, namely, Ms. V. Saraswathi, Sri M.S. Srinivas, Sri M.S. Ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vement or in connection with the transfer of the said property. We, therefore, dismiss this ground raised by the assessee. 9.1 In the ground raised at S.No.6, the assessee challenges the action of the learned CIT(Appeals) in disallowing the claim of exemption of Rs. 50 lakhs being the investment made in NHAI Bonds which he was eligible to invest in as per the provisions of section 54EC of the Act. 9.2 The assessee, in the relevant period, sold agricultural property measuring 6 acres and 5 guntas situated at Survey No.43/1, Kothanur Village, K.R. Puram Hobli, Bangalore on 14.12.2007 for a consideration of Rs. 3,50,93,750. As per the details on record, the assessee invested a sum of Rs. 50 lakhs on 3.3.2008 in bonds issued by Rural Electrification Corporation (REC Ltd) and a further sum of Rs. 50 lakhs by cheque dt.4.6.2008, which got encashed on 9.6.2008, in bonds of National Highways Authority of India (NHAI). Thus in all he has invested an amount of Rs. 1 Crore out of sale consideration in bonds issued by REC Ltd and NHAI. The Assessing Officer relying upon the proviso to sectin 54EC restricted the claim of exemption to Rs. 50 lakhs holding the same to be the maximum amount of e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee had tendered the payment and the NHAI has also encashed the same before the expiry of six months from the date of sale, the assessee is not entitled to exemption under section 54EC due to the fact that NHAI have allotted the Bonds on 30.6.2008 which is after the period of six months from the date of sale of the said property on 14.12.2007. 9.4 The issues now before us for adjudication are the following : (i) Whether the proviso to section 54EC of the Act restricts the exemption to Rs. 50 lakhs or does it merely restrict the investment that can be made in a single financial year to Rs. 50 lakhs ? (ii) If the answer to the above is that it is the investment that is restricted and not the exemption, then in view of the fact that NHAI had allotted the Bonds only on 30.6.2008 in respect of the second investment of Rs. 50 lakhs, which is beyond the period of six months from the date of sale of property, can it be said that the second investment of Rs. 50 lakhs is said to have been made outside the period of six months and no exemption is to be allowed under section 54EC of the Act in respect of the same. 9.5 The learned counsel for the assessee has placed reliance on the deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y lakh rupees in a financial year." It is clear form the Circular no.3/2008 of CBDT (supra) that the Government only intended to restrict the investment in a particular financial year and thus has fixed a limit of Rs. 50 lakhs as permissible investment in a particular financial year. It also appears clear that the Government did not intend to restrict the maximum amount of exemption permissible under section 54EC of the Act. The fact that the Legislature has consciously used the words "in a financial year" in the proviso to section 54EC of the Act also fortifies the same. If the Legislature wanted to restrict the exemption itself to Rs. 50 lakhs it could have simply dispensed with using the words "in a financial year." 9.8 The judicial decisions relied upon by the learned counsel for the assessee also support the stand of the assessee. The Hon'ble Apex Court while deciding the case of Vikrant Tyres Ltd Vs. First ITO reported in 247 ITR 821 have already laid down the law on interpreting of statutes by holding thereof that :- "It is settled principle in law that the courts while construing Revenue Acts have to give a fair and reasonable construction to the language of a statut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid property took place on 14.12.2007 and the six months period ended on 13.6.2008. NHAI, however, as evident from the record, has allotted the bonds only on 30.6.2008 which is after the six month period. The learned CIT(Appeals) held that the date of allotment is what is to be considered for reckoning the six months period and the same (viz. 30.6.2008) being beyond the period of six months, in the instant case, has denied the exemption claimed under section 54EC of the Act for the second investment of Rs. 50 lakhs. 10.2 The assessee has placed reliance on a decision of the ITAT, Bombay Bench in the case of Kumarpal Amrutlal Doshi Vs. DCIT in ITA No.1523/Mum/2010 dt.9.2.2011 wherein the Tribunal relying on the decision of the Hon'ble Apex Court in the case of CIT Vs. Ogale Glass Works Ltd (25 ITR 529) has held that payment by cheque subsequently realized on the cheque being honoured and encashed relates back to the date of receipt of the cheque and in law the date of payment is the date of delivery of the cheque. In the cited case the assessee therein had issued a cheque to NABARD on 9.2.2006 which was within the period of six months as specified in sectin 54EC. The cheque got ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
