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TMI Blog2001 (2) TMI 1020X X X X Extracts X X X X X X X X Extracts X X X X ..... directions of the IT (Appeals) and denied the claim for exemption again. This order was also confirmed by the IT (Appeals). Thus, there are two appeals. 2. The first issue which is covered by the first four grounds in ITA No. 2685/Mum./96 relates to the income to be assessed after the disclosure made by the assessee under the Kar Vivad Samadhan Scheme. The assessee is a builder engaged in the business of development and construction of real estate. From the assessment year 1983-84 to the assessment year 1990-91, the assessee was declaring a percentage of the sale price as its profits for income-tax purposes. In the assessment year 1991-92, the Assessing Officer noted that the project undertaken by the assessee was completed. The project consisted of three buildings. In respect of two buildings, they were fully sold out and in the third building, 50 out of the 130 flats had been sold out. This was the reason for the view of the Assessing Officer that the project has been completed in the assessment year 1991-92. The assessee filed applications under the Kar Vivad Samadhan Scheme of 1998 and declared a total income of ₹ 2,43,87,406 for the assessment year 1991-92, which is the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was paid to Vaswani Trust for the credit of the assessee's partners on the same day. All these details have been annexed as Annexure-J to the assessment order and there is no dispute about them. On 28-10-1991, the assessee borrowed a sum of ₹ 1.42 crores from M/s. Vaswani Trust and the borrowed amount was invested in IDBI Bonds on 30-10-1991, which are specified assets for the purpose of section 54E. 5. Before the Assessing Officer, the assessee claimed the benefit of deduction under section 54E proportionate to the amount invested in the IDBI Bonds. The Assessing Officer was of the view that section 54E contemplated the investment or deposit of the sale consideration itself in the specified assets and inasmuch as the assessee has diverted the sale consideration of ₹ 3.55 crores to various partners and has made the investment in the bonds by borrowing an amount of ₹ 1.42 crores from Vaswani Trust, the exemption as claimed cannot be given. The IT (Appeals) has endorsed the view taken by the Assessing Officer and hence the present grounds. 6. The contention of Mr. Dastur, the learned counsel for the assessee, runs like this. He points out to the phraseology of se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs/judgments : (1)Addl. CIT v. Surat Art Silk Mfrs. Association [1980] 121 ITR 1 at page 17 (SC)1 (2)CED v. Roshan Jahangir Gandhi [1994] 205 ITR 428 at page 432 (SC)1; (3)Santosh Agarwal 156 ITR 323 at page 339 (sic) (SC) and (4)IAC v. Jayantilal Chimanlal (HUF) [1954] 26 ITD 1 (Ahd.). With reference to the judgment of the Andhra Pradesh High Court, in S. Gopal Reddy v. CIT [1990] 181 ITR 378, which has been heavily relied upon by the Income-tax authorities, Mr. Dastur pointed out that this decision is distinguishable on facts inasmuch as it was a case of compulsory acquisition of the land and not a voluntary sale and in this judgment itself, the High Court has recognised the injustice that would be caused if investment in the specified asset within the time limit prescribed by the section from the date of acquisition is insisted upon in a case where the additional compensation is received after protracted litigation. Accordingly, Mr. Dastur contended that while interpreting a beneficial provision, the injustice such interpretation is likely to cause should always be eschewed. 8. The learned Sr. DR strongly relied on the orders of the Income-tax authorities especially the or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the specified assets. It cannot be the intention of the section that the other normal transactions or activities of an assessee should be curtailed or that the sale price should be immobilised. One example which immediately comes to our mind is as to what would happen if the sale price is lost by theft and the deadline of 6 months is about to be crossed. In such a case, the assessee should not be denied the exemption if he, in a desperate attempt to avail of the exemption, resorts to borrowing and utilises the borrowed amount for investment. No distinction can be made between an assessee who is forced to borrow for the purpose of making the investment and another assessee who effects the borrowing not because of forced circumstances, but because he consciously or deliberately used the sale consideration for a different purpose. As we have already seen the object of the provision is that funds should be chennellised into certain sectors and this object is achieved in both the cases. We are of the view that in giving effect to the object, we should shun a wooden approach. 10. We suppose that the requirement of the section would have been met if the assessee had first paid over the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... views are possible. It is the view which advances the cause of Justice that should be preferred. It may be seen that in the case before the SC also, the Estate Duty was paid out of the borrowings and not out of the proceeds of the transfer of shares. But still, adopting a purposive interpretation or an interpretation that would advance the cause of Justice, the Supreme Court held that it must be considered to be a payment of duty out of the payment of the proceeds of the transfer of shares and the rebate should be allowed. The facts of the present case bear close similarity. 12. The judgment of the Andhra Pradesh High Court in the case of S. Gopal Reddy (supra) has been heavily relied upon by the income-tax authorities and also by the learned Sr. DR before us. But in the light of the judgment of the Supreme Court in the case of Roshan Jahangir Gandhi (supra), we are unable to give effect to the judgment of the Andhra Pradesh High Court. Even otherwise, the Andhra Pradesh High Court has adopted the principle of interpretation which would advance the cause of justice by saying that in a case of compulsory acquisition of land where additional compensation is awarded after court proc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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