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TMI Blog2016 (5) TMI 487X X X X Extracts X X X X X X X X Extracts X X X X ..... (11) TMI 54 - MADRAS HIGH COURT ) and CIT vs. Coramandel Industries Ltd (2014 (12) TMI 852 - MADRAS HIGH COURT ) and setaside the order of the Commissioner of Income Tax (Appeals) and direct the Assessing Officer to delete the addition and allow the grounds in favour of the assessee. Enhancement of income on investments made by the assessee’s two minor children in REC Bonds and denial of exemption u/s.54EC - Held that:- It is nobody case that father has invested in shares in the name of two minor children. The issue on the investment u/sec 54EC of the Act has been pindown on two aspects, the Commissioner of Income Tax (Appeals) has denied exemption to the minor child and second issue being whether income to be clubbed with parents ‘’total income’’ or ‘’such income’’ contested by the Revenue. We highlight the provisions of Sec. 64(1A) of the Act were income of the minor has to be computed before application of clubbing provisions. In respect of clam of exemption of capital gain, the computation has to be worked out in the hands of the minor and allow the exemption and subsequent income should be added in the hands of the father u/s.64(1A) of the Act - Decided in favour of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proviso mentions that investment on which an assessee could claim exemption under section 54EC(1) shall not exceed .50 lakhs during a financial year. So the exemption provision has to be construed not transaction wise but, financial year wise. Explanatory memorandum does say that limitation has view to ensure equitable distribution of benefits among the prospective investors. Last sentence of the Explanatory memorandum clearly states that the exemption for investment cannot exceed 50 lakhs in a financial year. Since the assessee here has placed 50 lakhs in two difference financial years but within six months period from the date of transfer of capital assets, assessee was definitely eligible to claim exemption upto 1 crore . but deferred with the decisions of Tribunal as the Department has filed appeal against the order of Tribunal in the High Court and made elaborative finding in his order and came to a arbitrary conclusion that the investment of ₹ 50,00,000/- in bonds should be restricted as per exemption u/s.54EC of the act and dealt on the provisions of Sec.45 as under:- Capital gain not to be charged on investment in certain bonds:- (1) Where the capita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is no dispute on calculation of long term capital gains and investments by the assessee except understanding the provisions of Sec.54EC (1) of the Act were assessee has made investments in REC bonds of ₹ 50,00,000/- each on 14.03.2011 and 27.04.2011 in two financial years. The ld. Assessing Officer and Commissioner of Income Tax (Appeals) has expressed his own opinion in interpreting the definition and the dictionary meaning of any in the provisions further Assessing Officer suo-motu took the decision by distinguishing judicial decision and restricted ₹ 50,00,000/- is for one financial year only and excess claim was disallowed. The provisions of Sec. 54EC of the Act are beneficial provision and to be construed liberally. The investment by the assessee in Sec. 54EC Bonds within the period of six months from date of sale of property is as per law and supported the submissions with the jurisdictional High Court decisions and prayed for allowing the appeal. 7. Contra, the ld. Departmental Representative relied on the orders of the lower authorities, CBDT circular and spirit of amendment of Sec. 54EC of the Act vehemently opposed to the grounds of the assessee. 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allow the grounds in favour of the assessee. 9. The second ground raised by the assessee is that Commissioner of Income Tax (Appeals) erred in enhancement of income on investments made by the assessee s two minor children in REC Bonds and denial of exemption u/s.54ECof the Act. The Assessing Officer in the assessment order of the assessee u/s.143(3) of the Act dated 26.03.2014 clubbed the income of minor children Luka Pullela and Nethra Pullela u/s.64(1A) of the Act determined in the assessment order dt. 16.12.2013. Aggrieved the assessee raised grounds against action of Assessing Officer before Commissioner of Income Tax (Appeals) alongwith other grounds. 10. The ld. Commissioner of Income Tax (Appeals) under the powers u/s.251(1) 251(2) of the Act issued show cause notice for enhancement of income of minor children aggregated u/s.64(1A) of the Act. In the opinion of the Commissioner of Income Tax (Appeals) all such income should be clubbed irrespective of any benefit or exemption to be granted to the minors. In compliance to the show cause notice, the assessee filed objections on enhancement and denial of exemption u/s.54EC of the Act to minor children. 11. The ld. Aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion) is greater ; or (b) where the marriage of his parents does not subsist, in the income of that parent who maintains the minor child in the previous year, and where any such income is once included in the total income of either parent, any such income arising in any succeeding year shall not be included in the total income of the other parent, unless the Assessing Officer is satisfied, after giving that parent an opportunity of being heard, that it is necessary so to do] Thus in computing the total income of an individual, there shall be included All such income as ............. and All such income is not the total income the total income is the one on which tax is levied. Moreover after clubbing the minor's income with the father i.e. what deduction is eligible are allowed in the hands of father only i.e. the assessee. thus relying on the total income and all such income are not same because the total income is the one on which tax is computed as applicable where as after allowing exemptions/deductions etc the all such income leads to total income. so all such income arising in the minor's case will be clubbed u/ s 64(1A) in the fathe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that father has invested in shares in the name of two minor children. The issue on the investment u/sec 54EC of the Act has been pindown on two aspects, the Commissioner of Income Tax (Appeals) has denied exemption to the minor child and second issue being whether income to be clubbed with parents total income or such income contested by the Revenue. We highlight the provisions of Sec. 64(1A) of the Act were income of the minor has to be computed before application of clubbing provisions. In respect of clam of exemption of capital gain, the computation has to be worked out in the hands of the minor and allow the exemption and subsequent income should be added in the hands of the father u/s.64(1A) of the Act. The ld. Authorised Representative supported his arguments with the judicial decisions were (i) JCIT vs Govind Rohira Alias Srichand Rohra 95 ITD 0077 were it was held that residential house property purchased by father in the name of minor son, out of capital gains arising from sale of shares held in the name of minor, is eligible for exemption u/s.54F. (ii) M.A.C. Khaleeli vs. DCIT 48 ITD 0191 were it was held that capital gains liable to be clubbed u/sec 64 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts by an assessee but embargo is on allotment of bonds to a person; and such embargo is on allotting authority. Bonds have been allotted to three persons as per notification itself and assessee is entitled to benefits as per provisions of Sec. 54EC under which restriction have been put only for investments from 01.04.2007. Therefore, in view of judgment in the case of Segu Harnath 171 ITR 318 (AP), wherein income was clubbed in hands of her husband and where revenue did not allow standard deduction. Where assessee was a partner in a firm and his minor daughter was admitted to benefit of partnership in firm and assessee borrowed funds and invested same in partnership firm in name of his minor daughter, interest payable by assessee on capital borrowed by assessee on behalf of minor daughter was deductible u/s.67(3) from share income arising to minor child and it was only resultant income, after deduction which was to be included in total income of assessee u/s.64(1)(iii). Even if income of the minor is clubbed with income of other individual, all deductions are to be allowed while computation of income of minor /spouse and only net taxable income is to be clubbed u/s.64. Claim of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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