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TMI Blog2019 (8) TMI 229X X X X Extracts X X X X X X X X Extracts X X X X ..... er falling under section 47(xiii) was outside the ambit of mischief of deeming fiction of section 49. Therefore, the purpose of the amendment was to bring all these cases in the ambit of deeming fiction as provided u/s 49. It is also not in dispute that at the time of filing the return of income on 30th September, 2009 the law which was amended by Finance Act, 2012 was not in the Statute. Hon ble Supreme Court in case of CIT vs. Hindustan Electro Graphites Ltd [ 2000 (3) TMI 2 - SUPREME COURT] while dealing with the question of applicability of a subsequent amendment brought after the filing of the return of income has held that the law prevailing at the time of filing of the return has to be applied and the amendment which could not have been known before the Finance Act came into force cannot be applied for additional tax liability to be levied. It will amount to punishing the assessee for no fault of his. Law to be applied which is in force in the relevant assessment year unless and otherwise provided expressly or by necessary implication a clarificatory amendment by insertion of an explanation can be read into the main provision but if a change is brought in the exist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . was erroneous and which was liable to be cancelled, by deleting the addition by the ld.CIT (A), which was not done. Hence she erred. The addition may kindly be deleted. 3. That without prejudice to the ground no. 1 and 2 above, the ld. CIT (A) grossly erred in law and in facts in upholding levy of interest u/s 234B of the Act ignoring the submissions and legal position particularly when the amendment in statute was a retrospective charging amendment and the assessee has been denying completely its liability for such a charge of interest even if action of converting the Short Term Capital Loss into Long Term Capital Gain is upheld. 4. That in the facts and circumstances of the case, since the assessee had denied completely its liability to charge of interest u/s 234B, the ld. CIT (A) should have deleted the same cancelling the order of A.O. In not doing so, she has erred. 5. The appellant craves leave to add, alter, amend or delete the ground here in above taken on or before the hearing. 2. At the outset, we note that the appeal of the assessee was earlier decided by the Coordinate Bench of this Tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in nature. 13. We further note that contentions of the assessee regarding nonlevy of interest u/s 234B due to retrospective amendment, though noted by the Coordinate Bench, has apparently missed its attention and the ground of appeal has been dismissed holding it as consequential in nature in view of deletion of ground relating to cost of acquisition. 14. In light of above discussions, we consider it appropriate that the decision rendered by the Coordinate Bench be recalled in its entirety and the matter be heard afresh. We accordingly recall the order passed by the Coordinate Bench in ITA No. 428/JP/2013. The Registry is directed to fix the matter for hearing in due course. Thus the appeal was again placed before us for hearing and adjudication. Ground Nos. 1 2 are regarding the addition of capital gain arising from sale of immovable property by considering the cost of acquisition as in the hand of the predecessor partnership firm which was succeeded by the assessee. 3. The assessee is a private limited company and engaged in the business of trading of shares and commodities. The ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 12,75,183/-. On such revaluation of the asset, the firm transferred the differential amount to a capital reserve account prior to the business of the firm was taken over by the assessee company. Therefore, the assessee company has recorded the cost of acquisition of the land in question at ₹ 3,70,00,000/- being a part of purchase consideration. Thereafter the said land was sold by the assessee for a consideration of ₹ 2,00,00,000/- on 15.05.2008 and claimed short term capital loss of ₹ 1,81,62,525/-. The ld. A/R has submitted that the ld. CIT (A) has taken the cost of acquisition at ₹ 2,50,000/- being the cost of acquisition in the hands of partnership firm by applying the deeming provisions of section 49(1)(iii)(e) of the Act. He has pointed out that clause (e) to section 49(1)(iii) has been inserted by the Finance Act 2012 though with retrospective effect from 1st April, 1999. However, the said provision was not in the Statute at the time of filing the return of income or even at the time of passing the assessment order. Therefore, the subsequent amendment made in the provisions of section 49(1)(iii) cannot be applied to a transaction or in resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alued the asset and particularly the land in question from ₹ 2,50,000/- to ₹ 3,70,00,000/- and the differential amount was transferred to the capital reserve. Therefore, the entire transaction of revaluation and taken over of the assets and liabilities by the assessee company is only paper transaction and not the real transfer of the land against the consideration. He has relied upon the orders of the authorities below. He has further submitted that when there is no basis of valuation shown in the books, then the original cost of acquisition has to be taken into consideration for the purpose of computing the capital gain arising from the sale of the land in question. There is no dispute that the assessee has taken over the assets and liabilities of the erstwhile partnership firm under succession and, therefore, the deeming provisions of section 49 are applicable in the case of the assessee so far as the cost of acquisition of the land is concerned. He has further submitted that the amendment of sub clause (e) of clause (iii) of section 49(1) was retrospective from 1st April, 1999 and it is expressly stated by the legislature while bringing the amendment in the Statute. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fect was clarificatory and not substantive in nature. The AR of the appellant has submitted that the cost could not have been determined u/s 49(1)(iii)(a) which has been done by the AO but should have been done u/s 49(1)(iii)(e). First of all, it is a presumption that the cost worked out by the AO is u/s 49(1)(iii)(a) and not u/s 49(1)(iii)(e) because the assessment order is completely silent regarding the section under which the cost of the property has been worked out. Therefore, the AR of the appellant is making a presumption that the cost of the property has been worked out u/s 49(1)(iii)(a). The Hon ble ITAT in the case of Ishrawati Devi V/s ITO (2008) 298 ITR (AT) 313 (Allahabad) has held that the CIT (A) has powers coterminous with the Assessing Officer. The Commissioner (Appeals) can direct the Assessing Officer to do what the latter failed to do. Unless there are specific fetters placed upon the powers of the Commissioner (Appeals) by express words, he exercise the same powers as does the original court or authority. In fact, the entire assessment is thrown open before him. He can travel outside the record, i.e., the return made by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (xiii) and clause (xiv) of section 47 within the scope of section 49 which deals with cost with reference to certain modes of acquisition. This amendment will take effect retrospectively from 1st April, 1999 and will, accordingly, apply in relation to the assessment year 1999- 2000 and subsequent assessment years. Thus it is clear that since the transfer of capital asset by a firm to the company as a result of succession of the firm by the company falls under section 47(xiii) was not covered by the pre amended provisions of section 49 of the Act, and therefore, to bring the nature of transfer as provided under section 47(xiii), the amendment was brought into Statute whereby sub-clause (e) to section 49(1)(iii) was inserted. In the absence of this amendment, the case of transfer falling under section 47(xiii) was outside the ambit of mischief of deeming fiction of section 49 of the Act. Therefore, the purpose of the amendment was to bring all these cases in the ambit of deeming fiction as provided under section 49 of the Act. It is also not in dispute that at the time of filing the return of income on 30th September, 2009 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nion of India [1957] 31 ITR 565 are apt : . . . A humane and considerate administration of the relevant provisions of the Income-tax Act would go a long way in allaying the apprehensions of the assessees and if that is done in the true spirit, no assessee will be in a position to charge the revenue with administering the provisions of the Act with 'an evil eye and unequal hand'. 12. We uphold the view expressed by the Calcutta High Court. Keeping in view the principles laid down by this Court it has to be held that in the circumstances of the present case, levy of additional tax taking into account the income by way of cash compensatory support is not warranted. The question is answered in the affirmative, i.e., in favour of the assessee and against the revenue. The appeal is, accordingly, dismissed with costs. Thus the Hon ble Supreme Court has held that the law prevailing at the time of filing of the return has to be applied and the amendment which could not have been known before the Finance Act came into force cannot be applied for additional tax liability to be levied. It will amount to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be held that the 1999 Explanation to section 9(1) (ii) were applicable to the facts of the present case, it is doubtful whether in the facts of this case the activity of the employees in the UK could be said to be rest period or leave period within the meaning of the words in clause (b) of the 1999 Explanation. However, it is not necessary to decide the issue as we are satisfied that the 1999 Explanation would not apply to the assessment years in question. It is clear from the amendment brought into Statute that this amendment was not brought to clarify the existing provision but a new clause is added which creates a tax liability by itself. Further, the assessee has filed the return of income as per the provisions of Act prevailing at that time and, therefore, the subsequent amendment by Finance Act 2012 cannot be applied on the return of income filed prior to the said amendment. When the said amended provision was not in the Statue at the time of filing of return by the assessee, then this amendment in provisions of section 49(1)(iii)(e) though with retrospective effect cannot be applied in this case. The assessee cannot be asked to perform an impossibl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after that date though made during the currency of the assessment year, unless specifically made retrospective, does not apply to the assessment for that year. 38. When we examine the insertion of proviso in Section 113 of the Act, keeping in view the aforesaid principles, our irresistible conclusion is that the intention of the legislature was to make it prospective in nature. This proviso cannot be treated as declaratory/statutory or curative in nature. There are various reasons for coming to this conclusion which we enumerate herein below: Therefore, retrospective operation of a law should not be given so as to effect, alter or destroy an existing right and to create a new liability or obligation. The Hon ble Supreme Court again in case of CIT vs. Walfort Share Stock Brokers (P) Ltd., 326 ITR 1 has dealt with this issue of retrospective amendment in para 20 as under :- 20. The real objection of the Department appears to be that the assessee is getting tax-free dividend; that at the same time it is claiming loss on the sale of the units; that the assessee had purposely and in a planned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the argument of the Department is to be accepted, it would mean that before 1-4-2002 the entire loss would be disallowed as not genuine but, after 1-4-2002, a part of it would be allowable under section 94(7) which cannot be the object of section 94(7) which is inserted to curb tax avoidance by certain types of transactions in securities. There is one more way of answering this point. Sections 14A and 94(7) were simultaneously inserted by the same Finance Act, 2001. As stated above, section 14A was inserted with effect from 1-4-1962 whereas section 94(7) was inserted with effect from 1-4-2002. The reason is obvious. Parliament realized that several public sector undertakings and public sector enterprises had invested huge amounts over last couple of years in the impugned dividend stripping transactions so also declaration of dividends by mutual fund are being vetted and regulated by SEBI for last couple of years. If section 94(7) would have been brought into effect from 1-4-1962, as in the case of section 14A, it would have resulted in reversal of large number of transactions. This could be one reason why the Parliament intended to give effect to section 94(7) only with effect from ..... X X X X Extracts X X X X X X X X Extracts X X X X
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