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TMI Blog1989 (4) TMI 26X X X X Extracts X X X X X X X X Extracts X X X X ..... ate of the transfer. Award was passed on July 17, 1978, but, for reasons which are not clear, the notice of the award was given only on August 1, 1980, to the assessee. Compensation was received by him on August 19, 1980. The assessee got Rs. 66,605.13 as his share. On February 7, 1981, he invested a sum of Rs. 50,000 out of the said compensation in a fixed deposit in the Bank of, Baroda and claimed relief under section 54E(1) for the amount deposited. The assessee's case was that inasmuch as he received the compensation only on August 19, 1980, the deposit made by him on February 7, 1981, is within six months of the receipt and, hence, he is entitled to the benefit of section 54E(1). The Income-tax Officer rejected the said claim on the ground that the deposit was not made within six months, from the date of the transfer, i.e., January 10, 1978. His view was confirmed on appeal by both the appellate authorities, whereupon the present reference was obtained by the, assessee. The assessment year concerned herein is 1978-79. Section 54E was introduced by the Finance (No. 2) Act of 1977. Sub section ( 1 ), in so far as it is relevant, read as follows at the relevant time "54E. Cap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of the original asset is by way of compulsory acquisition under any law and the full amount of compensation awarded for such acquisition is not received by the assessee on the date of such transfer, the period of six months referred to in this sub-section shall, in relation to so much of such compensation as is not received on the date of the transfer, be reckoned from the date immediately following the date on which such compensation is received by the assessee". Learned counsel submits that this proviso is merely clarificatory in nature ; that even prior to April 1, 1984, the very same position obtained and that, according to the said position, the period of six months should be computed from the date when the original, or enhanced compensation, as the case may be, is received. Mr. Ratnakar further submitted that section 54E confers a benefit upon the assessees ; it goes to reduce the burden of tax. In such a, case, he says, the provision should be construed liberally and beneficially. It should be construed in a reasonable manner, which means, according to learned counsel, avoiding a situation where the law would be asking an assessee to do the impossible. On the other han ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oluntary transfer and it is important to stress this aspect. The property of the assessee was acquired compulsorily by the State in exercise of its power of eminent domain. Possession of the property was taken before the award was passed and it is the common case of the parties that the date of the transfer is the date on which possession of the property was taken, i.e., January 10, 1978. But, the assessee was not paid a single pie on that date or within six months thereof Compensation was paid to him only on August 19, 1980, i.e., more than 2% years later. If sub-section (1) of section 54E is construed literally, the assessee ought to have deposited the consideration within six months of January 10, 1978, if he wanted to avail of the benefit provided by the said provision. But it was impossible for the assessee to do so, because he was not paid, the compensation on the date of the transfer or within six months thereof The law could not have contemplated that the assessee, if at all he wanted to take advantage of the said provision, should invest some other amount/income in the specified asset. After all, what is, to be invested is the consideration received by the assessee and not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proviso does not apply to voluntary acquisition, but only to compulsory acquisition under a statute. The reason is obvious. The owner of the property has no, choice in the matter ; he has no choice in the matter of acquisition, nor has he any choice in the matter of receipt of compensation. All that he has to do is to receive the compensation awarded by the Land Acquisition Officer, and if dissatisfied with it, fight for enhancement in accordance with law. In such situation, and for the further reason that what the law contemplates is investment of consideration in the specified asset, we are inclined to hold that in the case of compulsory acquisition, the period of six months should be reckoned from the date of receipt of compensation, as and when received. In other words, the provision made by the second proviso to subsection (1) should be deemed to have prevailed even prior to April 1, 1984, i.e., with effect from the date of enforcement of section 54 E. There was a controversy before us as to the very meaning of the second proviso to section 54E(1). The contention of learned standing counsel for the Revenue was that it is applicable only to enhanced compensation, but not to o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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