9911796707
TMI Blog1988 (4) TMI 100X X X X Extracts X X X X X X X X Extracts X X X X ..... of the utilisation of the net consideration of Rs. 63.52 lakhs which have been reproduced in the assessment order and are as under : "Details of re-investment of Sale Proceeds of Rs. 63.52 lakhs : Period (A) 7-4-1981 to 25-5-1982 Loan to Shri Bhagirath Murarka, 7, Lyons Range, Calcutta. Rs. 15,00,000 (B) 31-3-1981 to 31-5-1981 Fixed Deposit with Bank. Rs. 31,75,000 10-4-1981 to 31-5-1981 -do- Rs. 17,25,000 ------------- Rs. 49,00,000 ------------- Rs. 64,00,000 (C) Out of Rs. 49,00,000 used as under : 1-6-1981 to 15-6-1981 Fixed Deposit with Bank Rs. 10,00,000 1-6-1981 to 15-7-1981 -do- Rs. 20,00,000 1-6-1981 to 29-8-1981 -do- Rs. 5,00,000 1-6-1981 to 8-10-1981 -do- Rs. 4,00,000 ------------- Rs. 39,00,000 2-6-1981 Fixed Deposit with Indian Hotels Co. Ltd., Taj Mahal, Bombay-400039 2-6-1981 to 1-6-1982 (1 year) Rs. 10,00,000 ------------- Rs. 49,00,000 ------------- (D) (Out of Rs. 39,00,000 used as under:) 18-6-1981 to 17-6-1982 Fixed Deposit with Mafatlal Fine Spg. & Mfg. Co. Ltd., Mafatlal Centre, Nariman Point, Bombay - 400021. Rs. 10,00,000 Fixed Deposit with Sutlej Cotton Mills Ltd., 9/1 R. N. Mukherjee Road, Calcutta : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be considered that the same was "utilised for acquiring another capital asset". In that view, the IAC held that the utilisation of the sale proceeds would not satisfy the requirements of "acquiring another capital asset" and hence the benefit under section 11(1A) could not be availed of by the assessee. 5. Another point made by the IAC was that the provisions of the Explanation (2) to section 11(1) were not complied with. The assessee had stated that by letter dated 25-5-1981 they had exercised an option to apply a part of the income of the trust of the previous year relevant to the assessment year 1981-82 now under consideration in the immediately succeeding previous year, i.e., in the previous year 1-4-1981 to 31-3-1982. According to the IAC, in this letter no amount to be applied was mentioned. Further, in the IT return filed for the assessment year 1981-82, the assessee-trust in column 9(ii) of the said return specified an amount of Rs. 2,89,970 as deemed to have been applied for charitable purposes out of the total income of Rs. 6,67,513 and the Annexure in Form 10B of the Auditor's report also showed application of income only to that extent. The profit on sale of inves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... He emphasised that the utilisation of the net consideration in acquiring the capital asset was to be within the previous year unless option was exercised under Explanation (2) to section 11(1) and this was not done and, therefore, the ITO had rightly denied the assessee the benefit under section 11(1A). The finding of the ITO in this regard was, therefore, upheld. 7. The assessee is in appeal before us. The learned counsel for the assessee Shri R. N. Bajoria submitted that the assessee was a public charitable trust and after adverting to the background which we have set out, highlighted that part of the sale proceeds were received this year and part next year and out of the net consideration a part found its way as investments as short-term deposits and was given as loans to private limited companies. In particular, with reference to the pattern of utilisation, the learned counsel submitted that on 31-3-1981, which date was the last day of the previous year relevant to the assessment year 1981-82 now under consideration, fixed deposits had been made with the bank of Rs. 31,75,000 for the period 31-3-1981 to 31-5-1981. He referred to certain instructions of the Central Board of Dir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see made a fixed deposit or a loan, the entire net consideration had been utilised for acquiring another capital asset because the pattern set out earlier showed that the entire net consideration was utilised for "acquiring another capital asset" because the pattern set out earlier showed that the entire net consideration was utilised for such purposes either in the previous year relent to the assessment year under consideration or in the subsequent previous year. At this stage, he stated that the question which arose was whether any period was prescribed for acquisition of a capital asset within the meaning of section 11(1A). He stated that section 11(1A) was a self contained code and no period had been prescribed for acquisition of a capital asset. Hence, even if the capital assets were acquired only in the next accounting year, as long as it was with him a reasonable time, it had to be considered that the net consideration had been utilised for acquiring another capital assets and hence under the provisions of section 11(1A) the amount should be deemed to have been utilised for charitable purposes. 8. If, on the other hand, it was considered that the utilisation had to be in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard, Trust Circle, Cal. on 26-5-1981. )" did not militate against the exercise of the option. He stressed that the plea of the assessee was twofold : (a) that the investment of the net consideration was exempt under section 11(1A). This is because it was in part IV of the return the assessee had shown "profit on sale of investment as per accounts Rs. 40,27,099 and it stated, in respect of reasons why the same was not taxable (see covering letter)". In the said letter dated 25-9-1981, it was stated as under: "We sold the shares of Joint Stock Companies held by us during the year ended 31-3-1981. The sale proceeds were utilised for acquisition of another capital asset. Accordingly no part of the sale proceeds will be liable to tax as capital gains. Profit on sale of investment as per accounts amounting to Rs. 40,27,099 has been shown in Part IV of the return." and (b) even if section 1(1A) was not considered to be a self-contained code, the assessee had exercised the option to make the balance investment in capital assets in the immediately succeeding previous year. 9. In reply the learned Standing Counsel for the Department Shri B. K. Bagchi submitted that what we have to first e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ositive act in the present case and no new capital asset had been got and, therefore, the requirement of "acquiring' was also not satisfied. In support, of this proposition reliance was placed on the decision of the Gujarat High Court in the case of CIT v. Aukash Nidhi [1986] 160 ITR 729. In other words, according to the learned Standing Counsel, the property, i.e., money, even when the fixed deposit or loan was made, remained the same, viz., money with the assessee, and the assessee was not divested of the title of such property i.e., money when the fixed deposit, etc., was obtained. 12. Finally, he submitted that it was not proved, even if the fixed deposit or the loans granted were held to be capital assets, which were acquired, that they were "held" wholly for charitable or religious purposes. Therefore, the learned standing counsel submitted that the deeming provisions of section 11(1A) were not applicable to the present case. 13. Dwelling on the contention that no time was prescribed under section 11(1A), which was the proposition canvassed for by the learned counsel for the assessee, the learned standing counsel submitted that even the assessee was at pains to submit that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tc. As long as an assessee came into possession of "another capital asset", he submitted, there was "acquisition" of such other capital asset. The mode or manner of acquisition thereof was not relevant. Though a banker may not be a trustee for the customer and may be legally a debtor, he stated that unlike in a current account, a fixed deposit was made to secure a return in the form of income. This was an investment. An investment was made in property and, therefore, "another capital asset" was "acquired", which was an income-yielding asset and which was entirely different from money which was kept idle, which would never have yielded any income. Therefore, the making of a fixed deposit was clearly acquisition of another capital asset, and the ratio of the decision of the Calcutta High Court in Khaitan and Co.'s case had no application. 16. AS far as making of the option was concerned, the learned counsel submitted that the letter dt. 25-5-1981 was filed within the time prescribed in Explanation (2) to section 11(1). The said Explanation did not prescribe any statutory form. Therefore, writing a letter in general terms satisfied the requirements fully. It was not necessary to spel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt to acquiring another capital asset within the meaning of section 11(1A). 20. We would proceed to decide the appeal before us with reference to the facts as ascertained and as are relevant with reference to the various contentions put forth before us. 21. In the present case, the sale price came to Rs. 63,52,565 of the shares which were sold. The amount "net consideration" within the meaning of the Explanation (iii) to sec. 11(1A) would be the same figure of Rs. 63,52,565 as no claim is made for any expenditure incurred wholly and exclusively i connection with such transfer which alone is deductible from the full value of consideration to arrive at "net consideration". At the juncture, we may state that the provisions of sec. 11(1A) were introduced by the Finance Act of 1971 with retrospective effect from 1-4-1962, i.e., the date of commencing of the Income-tax Act, 1961 to embody in the statute certain concessions which were given by administrative circulars, from time to time. (See in this regard Explanatory Notes contained in Circular No. 52 dated 30-12-1970 in Direct Taxes Circulars Vol. II from paras 73 to 78 at pages 424 of 426). The portion of the "net consideration" wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that a part of the income of the previous year relevant to the assessment year 1981-82 could not be applied for charitable purposes up to the end of the previous year and has been applied or would be applied a for the said purposes within the financial year ended 31-3-1982. The assesses also categorically stated that they were exercising the option provided for in the Explanation to sub-sec. (1) of sec. 11. There is no prescribed form for exercising this option alike where a notice is given under section 11(2) which has to be given in the prescribed manner and for which a rule a is prescrided, i.e., rule 17 which prescribe in its turn Form No. 10. Therefore, the option exercised in a letter form satisfies the requirements of the Explanation (2) to section 11(1). The provisions do not require quantification of the income not utilised to be mentioned while exercising the said option. Therefore, the letter of the 25th May. 1981 fully satisfies the requirements. The subsequent information given in Form No. 10 in terms of rule 17 in the form of the Audit Report, or what was stated in reply to the question whether the assessee had exercised the option under Explanation (2) to section 11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is court ruled in Ahmed G. H. Ariff's case was that even if the property in question is incapable of being sold in the open market, being a personal estate, in that event also the interest of the assessee has to be valued by the Wealth-tax Officer. In our opinion, the decision, of this court in Ahmed G. H. Ariff's case completely covers the issue under discussion." Therefore, if by making the fixed deposit there is an interest which a person can clearly hold or enjoy, then the fixed deposit is "property" and whether such property could be sold or not loss all relevance in determining whether it is property. The Wealth-tax Act requires the market value of property to be ascertained for then alone wealth-tax is leviable. Yet, in such cases, the Supreme Court held that even if the property was not saleable, a hypothetical market had to be assumed. The provision of section 11(1A) only require determination whether the net consideration was utilised in acquiring another capital asset. It is not necessary that if what is acquired is a capital asset, such asset should also be capable of sale, and further if sold, should be capable of resulting in a capital gain or loss. All that the sec. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is one of a debtor who is not bound to repay the amount before its due date. Some banks reserve to themselves the right to repay deposits before their maturity by giving due notice. This condition, along with others, is printed on the back to it, it governs the contract between the banker and his customer. In the absence of such a stipulation the banker cannot return a fixed deposit before the due date without the consent of his customer. The banker continues to be a debtor, even though the period fixed for the deposit has expired and the deposit is not withdrawn and although the banker may not allow interest after the deposit has matured for payment, he does not become a trustee for the customer of the funds so laying with him [Pearce v. Creswick [1843] 2 Hare 286 and Official Assignee of Madras v. Smith [1908] ILR 32 Mad. 68 followed in Subramaniam v. Kadiresan, 39 Mad 1081]. A third party has no right to claim the money deposited with a banker by giving notice to him. Such a notice does not create any liability on the part of the bankers. Payment of Fixed Deposits before due date. - In order to oblige their customers, bankers occasionally allow them to withdraw their fixed de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ided due notice of assignment is given to the bank, subject to such claims the bank may have against its depositor at the time of the receipt of the notice. In England a form of cheque is sometimes printed on the bank of a 'deposit receipt'. In such a case, if the conditions of the deposit, such as previous notice, etc., have been fulfilled the bank cannot. as between itself and the depositor, refuse to pay the amount to its holder [In re Mead [1880] 15 Ch. D. 651]. Payment to a person wrongfully dealing with even a signed deposit receipt, is no discharge to the bank, unless the depositor is stopped by his conduct from disputing such payment [Evans v. National Provincial Bank of England [1904] 13 T. L. R. 429], and the banker should, therefore, obtain a letter of authority from the customer before paying back a deposit to a person other than the depositor. Cheques not be Drawn Against Fixed Deposits - In the absence of an agreement, valid cheque cannot be drawn against a deposit account at all, if that is the only account of the customer with the bank. Bankers in England usually honour cheques, relying upon their lien or right of set-off, either of which right applies to a deposit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment in Avkash Nidhi's case, relied on, on behalf of the Revenue, explains the position in the case of a pledge and the rights of the pawnee. The ratio of the said judgment would not apply in determining the rights of an assessee who holds a fixed deposit. So also, the ratio of the judgment in India Cements Ltd.'s case has no application because that was a case where the assessee took a loan from a party and it was in that context held that taking of a loan would not result in the creation of an asset. 26. In the case of Smt. Denabai Boman Shah v. CED [1967] 66 ITR 385 (AP), while dealing with the ownership of NGP Notes, which was in issue in that case, held in joint names payable to either or survivor, it was observed by the Andhra Pradesh High Court at pages 387 and 388 as under :-" In an unreported decision of this Court in Neol Henry Crawshaw v. Thera John Robert, CCA No. 15 of 1960, dated December 2, 1965, to which one of us was a party, the nature of a joint account and as to the legal title thereto, was considered. We had observed in that case : 'It may be stated generally that, whatever may be the position of law as exists in England in respect of the theory of advancemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds "owned by him" were substituted for "held by him" by the Finance Act, 1975. The "bank deposits" are the "assets" referred to in sec. 5(1) (xxvi). For getting the exemption, the fixed deposit should have been "owned" by the assessee for at least six months ending with the relevant valuation date. Therefore, even a taxing statue, i.e., the Wealth-tax Act, which forms an integral part of the Direct Taxes Code, has recognised banking deposits as capable of being owned by a person. In sec. 54E of the Income-tax Act, 1961, there is reference to the net consideration being invested or deposited in any "specified" asset. In respect of transfers prior to 1st March, 1979, in terms of Explanation 1(vi), deposits in banks for a period of not less than three years were listed as "specified assets". Sec. 54E also refers to the cost of the net asset being equal to or less than the net consideration, etc. Therefore, the Income-tax Act also recobnises a "fixed deposit" to be an "asset" and speaks of such asset having a cost, etc. It can, therefore, be said that statutorily also in taxing statutes, fixed deposits in banks have been recognised as "property" which can be owned by a person. 27. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , though it must give was where the language of the statute is plain and unambiguous. This rule has been succinctly, and felicitously expressed in Crawford on Statutory Construction, 1940 Edn. where it is stated in paragraph 219 that "administrative construction (i.e., contemporaneous construction placed by administrative or executive officers charged with executing a statute generally should be clearly wrong before it is overturned; such a construction, commonly referred to as practical construction, although non-controlling, is nevertheless entitled to considerable weight, it is highly persuasiv". The validity of this rule was also recognised in Baleshwar Bagarti v. Bhagirathi Dass [1908] ILR 35 Cal. 701, 713, where Mookerjee, J. stated the rule in these terms : 'It is a well-settled principles of interpretation that courts in construing a statute will give much weight to the interpretation put upon it, at the time of its enactment and since, by those whose duty it has been to construe, execute and apply it.' and this statement of the rule was quoted with approval by this court in Deshabandhu Gupta & Co. v. Delhi Stock Exchange Association Ltd. [1979] 4 SCC 565; AIR 1979 SC 104 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 44 NE 2d 683, 684. The act of getting or obtaining something which may be already in existence, or may be brought into existence through means employed to acquire it. Ronnow v. City of Las Vegas, 57 Nev. 332, 65 p. 2d 133, 140. Sometimes used in the sense of 'procure'. It does not necessarily mean that title has passed. Included taking by devise. U. S. v. Merriam, 263, U. S. 179, 44 S. Ct. 69, 70 68 L. Ed. 240. See also Accession; Acquisition, Purchase." "Investment" is specifically included in the meaning of the word "acquire". It is, therefore, clear from this as also the other meanings of the word "acquire" as set out aforesaid that by placing money with the bank and making a fixed deposit, the assessee "acquired" a capital asset which is different from the money which the assessee originally had. 30. The share which sold were admittedly held for charitable purposed. Part of the sale proceeds were, as far as this year was concerned, utilised in the fixed deposits made of Rs. 31,75,000. These fixed deposits were held by the trust and it follows that they were so held which means they were held for charitable or religious purpose wholly. No further requirement is to be satisfie ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
