S. 54EC benefit on investment after 6 month from transfer but within from payment receipt
Chanchal Kumar Sircar Vs. ITO (ITAT Kolkata)
The assessee has deposited the sale consideration within one month of receipt with NABARD for availing exemption u/s. 54EC of the Act. In such circumstances whether the assessee is eligible for claim of exemption or not ? In our view, in this type of case, the period of six months for making deposit u/s. 54EC of the Act should be reckoned from the dates of actual receipt of the consideration, because in the present case the assessee has received part payment as on the date of execution of agreement and handing over of possession of the property and received part payment after six months at the time of registration of sale deed or even after that in few of instances, as is evidently clear from the above chart at para 3 page 3 of this order. We are of the view that if the period is reckoned from the date of agreement and receipt of part payment at the first instance, then it would lead to an impossible situation by asking assessee to invest money in specified asset before actual receipt of the same.
Above view of ours is supported by the decision of Hon’ble Andhra Pradesh High Court in the case of S. Gopal Reddy Vs. CIT (1990) 181 ITR 378 (AP), wherein similar situation of delayed receipt of compensation amount on acquisition of property, Hon’ble High Court observed that if the investment in specified asset was made within a period of six months from the date of receipt of compensation, as against the date of acquisition of the property denoting transfer thereof, the same should be considered to be sufficient compliance for the purpose of claiming exemption u/s. 54E of the Act. Hon’ble High Court observed that a taxing statute or any other statute has to be construed reasonably and every effort should always be made to ascertain the intention of Parliament from the words employed and, as far as possible, an interpretation which leads to absurdity should be avoided. Though equity and taxation are often strangers, attempts should be made that these do not remain always so and if a construction results in equity rather than in injustice, then such construction would be preferred to the literal construction. The Hon’ble Court also observed that under the provisions of section 54E of the Act, what is to be invested in specified assets is “the consideration or any part thereof” and unless the consideration is received, or accrues, there is no question of investing it. The second proviso to sub-section (1) of section 54E inserted with effect from April 1, 1984, states that in the case of compulsory acquisition of property under a statute, if 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 sub-section (1) shall, in relation to so much of such compensation as is not received on the date of the transfer, be reckoned from the date on which such compensation is received by the assessee. It would be consistent with reason to construe this proviso as being merely clarificatory. In other words, the provision made by the second proviso to sub-section (1) of section 54E should be deemed to have prevailed even prior to April 1, 1984, i.e., with effect from the date of the enactment of section 54E of the Act.
In the present case before us, admittedly assessee received part payments after execution of agreement to sale and handing over of possession thereby completing the transaction in terms of section 53A of Transfer of Property Act but invested in specified bonds i.e. NABARD bonds within one month of the receipt of sale consideration being part payment. Hence, we are of the considered view that the assessee is eligible for exemption u/s. 54EC of the Act on part payment received after completion of transaction on 02.07.2004 and as detailed out in para 3 page 3 of this order. AO is directed accordingly. This issue of assessee’s appeal is allowed. Similar are the facts in ITA No. 1 146/Kol/201 1 in the case of Shri Chanchal Kr. Sircar, hence AO will allow exemption in this case also.
INCOME TAX APPELLATE TRIBUNAL, KOLKATA
I.T.A Nos. 1146/Kol/2011 – /Assessment Years: 2005- 06
Chanchal Kumar Sircar Vs. Income-tax Officer
I.T.A Nos. 1147/Kol/2011 – Assessment Years: 2005- 06
Chapal Kumar Sircar Vs. Income-tax Officer
Date of pronouncement : 21.02.2012
ORDER
Per Mahavir Singh, JM
These appeals by different assessees are arising out of separate orders of CIT(A)-XIX, Kolkata in Appeal No.172 &171/CIT(A)-XIX/ITO,Wd-32(1),Kol/10-1 1 vide dated 21.06.2011. Assessments were framed by ITO, Wd-32(1), Kolkata u/ss. 254/263/143(3) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for Assessment Years 2005-07 vide his separate orders, both dated 24.12.2010.
2. The only common issue in these appeals of assessee is against the order of CIT(A) confirming the action of Assessing Officer in disallowing exemption u/s. 54EC of the Act. We will take up the issue from ITA No.1147/K/2011 in the case of Chapal Kr. Sircar and decide the issue. For this, assessee has raised following effective ground nos. 2 to 7:
“2. On the facts and in the circumstances of the case, the lower authorities erred in failing to appreciate that law cannot compel anybody to do the impossible and that it was not possible for the appellant to invest any portion of the sale consideration in ‘long term specified asset’ before the same had actually been received by the appellant.
3. On the facts and in the circumstances of the case, the lower authorities erred in failing to appreciate that in case of ‘Deemed transfer’ of property under section 2(47)(v) of the Act involving full payment of the consideration amount in a spread-over manner, the date of transfer’, for the purpose of allowing time for investing the consideration amount in specified assets, should be considered to be the actual date of receipt of each installment of the payment.
4. On the facts and in the circumstances of the case, the lower authorities erred in failing to appreciate that the appellant had duly deposited the amounts of installments of sale consideration received by him within a short period from the respective dates of such receipts and in that way, he had done everything possible on his part to comply with the requirements of section 54EC of the Act.
5. On the facts and in the circumstances of the case, the learned CIT(A) erred in not taking into consideration the various judicial decisions as cited before him.
6. On the facts and in the circumstances of the case, the learned CIT(A) erred in confirming the assessment of Long Term Capital Gains of Rs. 10,47,745/- in the hands of the appellant.
7. Without any prejudice to above and having regard to the fact that the learned CIT(A) has held that ‘deemed transfer’ of portions of building under consideration had taken place during the year under appeal only in respect of the three flats in the 1st floor of the building to Paschim Banga Ganatrantik Mahila Sainity (Zila Committee), Paschim Banga Ganairantik Mahila Samily (State Committee) and Eksathe, the learned CIT(A) erred in not giving any credit in respect of the deposit of Rs.30,00,000/- made with NABARD on 27.08.04.”
3. Briefly stated facts of the case are that assessee filed his return of income for the relevant assessment year 2005-06 on 12.07.2005. Assessment was framed u/s. 143(3) of the Act dated 24.12.2007 assessing the total income of the assessee at Rs. 3,51,600/-. Assessment order was revised by CIT, Kolkata u/s. 263 of the Act vide order dated 10.08.2009 directing the Assessing Officer to frame fresh assessment because as per him the assessment order is erroneous and prejudicial to the interest of revenue in allowing excess exemption u/s. 54EC of the Act from the capital gains earned by assessee. The revision order framed by CIT u/s. 263 of the Act was upheld by ITAT vide its order dated 02.01.2010 in ITA No.1705/K/2009. The Assessing Officer passed consequential order in consequence to revision order passed by CIT u/s. 263 of the Act for the present assessment. In the present assessment, facts are that assessee Shri Chapal Kr. Sircar and his brother Shri Chanchal Kr. Sircar were the joint owners of the house property at 114 Eliots Road, Kolkata-16. This property was demolished and in its place both brothers constructed house with ground plus three storied building jointly during the period 1993-94 relevant to assessment year 1994-95 at a total cost of Rs.61.26 lacs. This is an admitted position as assessment was framed in both the cases u/s. 147 r.w.s. 143 of the Act for Assessment Year 1994-95 and 1995-96. Out of the above three floors, the entire first floor was sold in three parts to the following:
i) Ganatrantik Mahila Samity,
(ii Kolkata Ganatrantik Mahila S amity and
(iii) Eksathe
These were sold by way of separate agreements all dated 02.07.2004 and sale deed was registered at a value of Rs. 49,09,470/-, Rs. 12,60,950/- and Rs. 13,26,826/- respectively. The total sale consideration of the entire first floor was at Rs. 74,97,246/-. Further, the entire second floor of the building excluding two rooms were sold to Communist Party of India (Marxist) by another agreement for sale dated 01.07.2004 at the value of Rs. 56.80 lacs. This agreement was not registered as sale deed or it was not a registered agreement. The other portions of the property were retained by these two brothers for their residential premises. The ground floor was for common car parking space. The assessee and his brother received part payments from the parties [as per details below] and possession of the respective flats was also handed over to the parties simultaneously. Almost immediately after the receipt of the said payments, they were fully deposited with NABARD in terms of the requirement u/s 54EC of the Act, as the details given below would establish.
G. M. Samity
Amount (Rs.)
