A.D. Jain, Judicial Member - This is an appeal filed by the Assessee for Assessment Year 2007-08 against the order dated 10.04.2012 passed by the CIT (A)-II, Dehradun, taking the following grounds:-
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Because the learned authorities below were not justified in not granting exemption on the investment made in REC Bonds on 13th July, 2007. |
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Because the learned Commissioner of Income Tax (Appeals)-II, Dehradun, failed to appreciate the fact that appellant is not disputing the delay in investment of Rs.50,00,000.00 in Rural Electrification Bonds, but the delay was beyond the control of the appellant viz., Non-availability of REC Bonds or any other Tax Saving Bonds at the relevant time. |
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Because the learned first appellate authority failed to appreciate the fact that the new series of REC Bonds was introduced in the market on 1st July 2007 only and this appellant invested the sum of Rs.50,00,000.00 in these Bonds on 13.07.2007. |
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Because the learned first appellate authority has referred to the CBDT instruction F.No.142/09/2006/TPL dated 30.06.2006 which applies to transactions completed upto 30.06.2006 while this appellant sold his property on 10th November, 2006 much after that date. |
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Because the learned first appellate authority also failed to appreciate the fact that during the intervening period the sale proceeds of land were kept in a cooperative bank and were not utilized or spent in any manner. |
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Because in any view of the matter the finding of the learned first appellate authority are wrong and not sustainable at law and are liable to be set aside and the appeal of this appellant needs to be allowed." |
2. The facts are that the Assessing Officer made the addition observing that the assessee's proceeds from sale of long-term capital asset ought to have been invested in specified securities/assets within six months of the receipt of such consideration and that the same had, however, been invested by the assessee beyond this specified time limit. The property had been sold on 10.11.2006. On this very date, the amount of consideration had been deposited in the bank account. Thereafter, specified bonds of M/s REC were applied for by the assessee on 13.07.2007 and the same were allotted to the assessee on 31.07.2007. This being beyond the time limit of six months provided u/s 54EC (1) of the IT Act, the claim of the assessee was rejected by the Assessing Officer.
3. By virtue of the impugned order, the Ld. CIT (A) dismissed the assessee's appeal, observing, inter alia, that Section 54EC of the Act does not provide for any discretion for allowing extended time periods due to any exigency whatsoever. The Ld. CIT (A) placed reliance on Chanchal Kumar Sirear v. ITO [2012] 50 SOT 289/18 taxmann.com 304 (Kol.), wherein it has been held that the six months period is to be reckoned from the date of actual receipt of consideration. Yahya E Dhariwala v. Dy. CIT [2012] 49 SOT 458/17 taxmann.com 159 (Bom.) was also referred to. In this case, 'month' has been defined to mean six months from the end of the month in which the consideration was received. Further, the Ld. CIT (A) made reference to CBDT Instruction dated 30.06.2006 and observed that this Instruction was issued to mitigate any hardship arising out of change in law, by extending the time period of investment, and that this very Instruction indicates new series of Bonds issued by both the specified agencies, which shows that investment options were available to the assessee within the time frame allotted under the Act, which options were not availed of, for whatever reason.
4. Aggrieved, the assessee is in appeal before us.
5. Challenging the impugned order, the ld. counsel for the assessee has contended that exemption has not been granted to the assessee on the investment made in REC Bonds on 13.07.2007; that the Ld. CIT (A) failed to appreciate that the delay in the investment was beyond the control of the assessee, since neither the REC Bonds, nor any other Tax Saving Bonds were available at the relevant time; that the new series of REC Bonds was introduced in the market only on 01.07.2007 and the assessee made the investment in these Bonds on 13.07.2007; that the Ld. CIT (A) has erred in applying CBDT Instruction F. No.142/09/2006/TPL dated 30.06.2006, inasmuch as the said Instruction does not apply to the facts of the assessee's case, rather, it applies to transactions completed upto 30.06.2006; that in the assessee's case, the property had been sold on 10.11.2006, i.e., much after 30.06.2006, the date relevant to the aforesaid CBDT Instruction; and that the Ld. CIT (A) has also erred in not appreciating the fact that in the interregnum, the sale proceeds of the land were kept by the assessee in a Cooperative Bank and were not utilized or spent in any other manner. The ld. counsel for the assessee has placed reliance on CIT v. Cello Plast [2012] 209 Taxman 617/24 taxmann.com 111 (Bom.), a decision rendered by the Hon'ble Mumbai High Court on 27.07.2012 in ITA No.3731 of 2010 (copy is placed on record).
6. The Ld. DR, on the other hand, has placed strong reliance on the impugned order. It has been contended that the assessee has remained unable to rebut the perfectly valid observations made by the Ld. CIT (A) to the effect that investment options were indeed available to the assessee in the period allowed under the Act and that the assessee did not, for reasons best known to the assessee himself, did not avail of such options. It has been submitted that undeniably, as correctly observed by the Ld. CIT (A), no discretion is available for condoning the delay in investment, on whatever grounds; and that therefore, there being no merit whatsoever therein, the appeal filed by the assessee be ordered to be dismissed, while upholding the well reasoned order passed by the Ld. CIT (A).
7. We have heard the parties and have perused the material on record. Section 54 EC (1) of the Act provides for capital gain not to be charged on investment in certain Bonds, where the capital gain arises from the transfer of a long-term capital asset and the assessee has invested the whole or any part of such capital gain in the Bonds within a period of six months after the date of such transfer.
8. The transfer of the long-term capital asset, i.e., land, took place on 10.11.2006. Thus, going by the provisions of Section 54EC (1) of the Act, in order to avail exemption thereunder, the investment in Bonds ought to have been done by 10.05.2007. However, the assessee made application for allotment of Bonds on 13.07.2007. The amount was credited in the bank account on 18.07.2007. The Bonds were allotted to the assessee on 31.07.2007. Thus, the investment was made only on 18.07.2007, incurring a delay in such investment.
9. The stand of the assessee all through has been that the Scheme of Rural Electrification Bonds was opened to the public only on and from 01.07.2007 and that the assessee applied for such Bonds on 13.07.2007, within 13 days of the Scheme being offered to the public and the money was paid through cheque on 18.07.2007. The delay, thus, according to the assessee, was beyond his control.
10. In 'Cello Plast' (supra), availability or otherwise of the REC Bonds upto 03.08.2006 has been found to be proved by documentary evidence in the shape of REC's letter dated 10.04.2008, as filed by the assessee before the Assessing Officer (Table in para 10 of the judgement). In the present case, the relevant period for which the availability of the REC Bonds is to be seen, is from 11.11.2006 to 18.07.2007. So, the non-availability of the REC Bonds for the period from 01.02.2007 to 18.07.2007 needs to be proved with documentary evidence. Further, by way of ground of appeal No.2 taken before us, as before the Assessing Officer (fourth page, last para of the assessment order), the assessee has stated that the Scheme of REC Bonds was opened to the public only on 01.07.2007.
11. In keeping with 'Cello Plast' (supra), the non-availability of the REC Bonds for the claimed period needs to be proved by documentary evidence. In that case, a specific factual finding was recorded regarding the availability and non-availability, respectively, of the REC Bonds during the period involved therein. Now, if the present case is to be considered at parity with 'Cello Plast' (supra), a similar specific finding of fact regarding non-availability of REC Bonds for the period from 01.02.2007 to 18.07.2007 requires to be recorded. This aspect has remained from being examined. The Assessing Officer rejected the assessee's claim by merely stating that there was no force in the assessee's contention that he had to wait for the issuance of the REC Bonds. The relevant portion of the Assessing Officer's order reads as follows:-
"Assessee's contentive (sic contention) is accepted on the legal platform as regards his reply to wait electrical bonds option scheme is totally devoid of any legal force. Since such type of the schemes in which the investment have been made exempted by the Government of India is consistent and recurring in nature appear remained in force for a certain period and closed down after a certain period this is more of less cyclic in chain. The provisions u/s 54EC simply propounded a certain period of making the investments. It has not provided any scope for any event or contingencies. Provision of 54EC runs as below:"
12. It appears from the Assessing Officer's aforesaid observations, that though he did not contradict the delay in the purchase of REC Bonds, such delay was not contemplated by the provisions of Section 54EC of the Act.
13. The Ld. CIT (A), it is seen, has also not taken this aspect into consideration.
14. On consideration of the above conspectus of the case, we deem it proper to remit this matter to the file of Assessing Officer to be decided afresh in accordance with law, particularly keeping in mind the decision in 'Cello Plast' (supra), on determining as to whether the REC Bonds were or were not in fact available during the period from 01.02.2007 to 18.07.2007. This determination shall be enabled by documentary proof to be furnished by the assessee. The assessee shall be afforded adequate opportunity of hearing in this regard.
15. In the result, for statistical purposes, the appeal of the assessee is treated as allowed.