TaxTMI 
TaxTMI 
2008 (9) TMI 510
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....2007 : 4. The petitioner is a company incorporated under the Companies Act, 1956, engaged in the business of transmission and distribution including manufacturing relays, circuit breakers, power transformers, distribution transformers and switch gear (transmission and distribution business (T & D business). Earlier the petitioner company was also engaged in non T & D business comprising manufacture of industrial motors, pumps, fans and energy meters for a number of years. The name of the petitioner company until September 22, 2005 was Alstom Limited. The Areva group of com-panies acquired the T & D business of the Alstom group of companies world wide in January 2004. Areva T & D SA, France acquired in August 2005, the entire 66.35 per cent. share holding in the petitioner company which was earlier held by Alstom Holdings S. A. As per the SEBI Regulations, Areva T & D SA, France acquired further 1,19,445 shares and thus Areva T & D SA now holds 2,65,83,845 shares of the petitioner company. The ultimate parent company of the petitioner company, namely, Areva T & D SA is owned by the Government of France to the extent of 88 per cent. of the shareholding. After the take over, since ....
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....e said Noida authority granted permission to the petitioner to transfer the leasehold rights of the said property in favour of M/s. Bennett Coleman Company Limited by Transfer Memorandum No. 10271, dated November 17, 2006. The petitioner, by agreement dated December 21, 2006, has transferred the leasehold rights of the said property in favour of Bennett Coleman and Company for a total sale consideration of Rs.42.13 crores. Out of this, Rs. 41.63 crores was towards sale of land and Rs. 50 lakhs was towards sale of building. The capital gain arising out of the transaction worked out to Rs. 40,00,14,349 being the difference between the considerations. So the taxable capital gains for the assessment year 2007-08 worked out to Rs. 39,50,14,349. Both the petitioners decided to invest the capital gains in the bonds for the purpose of availing of the benefit of exemption under section 54EC of the Act. Section 54EC deals with capital gains not to be charged on investment in certain bonds. The benefit of tax exemption is only with respect of long-term capital gains invested in the bonds which are redeemable after three years and issued by the National Highways Authority of India or by the Ru....
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....r of judgments of the Supreme Court reported in CIT v. British Paints India Ltd., [1991] 188 ITR 44 (SC) ; [1992] Suppl. 1 SCC 55, K. T. Moopil Nair v. State of Kerala, AIR 1961 SC 552, State of Andhra Pradesh v. Nalla Raja Reddy, AIR 1967 SC 1458, New Manek Chowk Spinning and Weaving Mills v. Ahmedabad Municipality, AIR 1967 SC 1801, State of Kerala v. Haji K. Kutty Naha, AIR 1969 SC 378, Khandige Sham Bhat v. Agrl. ITO [1963] 48 ITR (SC) 21 ; AIR 1963 SC 591, R. L. Marwaha v. Union of India [1987] 4 SCC 31, S. K. Dutt, ITO v. Lawrence Singh Ingty [1968] 68 ITR 272 (SC); AIR 1968 SC 658, CIT v. B. C. Srinivasa Setty [1981] 128 ITR 294 (SC) ; [1981] 2 SCC 460 and Deepak Sibal v. Punjab University [1989] 2 SCC 145 to support their claim. 7. Learned counsel appearing for the respondents filed counter and denied the allegations and vehemently contended that the notification issued under section 54EC of the Income-tax Act, 1961, is not ultra vires the said provisions of section 54EC. It was further contended that section 54EC envisages the investor to invest the capital gains on sale of long-term capital assets in specified assets to be eligible to claim exemption. The F....
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....(53 of 1987), or by the Small Industries Development Bank of India established under sub-section (1) of section 3 of the Small Industries Development Bank of India Act, 1989 (39 of 1989)." 10. From a reading of the above, it is clear that "long-term specified asset" means any bond redeemable after three years and issued on or after April 1, 2000, by the National Bank for Agriculture and Rural Development established under section 3 of the National Bank for Agriculture and Rural Development Act, 1981, or by the National Highways Authority of India constituted under section 3 of the National Highways Authority of India Act, 1988, or on or after the 1st day of April, 2001, by the Rural Electrification Corporation Limited, a company formed and registered under the Companies Act, 1956, and on or after the 1st day of April, 2002, by the National Housing Bank established under sub-section (1) of section 3 of the National Housing Bank Act, 1987 (53 of 1987), or by the Small Indus-tries Development Bank of India established under sub-section (1) of section 3 of the Small Industries Development Bank of India Act. There is no limitation imposed for the purpose of the investment. Any amount....
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....ars) to be issued by the National Highways Authority of India constituted under section 3 of the National Highways Authority of India Act, 1988 (68 of 1988), during the financial year 2006-07 as 'long-term specified asset' for the purpose of section 54EC. S. O. 964(E). In exercise of the powers conferred by sub-clause (ii) of clause (b) of the Explanation to section 54EC of the Income-tax Act, 1961 (43 of 1961), the Central Government herby notifies the bonds for an amount of rupees four thousand five hundred crores (redeemable after three years) to be issued by the Rural Electrification Corporation Limited, a company formed and registered under the Companies Act, 1956 (1 of 1956), during the financial year 2006-07 as long-term specified asset for the purpose of the said section." 15. The Central Board issued another circular in F. No. 142/09/2006-TPL, dated June 30, 2006, extending the time limit for making investments under section 54EC of the Act, after taking into consideration of the representation as well as the non-availability of the capital gain bonds. In paragraph 6 of the circular reads as follows ([2006] 284 ITR (St.) 11) : "With a view to removing the hardship....
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....n No. S.O. 963(E), dated June 29, 2006, or Notification No. S.O. 964(E), dated June 29, 2006." 17. From a bare reading it is clear that notification is issued under the power conferred by sub-clause (ii) of clause (b) of Explanation to section 54EC of the Act. The Central Government further notifies the bonds to be issued by the Rural Electrification Corporation Limited during the period from 26th day of September, 2006, to 21st March, 2007, for an amount of Rs. 3,500 crores. The said bonds are considered as "long-term capital asset" for the purpose of section. The notification imposed two conditions : "(1) No more bonds will be issued to any person, if he has already made an investment of an amount aggregating more than Rs. 50 lakhs in the bonds already notified in Notification No. 963(E), dated June 29, 2006, or 964(E), dated June 29, 2006. (2) Persons not covered under the first condition, no person is allotted any bonds notified as 'long term capital asset' which exceeds 50 lakhs as reduced by the aggregate investment, if any, made by him in the bonds notified as 'long-term specified asset'. " 18. Aggrieved by these conditions, these writ petitions challenging the s....
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....n with such conditions including the condition for providing a limit on the amount of investment by the assessee in such bonds. It means that the Central Government can notify the conditions as it thinks fit. The proviso has also been inserted after clause (b) for the purpose of validating the bonds notified before April 1, 2007, under the provisions of clause (b) as they stood immediately before the amendment by the Finance Act. The said amendment takes effect retrospectively from April 1, 2006. By this amendment the impugned notification dated December 22, 2006, with conditions issued earlier, is deemed to be a bond notified under this amended provision. It is to be noted that another proviso was also inserted after sub-section (1) of section 54EC of the Act, which reads as follows : "Provided investment made on or after April 1, 2007, in the 'long-term specified asset' by the assessee during any of the financial year does not exceed Rs. 50 lakhs." 21. By this amendment by the Finance Act of 2007, the Central Government limited the investment made on or after April 1, 2007, in the specified long-term asset by the assessee during the end of the financial year to Rs. 50 lakhs....