TaxTMI 
TaxTMI 
2012 (9) TMI 796
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....on 147, which has been upheld by the CIT(A). Grounds No.2 & 3 relate to year of transfer of capital assets and the taxability of capital gain in the assessment year 2003-2004. In Ground No.4, the assessee has challenged the disallowance of deduction under Section 54EC. 3. The brief background of the case are that the assessee had entered into a development agreement in respect of jointly owned property with 'M/s Sej Developers' vide agreement dated 21-9-2002. The income from transfer of this property was offered for 'long term capital gain' tax by the joint co-owner, through Yogesh Mathuradas and Shri Janak Mathuradas in the assessment year 2004-2005, after the completion of various covenants/conditions stipulated in the agreement. The sale proceeds arising out of the transfer of capital asset, was invested in specified bonds and exemption under Section 54EC was claimed in the return of income and the same was duly accepted by the Assessing Officer in the order dated 16-12-2006 passed under Section 143(3) for the assessment year 2004-2005. For the assessment year 2003-2004,the assessee has filed his return of income on 30-3-2004 declaring the income of Rs..9,58,130/-, whi....
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....on that basis, the date of transfer falls in the assessment year 2004-2005, wherein capital gain has been offered. All the gains have been transferred to the capital assets, i.e. has been invested in specified bonds and exemption under Section 54EC was claimed which has been accepted by the Assessing Officer in the order passed under Section 143(3), in the assessment year 2004-05. Therefore, the reopening of the case for disallowance of part of the investment made in 54EC amounts to "change of opinion". Further objections with regard to non-service of notice under Section 148, 'reason to believe', that no income chargeable to tax has escaped assessment, were raised before the Assessing Officer. All these objections has been rejected by the Assessing Officer as per his finding given in the assessment orders. Finally, the Assessing Officer disallowed the claim of exemption under Section 54EC for an amount of Rs..47,00,000/- out of Rs..2,26,00,000/- in the following manner :- "6. In view of the detailed discussions given above, the year of chargeability of capital gains is the year in which the contract is executed and in the case of assessee, the date of agreement is 21.9.2002 whi....
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....r had taken place in the assessment year 2003-2004 as the full and final payment was made after 31st March, 2003. Various other arguments were also placed relying upon various judicial pronouncements in support of the contention that the conditions of Section 2(47)(v) was not fulfilled in the assessment year 2003-04. 6. Learned CIT(A) rejected all the contention of the assessee and after referring to various clauses of agreement and relying upon the decision of Hon'ble Jurisdictional High Court in the case of Chaturbhuj Dwarkadas Kapadia v. Commissioner of Income-tax, reported in 260 ITR 491, dismissed the assessee's appeal. The detail finding of the CIT(A) are given from para 8 to 8.3 of the appellate order. 7. Learned Senior Counsel appearing on behalf of the assessee submitted that the main issue involved here in this case is non-allowance of deduction under Section 54EC for sums amounting to Rs..47,08,000/-, which has been invested on 21.4.2003 and 26.4.2003, i.e beyond the period of 6 months from the date of transfer, which as per the Assessing Officer is the date of development agreement 21.9.2002. It was on this issue only that the reopening under Section 147 ha....
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....me was redeposited on 16.4.2003 and bonds were purchased immediately on 21.4.2003 & 26.4.2003 i.e. within the period of one month. In support of this argument he has heavily relied upon the decision of ITAT Kolkata Bench in the case of Chanchal Kumar Sircar, passed in ITA No.1146/Kol/2011, vide order dated 21.2.2012. 8. Per Contra, Learned Senior DR submitted that by the terms of builders/development agreement dated 21.9.2002, almost all the payments were received prior to 31st March, 2003 and hence there was a clear cut part performance by the parties in view of section 2(47)(v). Once the parties have acted upon, the terms of development agreement and full consideration has been paid, the date of transfer has to be taken from the date when the development agreement was entered into as all the rights vested in the property stood transferred to the developer. He also referred to the various clauses given in the agreement specifically Clause 18, 24 given at pages 31 and 33 of the builders' agreement. He also tried to distinguish the judgment of Geetadevi (supra) as have been relied by the learned AR and submitted that this case was purely distinguishable on the facts. On the other....
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.... of the section itself. Looking to this hardship in a similar situation, the CBDT vide circular No.791 dated 26.2.2000 has clarified applicability of the Section 45(2) read with section 54E, 54EA, 54EB & 54EC in the following manner :- CIRCULAR NO.791 Tax exemption on the sale of capital assets converted into stock-in-trade-Clarification regarding section 45(2) read with sections 54E, 54EA, 54EB & 54EC of the Income-tax Act, 1961. 02/06/2000 CAPITAL GAINS SECTION 45(2), 54E, 54EA, 54EB, 54EC Section 2(47) of the Income-tax Act provides that any conversion of capital assets into stock-in-trade shall be regarded as a transfer. This transfer arises in the year in which such conversion takes place and, accordingly, capital gain would normally arise in that very year. However, section 45(2) of the Act postpones the assessment of such capital gains to the year in which the stock-in-trade is actually sold or otherwise transferred by the assessee. 2. In order to qualify for deduction under Section 54E of the Act, the investment in specified assets were required to be made within six months from the date of transfer. A question had arises as to whether the date of trans....
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.... by the Apex authority like CBDT has a binding effect on the Income Tax authorities. In our considered opinion, this interpretation laid down by the CBDT regarding condition of making the investment within the period of six months from the date of receiving of money from transfer of capital asset under Section 54EC is correct and logical interpretation, which goes to support the claim of the assessee in the present case. Thus, exemption for sum of Rs..47,08,000/- would be applicable to the assessee on the investment made on 21.4.2003 and 26.4.2003 in the specified bonds/assets. 9.3 This view has also been taken by ITAT Kolkata Bench on almost similar situation in the case of Chanchal Kumar Sircar, reported in (2012) 16 ITR (Trib) 91 (Kol), wherein the ITAT after considering the judgment of Hon'ble Andhra Pradesh High Court in the case of S. Gopal Reddy Vs. CIT, reported in (1990) 181 ITR 378 (AP), Allahabad High Court Judgment in the case of CIT Vs. Janardhan Dass (late through legal heir Shaym Sunder), reported in (2008) 299 ITR 210 (All) and in the case of Darapaneni Chenna Krishnayya (HUF) Vs. CIT, reported in (2007) 291 ITR 98 (AP), had observed and held as under :- "9. I....