TaxTMI 
TaxTMI 
2023 (12) TMI 549
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.... 2. The petitioner had computed capital gains as per Section 50B of the Income Tax Act, 1961 as the petitioner opted for 'slump sale'. The petitioner has approached this Court for a writ, order or direction in the nature of mandamus commanding the first respondent i.e. the Union of India to notify 'long term specified assets' for availing capital gains exemption under Section 54EE of the Income Tax Act, 1961 with appropriate extension of time period under Section 54EE and Explanation-2 therein or any such appropriate manner known to law. 3. Section 54EE allows capital gains exemption upto a limit of Rs. 50 lakhs provided the capital gain proceeds are invested by the assessee in the long term specified assets notified under Section 54EE for a minimum period of 3 years. For ready reference, Section 54EE is extracted hereunder: Capital gain not to be charged on investment in units of a specified fund. 54EE. (1) Where the capital gain arises from the transfer of a long-term capital asset (herein in this section referred to as the original asset) and the assessee has, at any time within a period of six months after the date of such transfer, invested....
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....ny long-term specified asset, means the amount invested in such specified asset out of capital gains received or accruing as a result of the transfer of the original asset; (b) "long-term specified asset" means a unit or units, issued before the 1st day of April, 2019, of such fund as may be notified by the Central Government in this behalf. 4. The Explanation 2(b) of Section 54EE defines a 'long term specified asset'. Thus, under the said definition, unit(s) should have been issued before Ist day of April 2019 of such funds, as may be notified by the Central Government in this behalf. Total investment in unit(s) in the specified fund allowable is upto 50,00,000/- only. Thus, unless the Central Government would have notified the 'fund' for investment of the sale proceeds upto Rs. 50,00,000/-, and investment would have been made before Ist April of 2019 in such a 'fund', notified by the Central Government, an assessee would not be entitled to claim exemption from capital gains. Admittedly, despite the said provision having been brought into statute by Finance Act, 2016 with effect from Ist April 2017, the Central Government had not notified the &#....
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.... submitted that the Hon'ble Minister of State (Independent Charge) of the Ministry of Industry and Commerce, on 17th July, 2017 during Lok Sabha question and answer session clarified regarding setting up of fund(s) for a start up and the key provision regarding tax exemption of capital gains under Section 54EE. The relevant part of the answer to the question given by the Minister is extracted hereunder : viii. Fund of Funds for Startups with a corpus of INR 10,000 crores managed by SIDBI has been created, to be released by SIDBI by 2025. So far, SIDBI has committed INR 623.5 cr. to 17 AIFs under FFS. Out of this, Rs. 55.00 crore has been disbursed and a total investment of INR 252.20 cr. has been made in Startups. .............. x. Key tax exemptions and regulatory benefits have been provisioned for Startups, including Income Tax Exemption for 3 years out of a block of 7 years, Tax Exemption on Capital Gains (Section 54EE), Tax exemption on Investments made in Startups above Fair Market Value. 8. The learned counsel for the petitioner has submitted that the purpose of insertion of Section 54EE in the Income Tax Act introduced by Finance Act, 2016 i....
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....der Section 54EE, the petitioner's interest would adversely get affected and therefore, the Central Government is estopped from resiling from publicly stated position on the applicability of capital gain exemption under Section 54EE of the Act. The Central Government is estopped from denying the benefit of Section 54EE by failing to notify long term specified asset under Section 54EE. The failure of the Central Government to notify long-term specified asset had prejudiced the petitioner and caused irreparable harm and injury. The outer limit of six months for investing capital gains proceeds in 'long term specified assets' in the case of the petitioner under Section 54EE got expired on 25th June 2019. 9. The learned counsel for the petitioner, in alternate, has submitted that if the principle of promissory estoppel is not applicable in the facts of the present case, atleast the petitioner had legitimate expectations of notifying the long term specified assets before Ist April 2019 and the petitioner has acted upon such expectation in as much as he has arranged his tax liability keeping in mind that the Central Government would notify the long term specified asset for....
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....um period of three years. Despite the said provisions, the Government did not notify the 'long term specified asset/fund' for investment of capital gains arising from the transfer/sale of a long term capital asset. The reasons for not notifying the 'long term specified asset'/fund by the Central Government is in the domain of fiscal policy and prudence, this Court would not like to go behind the reasons for not notifying the fund/long term specified asset. This is the domain of the executive and matter of policy decision. The Court should not enter into the area of making fiscal policy, and the decision taken in this regard. If the Central Government has not notified the scheme/fund under Section 54EE, it cannot be said that such a decision is arbitrary. A provision may or may not be given effect to in the wisdom of the executive for giving effect to the necessary notification would be required to be issued. Therefore, it cannot be said that since Section 54EE though has been kept alive but has not been given effect to by not notifying the 'long term specified asset/fund', the Central Government has acted arbitrarily. In view thereof, I do not find much subs....
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....ve action. It is entirely different from judicial review of a legislative action. 34. According to de Smith (Sunley A. de Smith, Judicial Review of Administrative Action (Stevens, 1973), the following legal consequences flow from the aforesaid distinction: 34.1. If an order is legislative in character, it has to be published in a certain manner, but it is not necessary if it is of an administrative nature. 34.2. If an order is legislative in character, the court will not issue a writ of certiorari to quash it, but if an order is an administrative order and the authority was required to act judicially, the court can quash it by issuing a writ of certiorari. 34.3. Generally, subordinate legislation cannot be held invalid for unreasonableness, unless its unreasonableness is evidence of mala fides or otherwise shows the abuse of power. But in case of unreasonable administrative order, the aggrieved party is entitled to a legal remedy. 34.4. Only in most exceptional circumstances can legislative powers be sub-delegated, but administrative powers can be sub-delegated. 34.5. Duty to give reasons applies to administrative orders but not....
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....ipal Corporation. Repelling the said submission, the Court held: 5...... In our opinion, this is a matter of policy for the elected representatives of people to decide and no direction in this regard can he issued by the Court. That apart this Court cannot issue any direction to the legislature to make any particular kind of enactment. Under our constitutional scheme Parliament and Legislative Assemblies exercise sovereign power to enact laws and no outside power or authority can issue a direction to enact a particular piece of legislation. In Supreme Court Employees Welfare Assn v. Union of India (1989(4) SCC 187), it has been held that no court can direct a legislature to enact a particular law. Similarly, when an executive authority exercises a legislative power by way of a subordinate legislation pursuant to the delegated authority of a legislature, such executive authority cannot be asked to enact a law which it has been empowered to do under the delegated legislative authority. This view has been reiterated in State of J&K v A.R. Zakki (1992suppl.1 SCC 548). In A.K. Roy v. Union of India's (1982(1) SCC 271) it was held that no mandamus can be issued to enforce an....
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.... the press release as well as the answer to a question given by the Hon'ble Minister on the floor of Lok Sabha, the petitioner had arranged its tax liability accordingly and therefore, the Government of India was bound to notify the 'long term specified asset/fund' for investment of proceeds from sale of long term capital asset of the petitioner to an extent of Rs. 50 lakhs. By not notifying the long term specified asset/fund by the Central Government, the petitioner would suffer as he would not be able to get exemption from capital gain tax from sale proceeds of his long term capital asset to an extent of Rs. 50 lakhs. 17. If the provision of Section 54EE is scrutinised, it would be evident that the Government would have notified long term specified asset/fund for investment before Ist April 2019. In as much as the unit(s) in the fund notified by the Central Government ought to have been issued before Ist April 2019. The Central Government has not issued necessary notification for availing the benefit under Section 54EE. As the Government has not notified a 'long term specified asset or fund, can it be said that since, the Central Government held out a promise t....
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....ftment of milk producers, it would be inequitable to allow the State Government to resile from the decision to exempt milk from purchase tax and demand of purchase tax with retrospective effect from Ist April 1996 was set aside. 20. This judgment has been recently clarified in the case of Hero Motorcorp Ltd. v Union of India and others (supra). It has been held in the said judgment that general rule of doctrine of estoppel would not be applied against the Government except to prevent fraud and manifest injustice. In the Nestle India (supra), the respondent milk producers did not pay the purchase tax for the period between 1.4.1996 to 4.6.1997, as the Government had decided to abolish purchase tax for the said period and for the rest period tax was paid and therefore, the respondent's claim against recovery of tax for such period for which the Government had taken decision to abolish the said tax and also considering the fact that the respondents had passed on the benefit of exemption of purchase tax on the milk producers, the decision was rendered. 21. The Constitution Bench of the Supreme Court in the case of Ramanatha Pillai v State of Kerala (1973) 2 SCC 650 had held t....
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.... of promissory estoppel shall not be applicable. 27.3 In taxing matters, the doctrine of promissory estoppel as such is not applicable and the Revenue can take a position different from its earlier stand in a case with established distinguishing features. [See Commissioner of Central Excise, Bangalore-1 Vs. Bal Pharma Limited, Bangalore and Ors., (2011) 2 SCC 620]. 27.4 The rules of promissory estoppel and estoppel by conduct may not be applied to alter or amend the specific terms and against statutory provisions. All the terms and conditions contained in the exemption notification shall prevail and the person claiming the exemption has to fulfil and satisfy all the eligibility criteria/conditions mentioned in the exemption notification." 25. In paragraph-37 of the judgment in Augustan Textile Colours Ltd. v Director of Industries and another (supra) it is stated as follows: "While the equitable principle of promissory estoppel requires a valid promise, based on which the promisee has changed its position, it is necessary to observe that the principle of legitimate expectation does not take into account such considerations. Instead, it is rooted in fun....