TaxTMI 
TaxTMI 
2024 (11) TMI 644
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing the authorised representative of the assessee. Though brief, the assessing authority notes inter alia the claim of the assessee of short term capital loss and the verification carried out in that regard, that culminated in a minor addition. 3. The assessment order also contains a note making reference to an agreement between the seller and the purchaser that the seller/its affiliates shall not indulge in certain activities without the express prior written approval of the purchaser. The assessing authority states that subject to approval being granted by his superiors, the assessment for previous assessment year i.e., A.Y.2003-04 will be reopened for consideration of certain additions. 4. On perusal of the assessment records, the Commissioner of Income Tax (CIT) was of the view that the assessment was erroneous and prejudicial to the interests of the revenue and hence issued a show cause notice dated 24.09.2008 invoking the provisions of Section 263 of the Act. The proposal contained in the show cause notice dated 24.09.2008 for revision of assessment was based on the following aspects: 1. The agreed rental income of Rs.75,000/- was omitted to be assessed. 2. The claim o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e decisions of the ITAT. Overriding the explanations tendered, the CIT passed an order dated 27.01.2009, adverse to the respondent. 10. He proceeded on the basis that the investments in bonds had been made prior to the date of transfer and since the source of investments was from redemption of certain securities and not the advances received in connection with transfer, it was not entitled to exemption under Section 54EC. He distinguished the Circular that had been relied upon stating that that Circular had been issued in the context of Section 54E and not Section 54EC. 11. In addition, he stated that even assuming that the said Circular was applicable the fact remained that the investment had been made out of redemption of certain other securities and not out of the earnest money or advances in relation to the transfer. The Commissioner was thus of the view that the assessee had not established a nexus between the amounts invested in the bonds and the advances, particularly since the balance in the bank account immediately preceding the credit of the redemption from securities was only Rs.1,94,801/-. A direction was thus given to withdraw the deduction that had been granted unde....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... Sunbeam Auto Ltd. [(2010) 189 Taxman 436 (Delhi)] 4.Commissioner of Income-tax v. Future Corporate Resources Ltd. [(2021) 132 taxmann.com 173 (Bombay)] 5.Virtusa Consulting Services (P.) Ltd. v. Deputy Commissioner of Income Tax, Chennai [(2021) 128 taxmann.com 22 (Madras)] 6.Malabar Industrial Co. Ltd. v. Commissioner of Income-tax [(2000) 109 Taxman 66 (SC)] 7.Jeevan Investment & Finance (P.) Ltd. v. Commissioner of Income Tax, City-1, Mumbai [(2017) 88 taxmann.com 552 (Bombay)] 17. We have heard the rival contentions and had perused the case records. The assessee had circulated a copy of the agreement of sale which is part of the record and which is the subject matter of interpretation by the authorities. The relevant clauses are as follows: 1.6 'Completion' shall mean the completion of the sale and purchase in accordance with Clause 5 of this Agreement. 1.7 'Completion Date' shall mean the date on which the Completion occurs, as specified in Clause 4.3(b) of this Agreement, provided that such date shall be no later than 120 (one hundred twenty) days from the date of execution of this Agreement unless further extended by the mutual consent of the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ased to Sellers upon the expiry of 9 months from the date of the Agreement to Sell. 3.00 3.00 Total 10.25 0.75 13.00 24.00 19. This schedule reveals clearly that the date of receipt of advances is contemporaneous with the execution of the sale agreement that is dated 02.01.2003. The investments have been made only thereafter and hence it is clear that the source for the investments are the advances received from the purchasers. The respondent has also explained that the advances were initially deposited in mutual funds and the maturity amounts had been credited to its bank account from out of which the investment in bonds had been made. 20. The mere fact that the advances had been deposited in mutual funds would not, in our view, militate against the claim under Section 54EC as the investments in bonds had been made from out of the proceeds of the mutual funds. There is no dispute, rather it is admitted, that there were no other funds available with the assessee from out of which the investment in bonds could have been made. The nexus between the advances and the amounts invested in bonds is clear, directly traceable to the advances received....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t argument of the revenue is that Section 54EC requires the investments to be made only subsequent to the date of transfer. In this regard, the respondent has relied upon a Circular issued in the context of Section 54E. The Circular reads thus: CIRCULAR : NO. 359 [F.NO. 207/8/82-IT(A-II)] SECTION 54F OF THE INCOME-TAX ACT, 1961 - CAPITAL GAINS - EXEMPTION OF, IN CASE OF INVESTMENT IN RESIDENTIAL HOUSE - ASSESSEE INVESTING EARNEST MONEY IN SPECIFIED ASSETS BEFORE DATE OF TRANSFER - WHETHER AMOUNT SO INVESTED QUALIFIES FOR EXEMPTION CIRCULAR : NO. 359 [F.NO. 207/8/82-IT(A-II)], DATED 10- 5-1983 1. Section 54E provides for exemption of long-term capital gains if the net consideration is invested by the assessee in specified assets within a period of six months after the date of such transfer. A technical interpretation of section 54E could mean that the exemption from tax on capital gains would not be available if part of the consideration is invested prior to the date of execution of the sale deed as the investment cannot be regarded as having been made within a period of six months after the date of transfer. 2. On consideration of the matter in consultation with the M....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lowing provisions of this section, that is to say,- (a) if the cost of the long-term specified asset is not less than the capital gain arising from the transfer of the original asset, the whole of such capital gain shall not be charged under section 45; 25. Section 54 and the provisions thereafter, from Section 54A to Section 54 GB, provide for an exemption from the levy of capital gains in various stipulated circumstances. Section 54E states that the capital gain arising on the transfer of a capital asset prior to 01.04.1992, is not to be charged in certain cases. Similarly, Section EA and EB, applicable in the event of the transfer of a long-term capital asset before 01.04.2000, grants an exempts from capital gain if the gain is invested in specified securities in the manner provided under those sections. 26. The exemption granted under Section 54EA and EB in respect of transfers prior to 01.04.2000, has been continued by Section 54EC, and is applicable to transfers post 01.04.2000. The scheme of capital gains exemption is thus seen to have envisaged a seamless sequence, from Section E dealing with transfers prior to 01.04.1992 to the present-day Section EC applicable to trans....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in the facts and circumstances of the case the Appellate Tribunal was right in coming to the conclusion that the part of the sale consideration was received on 21.12.2002 hence the capital gains will arise only for the assessment year 2003-2004 and not for the assessment year 2004-05? 3. Whether in the facts and circumstances of the case the Appellate Tribunal was right in coming to the conclusion that the sale consideration was received on 21.12.2002 and the property was handed over on the same day even though the possession of the property was handed over only on 25.03.2004?" 32. R.Krishnaswamy had entered into a sale agreement on 07.12.1999 and had received advance from the company. The remaining consideration had been received on 21.12.2002 and the sale deeds had been registered on various dates till 23.03.2004. Possession had been handed over to the agreement holders on 25.03.2004 and construction had been completed in October 2005. Completion certificate had been given by the CMDA on 12.06.2006. 33. R.Krishnaswamy claimed deduction under Section 54EC of the Act on the basis that the entire sale consideration had been invested in prescribed bonds. The issue had arose in....