TaxTMI 
TaxTMI 
2026 (8) TMI 1093
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....or HUF, if invested in a manufacturing small or medium enterprise, subject to conditions. 3. Memorandum Explaining the Provisions is reproduced for ready reference the Government had announced National Manufacturing Policy NMP 2011, one of the goals of which is to incentivise investment in the Small and Medium Enterprises SME in the manufacturing sector to provide a rollover relief from long term capital gains tax on sale of a residential property in case of reinvestment of sale consideration in the equity of the new start up SME company in the manufacturing sector which is utilized by the company for the purchase of new plant and machinery. 4. The company M/s Spads Polyplast Private Limited in which assessee invested its proceeds from sale of Residential Property and claimed exemption under section 54GB of the Income Tax Act 1961, has not commenced its operations nor purchased its plant and Machinery. The operations of the company commenced on 01.03.2017 and the plant and machinery acquired for manufacturing of goods were purchased in the Financial year 2016-17, the year in which capital gains accrued to the appellant. 5. The appellant has therefore comp....
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....s contended that the effective business operations of the company commenced only on 01.03.2017 and the plant and machinery for manufacturing activities were also acquired during the relevant financial year. The Ld. AR invited our attention to the provisions of section 54GB of the Act and submitted that the assessee had fulfilled all the substantive conditions prescribed therein. Referring to section 54GB(6) of the Act, it was submitted that the only dispute in the present case is regarding the date of incorporation of the eligible company. The Ld. AR argued that although the company was incorporated under the Companies Act on 27.03.2008, no business activity was carried on by the company till 01.03.2017. Inviting our attention to the MSME certificate placed at page no. 96 of the paper book, it was submitted that the date of commencement of business mentioned therein is 01.03.2017 and therefore the effective date of incorporation should be treated as 01.03.2017. The Ld. AR further referred to the Memorandum explaining the provisions of the Finance Act, 2012 introducing section 54GB of the Act, placed at page no. 113 of the paper book. It was submitted that the object of the legislat....
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....ssue arising for our consideration is whether the assessee is entitled to exemption under section 54GB of the Act in respect of investment made in the equity shares of M/s. Spads Polyplast. The facts are not in dispute. During the year under consideration, the assessee earned long-term capital gain of Rs.2,60,99,699/- from the transfer of a residential property. The assessee invested the said amount in the equity shares of M/s. Spads Polyplast and claimed exemption under section 54GB of the Act. The claim was denied by the Ld. AO on the ground that the investee company was incorporated on 27.03.2008 and, therefore, did not satisfy the conditions prescribed under section 54GB(6) of the Act. The action of the Ld. AO was upheld by the Ld. CIT(A). Before us, the contention of the assessee is that although the company was incorporated under the Companies Act on 27.03.2008, it had not commenced any business activity till 01.03.2017. It was further submitted that the company obtained registration under the MSME provisions and effectively commenced its manufacturing operations only on 01.03.2017. Therefore, according to the assessee, the date of commencement of business or the date of MSME....
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....any previous year: [Provided that in the case of an eligible start-up, being a technology driven start-up so certified by the Inter- Ministerial Board of Certification notified by the Central Government in the Official Gazette, the new asset shall include computers or computer software." 9. On perusal of the above, it is evident that the provision of section 54GB(6) of the Act clearly provides that an eligible company means a company incorporated in India during the period beginning from the first day of April of the previous year in which the capital gain arises and ending on the due date of furnishing the return of income under section 139(1) of the Act. Thus, the statute specifically refers to the date of incorporation of the company in India. The provision does not make any reference to the date of commencement of business, date of commencement of manufacturing activity, date of acquisition of plant and machinery, date of registration under MSME provisions, or any other operational date. Therefore, the legislative intent is clear and unambiguous that the relevant date for determining eligibility is the date on which the company is incorporated under the Companies Ac....
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....he Hon'ble Supreme Court in the case of Bajaj Tempo Ltd. Vs. CIT (Supra), for taking a liberal approach in the case of the assessee. There is no dispute regarding the proposition laid down by the Hon'ble Supreme Court. However, the said principle cannot be stretched to such an extent that an express statutory condition enacted by the legislature is ignored or rewritten. Liberal interpretation can be adopted only where two views are reasonably possible. It cannot be invoked to alter the plain meaning of the words used by Parliament. We also find support for the above view from the decision of the Hon'ble Supreme Court in the case of Commissioner of Customs Vs. Dilip Kumar and Company (95 taxmann.com 327), wherein the Constitution Bench held that exemption provisions are required to be construed strictly and that the burden lies upon the assessee to establish that he squarely falls within the scope of the exemption provision. The Hon'ble Supreme Court further held that where the language of the exemption provision is clear, the same has to be interpreted strictly and no benefit can be extended beyond what is expressly provided by the legislature. In the present case, the assessee see....