1. The following question of law is referred under s. 256(1) of the IT Act, 1961, for the opinion of this Court :
"Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that provisions of ss. 54E(3) and 155(10B) of the IT Act, 1961, were applicable in the case of the assessee for the asst. yr. 1975-76 whereas these sections were inserted by the Finance Act, 1978, and applicable w.e.f. 1st April, 1978 ?"
2. The assessment year is 1975-76. The assessment was initially completed under s. 143(3) on 4th Sept., 1978, on a total income of Rs. 57,700 which included capital gain that arose as a result of compensation received by the assessee from the Municipal Corporation, Hyderabad, on account of acquisition of her land in the year 1974. Subsequently, the city civil Court enhanced the compensation by a judgment dt. 23rd Feb., 1978, to Rs. 4,64,900. The assessee invested the entire additional compensation in 7-year National Rural Development Bonds as per s. 54E(3) which was introduced by the Finance Act, 1978, w.e.f. 1st April, 1978. The ITO rectified the original assessment under s. 154 r/w s. 155(7A) to tax the enhanced compensation received by the assessee on 11th July, 1979. The assessee contended that if the assessment is to be rectified under s. 155(7A) to rope in the income received by way of additional compensation, the ITO should have gone a step further and rectified the assessment under s. 155(10B) and granted the relief as provided for by s. 54E(3) by reason of the fact that the assessee invested the additional compensation amount in the "specified asset" in fulfilment of the condition laid down in the same sub-section. However, the ITO rejected the contention of the assessee and declined relief on the ground that the said beneficial provisions were not in force on the date of acquisition. On appeal, the CIT accepted the contention of the assessee and converted the order of the ITO passed under s. 155(7A) into an order under s. 155(10B) r/w s. 54E(3) and directed the ITO to allow the exemption admissible while computing the capital gains to the extent of the investment in Rural Development Bonds which is one of the specified assets. The Tribunal affirmed the decision of the CIT(A). Hence, the Revenue sought the present reference under s. 256(1).
3. In our view, as rightly observed by the Tribunal, the rectification of assessment in the light of subsequent event of accrual of additional capital gain by way of enhanced compensation cannot be a one sided measure. While rectifying or re doing the assessment, the beneficial provision introduced by the legislature with a definite purpose should also be kept in view. Secs. 54E(3), 155(7A) and 155(10B) should be read together harmoniously in order to effectuate the purpose of law. There is no warrant to confine the provision contained in s. 54e(3) of the it act only to the additional compensation received in respect of the acquisitions that take place after the introduction of the provision. Such a narrow interpretation is not warranted either going by the language of the section or by having resort to the purposive interpretation. The words "within six months after the date of receipt of additional compensation" cannot be qualified by the limitation that the additional compensation so received should relate to a future acquisition.
4. We are fortified in our view by the decision of this Court in S. Gopal Reddy vs. CIT . In that case, the Division Bench was concerned with the interpretation of s. 54E(1) and the second proviso added to the said sub-section w.e.f. 1st April, 1984. The learned judges having referred to the factors peculiar to compulsory acquisition, held that the period of six months should be reckoned from the date of receipt of compensation as and when received and the second proviso to sub-s. (1) was clarificatory in nature and must be deemed to have prevailed even prior to 1st April, 1984. The learned judges observed :
"We are not impressed by the argument of learned standing counsel that by adopting the interpretation which we have done, we would be reading words into the statute, or that we would be modifying or amending the statute. We may emphasise that what is to be invested in specified assets is 'the consideration or any part thereof', and unless the consideration is received or accrues, there is no question of investing it."
5. The ratio of the said decision applies a fortiori to the present case as s. 54E(3) is clear and categorical. Sub-s. (10B) of s. 155 has been introduced to effectuate the relief granted by s. 54E(3) as a part of fiscal policy.
6. We have, therefore, no hesitation in answering the question affirmatively, that is to say, in favour of the assessee and against the Revenue. Accordingly, the reference case is disposed of. No costs.
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