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Commissioner Of Income Tax v. Ms. Cello Plast
Structured Summary of the Opinion
Factual and Procedural Background
This is an appeal filed by the Revenue under Section 260A of the Income Tax Act, 1961 challenging the order dated 19/1/2010 passed by the Income Tax Appellate Tribunal in ITA No.2200 of 2009 relating to the assessment year 2006-07. The appeal was admitted on three substantial questions of law.
Procedurally relevant events arising from the Tribunal's order and earlier proceedings include:
- Respondent/assessee filed a return claiming, inter alia, (i) deduction of legal and professional charges of Rs.1,37,500, (ii) claim of depreciation, and (iii) exemption under Section 54EC for long-term capital gains arising on sale of a factory building.
- The Assessing Officer (AO), by order dated 26/9/2008, disallowed the legal and professional charges for lack of details and disallowed the Section 54EC exemption, subjecting the entire capital gain to tax. The AO's order also denied the Section 54EC claim because the bonds were purchased after the statutory six-month period.
- The Commissioner of Income Tax (Appeals) (CIT(A)), by order dated 5/2/2009, upheld the AO's disallowances in respect of the legal/professional charges and the Section 54EC claim. The CIT(A) also dismissed the assessee's appeal (and maintained the AO's position).
- The Tribunal, by its order dated 19/1/2010 (also referenced as 19/6/2010 in the text), allowed the respondent's appeal on (a) the legal and professional charges ground (on the Tribunal's finding that details had been submitted to the CIT(A)), and (b) allowed the Section 54EC exemption on the ground that bonds were not available during the relevant period and the respondent had deposited funds with specific instructions to invest when bonds became available. The Tribunal also directed allowance of the claim of depreciation.
- The present appeal by the Revenue seeks to challenge the Tribunal's conclusions on: (a) disallowance of legal and professional charges; (b) direction to allow depreciation; and (c) direction to allow Section 54EC deduction.
Legal Issues Presented
- Whether on the facts and in the circumstances of the case, the Tribunal in law was right in not sustaining the order of the CIT(A) in confirming the disallowance of the legal and professional charges of Rs.1,37,500/-?
- Whether on the facts and in the circumstances of the case the Tribunal in law was right in directing the A.O. to allow the claim of depreciation?
- Whether on the facts and in the circumstances of the case, the Tribunal in law was correct in directing the A.O. to allow the claim of deduction under Section 54EC?
Arguments of the Parties
Appellant (Revenue) - submissions of Mr. Suresh Kumar
- On legal and professional charges: The Tribunal's finding was perverse because, according to the Revenue, the respondent had not furnished details of the expenses either before the Assessing Officer or before the CIT(A).
- On Section 54EC:
- The respondents purchased the REC bonds beyond the six-month period from the date of sale and beyond the extended period of 31/12/2006 (as per the CBDT Circular), and therefore were not entitled to Section 54EC benefits.
- REC bonds were available during a period from 1/7/2006 to 3/8/2006 (as per REC's letter dated 10/4/2008), so the respondents could have purchased within the statutory window and failed to do so.
- The respondents could have purchased bonds of the National Highways Authority of India (NHAI), an alternative specified by Section 54EC; having not chosen that alternative, they cannot claim the Section 54EC benefit.
Respondent (Assessee) - submissions of Dr. Shivram
- On legal and professional charges: The respondent had submitted details by a letter dated 26/9/2008 to the Assessing Officer; a copy of that letter was produced in court. The letter identified the item as "Legal & Professional Charges: Rs.137500/-" and described that the sum was paid to different professionals for consultation on Income Tax, Excise and Customs matters.
- On Section 54EC:
- The REC bonds were not available during the statutory six-month period following the sale (and up to the extended date), and the respondent deposited Rs.50,00,000 in fixed deposits with the State Bank of India on 30/10/2006 with a specific instruction that the amount would be withdrawn and invested in the bonds when they became available.
- The respondent purchased REC bonds on 31/1/2007, shortly after they became available again on 22/1/2007, and therefore should be entitled to Section 54EC benefit because the non-availability of bonds made compliance within the six months impossible.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Commissioner of Income Tax v. G. R. Shipping Ltd., Income Tax Appeal No.598 of 2009 dated 28/7/2009 | Decision of this Court covering the question concerning allowance of depreciation (question (b) in this appeal). | The Court held that question (b) is covered by that decision and accordingly answered question (b) in the affirmative in favour of the respondent (i.e., depreciation claim to be allowed). |
| Directorate of Enforcement v. Deepak Mahajan, 1994 (3) SCC 440 | Principle that courts may "mould or creatively interpret the legislation by liberally interpreting the statute" when literal application would frustrate legislative intent or lead to implementation difficulties. | The Court relied upon and quoted the passage to justify a reasonable extension of the time for investing under Section 54EC when the specified bonds were not available, applying liberal interpretation to avoid injustice. |
Court's Reasoning and Analysis
The Court addressed each admitted substantial question of law in turn and applied the relevant facts and legal principles as follows:
Question (a) — Legal and professional charges (Rs.1,37,500)
- The Court reviewed the letter dated 26/9/2008 relied upon by the respondent and found that it did not furnish adequate particulars of the claimed legal and professional expenditure. The letter only stated that Rs.137,500 was paid towards fees for consultation on Income Tax, Excise and Customs matters, but did not provide specifics such as reasons for consultation, dates, or names of consultants.
- Given the absence of supporting details and evidence, the Court concluded that the Assessing Officer and the CIT(A) were justified in disallowing the expenditure. The Tribunal's contrary conclusion was characterized as ignoring the absence of necessary details. Accordingly, the Court answered question (a) in the negative (i.e., in favour of the appellant-revenue).
Question (b) — Depreciation
- The Court noted that question (b) was covered by a prior decision of this Court in Commissioner of Income Tax v. G. R. Shipping Ltd. and therefore answered question (b) in the affirmative in favour of the respondent (allowing the claim of depreciation) without re-opening the issues addressed by that precedent.
Question (c) — Section 54EC exemption for investment in specified bonds
- Facts established by the record and considered by the Court:
- Sale of factory building: 22/3/2006, producing long-term capital gain of Rs.49.36 lacs.
- Statutory six-month period to invest (for Section 54EC) extended in certain respects by CBDT circulars; the last date in normal course would have been 21/9/2006, and CBDT issued a circular (dated 30/6/2006) which extended the date to 31/12/2006 for investment in bonds as per that Circular.
- REC bonds were not continuously available during the six-month period; the record indicated periods when bonds were not available (the Court found that bonds were not available from 4/8/2006 to 22/1/2007). The respondent deposited Rs.50,00,000 in fixed deposits on 30/10/2006 with instructions to invest in bonds when available and purchased REC bonds on 31/1/2007, within nine days after REC bonds became available on 22/1/2007.
- The Court addressed the Revenue's objections:
- That the purchase was beyond six months and beyond the CBDT-extended date: the Court recognized the literal time limits but emphasized that where it was impossible to comply (here, because bonds were not available), the assessee cannot be penalized for inability to perform an impossible act.
- That bonds were available briefly between 1/7/2006 and 3/8/2006 (per an REC letter): the Court held that the statutory right to invest "at any time during the period of six months" entitles an assessee to wait until the last date; limited availability during that period does not deprive the assessee of the right to invest up to the last date and does not displace the principle that one cannot be compelled to do what is impossible.
- That the assessee could have invested in NHAI bonds instead: the Court rejected this, noting that Section 54EC offers the assessee a choice between REC and NHAI bonds and the Revenue cannot compel the assessee to choose one over the other.
- Legal principles applied:
- Maxims invoked: lex non cogit impossibilia and impossibilum nulla obligant (law does not compel performance of the impossible).
- Quoting Director of Enforcement v. Deepak Mahajan, the Court endorsed liberal/creative interpretation where literal application would frustrate legislative intent or lead to injustice.
- Scope and limitation of the Court's remedial approach:
- The Court refrained from laying down any fixed or general rule for all scenarios where bonds may not be available (for example, when they are unavailable only for a day or two before expiry); instead it confined itself to the facts before it and held that, in this case, a reasonable extension should be granted for the precise period during which bonds were unavailable prior to the expiry of the six months.
- Applying those considerations to the present facts (bonds unavailable from 4/8/2006 to 22/1/2007 and respondent purchasing bonds on 31/1/2007), the Court found the nine-day delay after availability to be reasonable and upheld the Tribunal's grant of Section 54EC benefit.
Holding and Implications
APPEAL DISPOSED OF — in the terms set out by the Court.
Holding (core rulings)
- Question (a): The Court answered in the negative — in favour of the appellant (Revenue) and against the respondent. The disallowance of Rs.1.37 lacs towards legal and professional charges by the AO and affirmed by the CIT(A) was upheld because the respondent did not produce adequate supporting details.
- Question (b): The Court answered in the affirmative in favour of the respondent (assessee) — the claim of depreciation was to be allowed, the question being covered by the cited decision in Commissioner of Income Tax v. G. R. Shipping Ltd.
- Question (c): The Court answered in favour of the respondent (assessee) — the Tribunal was correct to direct allowance of the Section 54EC deduction because the REC bonds were not available during substantial parts of the statutory period, and a reasonable extension (on the facts, effectively permitting investment on 31/1/2007) was justified; investment made within nine days of availability was reasonable.
Direct Consequences for the Parties
- The disallowance of Rs.1.37 lacs towards legal and professional charges stands (favouring the Revenue) unless further steps are taken by the assessee within the legal process.
- The assessee's claim for depreciation is allowed in accordance with the precedent relied upon.
- The assessee is entitled to exemption under Section 54EC for the investment in REC bonds purchased on 31/1/2007 (subject to the conditions of that section and the facts found by the Court), because the Court granted a reasonable extension in light of non-availability.
- The appeal is disposed of in the terms recorded; there is no order as to costs.
Broader Implications and Limitations
- The Court endorsed the principle that, where compliance with a statutory time limit is impossible for reasons beyond an assessee's control (here, non-availability of specified bonds), a reasonable extension may be read into the statute to avoid injustice. The Court invoked maxims of impossibility and a Supreme Court authority endorsing liberal interpretation in circumstances where literal application would frustrate legislative intent.
- However, the Court expressly limited its discussion and did not establish a universal rule for all possible scenarios of non-availability. It stated that the precise extent and period of any extension must be determined by reference to the facts of each case and declined to decide other hypothetical situations (for example, when bonds were unavailable for only a day or two prior to expiry).
Disposition: The appeal is disposed of in the terms recorded above. No order as to costs.
(Judges: M.S. Sanklecha, J. and S. J. Vazifdar, J.)
M.S. SANKLECHA, JJ.
) This appeal by the revenue under Section 260(A) of the Income Tax Act, 1961 (hereinafter referred to as the "said Act") challenges the order dated 19/1/2010 passed by the Income Tax Appellate Tribunal (hereinafter referred to as the "Tribunal") in ITA No.2200 of 2009 relating to the assessment year 2006-07.
ASN 2 ITXA-3731.10sxw
2) The appeal is admitted on the following substantial
questions of law :-
a) Whether on the facts and in the
circumstances of the case, the Tribunal in law was right in not sustaining the order of the CIT(A) in confirming the disallowance of the legal and professional charges of Rs.1,37,500/- ?
b) Whether on the facts and in the circumstances of the case the Tribunal in law was right in directing the A.O. to allow the claim of depreciation ?
c) Whether on the facts and in the circumstances of the case, the Tribunal in law was correct in directing the A.O. to allow the claim of deduction u/s. 54EC ?
At the instance and request of the Advocates for both the parties, the appeal is itself taken up for final disposal.
Re Question(a) :
3) The respondent assessee had filed its return of income inter alia seeking a deduction of an expenditure of Rs.1.37 lacs on the ground that the same was incurred towards the legal and professional charges.
ASN 3 ITXA-3731.10sxw The Assessing Officer, by an order dated 26/9/2008, disallowed the the above expenditure as no details in respect thereof had been furnished. On appeal, the Commissioner of Income Tax (Appeals) by an order dated 5/2/2009 upheld the order of the Assessing officer and disallowed the expenses of Rs.1.37 lacs towards the legal and professional charges. The Tribunal by its order dated 19/1/2010 allowed the respondent's appeal on the ground that the details of legal and professional charges had been submitted before the Commissioner of Income Tax (Appeals).
4) Mr. Suresh Kumar, the learned counsel for the appellant submits that the finding of the Tribunal is perverse as respondent had not furnished the details of the expenses incurred on account of legal and professional charges either before the Assessing officer or before the Commissioner of Income Tax (Appeals). As against the above, Dr. Shivram learned counsel for the respondent submits that the details of legal and professional expenses were submitted by a letter dated 26/9/2008 before the Assessing Officer and in support thereof produced a copy of the letter dated 26/9/2008 for the perusal of this Court. The relevant extract of the letter dated 26/9/2008 is as under:
"c) Legal & Professional Charges :Rs.137500/-
During the year 2005-06 the firm has paid
a sum of Rs.137500/- towards legal &
professional fees to different professionals for
consultation on various Income tax, Excise,
Custom matters".
5) We find that the respondent has not submitted the details of the legal and professional expenses allegedly incurred by it. The ASN 4 ITXA-3731.10sxw letter dated 26/9/2008 merely states that the expenses were incurred towards payment of fees for professional consultation in Income Tax, Excise and Customs matters. However, no details were furnished of the said consultation charges such as the reasons for consultation, the dates of consultation and names of the Consultants. In the circumstances, the Assessing Officer and the Commissioner of Income Tax (Appeals) were correct in disallowing expenditure of Rs.1.37 lacs as the same was not duly supported by evidence. The Tribunal while passing the impugned order has ignored the fact that the details of expenditure was not furnished by the respondent to the department.
6) In view of the above question (a) is answered in the negative i.e. in favour of the appellant - revenue and against the respondent -assessee.
Re Question (b) :
7) It is an admitted position between the parties that question(b) is covered by the decision of this court in the matter of Commissioner of Income Tax v. G. R. Shipping Ltd. in Income Tax Appeal No.598 of 2009 dated 28/7/2009. In view of the above, question
(b) is answered in the affirmative i. e. against the appellant-revenue and in favour of the respondent-assessee.
Re Question (c ) :
8) On 22/3/2006, the respondent sold its factory building earning a long term capital gain of Rs.49.36 lacs. The respondent ASN 5 ITXA-3731.10sxw sought to avail of the exemption from payment of tax on long term capital gain of Rs.43.36 lacs under Section 54EC of the said Act by purchasing bonds of the Rural Electrification Corporation Limited (hereinafter referred to as "REC Bonds"). Section 54EC, insofar as it is relevant, reads as under :-
"54EC. (1) Where the capital gain arises from
the transfer of a long -term capital asset (the capital
asset so transferred being hereafter 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 the whole or any
part of the capital gains in the long-term specified
asset, the capital gain shall be dealt with in
accordance with the following 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;
(b) if the cost of the long-term specified
asset is less than the capital gain arising
from the transfer of the original asset, so
much of the capital gain as bears to the
whole of the capital gain the same
proportion as the cost of acquisition of the
long-term specified asset bears to the whole
of the capital gain, shall not be charged
under section 45:
Provided that the investment made on or after the
1st day of April, 2007 in the long-term specified
asset by an assessee during any financial year
does not exceed fifty lakh rupees.
......................
ASN 6 ITXA-3731.10sxw
Explanation.- For the purpose of this section,-
(a) "cost", in relation to any 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" for making any
investment under this section during the period
commencing from the 1st day of April, 2006 and
ending with the 31st day of March, 2007, means any
bond, redeemable after three years and issued on
or after the 1st day of April, 2006, but on or before
the 31st day of March, 2007,-
(i)
by the National Highways Authority of
India constituted under section 3 of the
National Highways Authority of India Act,
1988 (68 of 1988); or
(ii) by the Rural Electrification
Corporation Limited, a company formed and
registered under the Companies Act, 1956
(1 of 1956)
and notified by the Central Government in the
Official Gazette for the purposes of this section with
such conditions (including the condition for
providing a limit on the amount of investment by an
assessee in such bond) as it thinks fit;
Provided that where any bond has been notified
before the 1st day of April, 2007, subject to the
conditions specified in the notification by the
Central Government in the Official Gazette under
the provisions of clause (b) as they stood
immediately before their amendment by the
Finance Act, 2007, such bond shall be deemed to
be a bond notified under this clause;"
ASN 7 ITXA-3731.10sxw
9) To avail of the exemption under section 54EC, the
respondent had to invest the sale proceeds in the REC bonds within six
months from the date of the sale of the factory building i.e. on or before
21/9/2006. However, the respondent purchased the REC bonds only
on 31/1/2007. The question is whether despite the same, the
respondent is entitled to the benefit of section 54EC in the facts and
circumstances of the case.
10) It is useful to set out the relevant facts chronologically.
22/3/2006 The respondents sold their factory building.
22/3/2006 During this period, REC bonds were not available. to 1/7/2006 30/6/2006 CBDT Circular extending the time to invest in the Section 54EC bonds upto 31/12/2006 1/7/2006 REC bonds became available during this period as to stated in a letter dated 10/4/2008 from REC Ltd. filed 3/8/2006 with the AO by the respondents.
04/08/06 REC bonds were not available during this period. to 22/1/2007 21/9/2006 Six months from the date of sale of the property by the respondents. In normal course, therefore, the last date for the respondents to invest in bonds to avail of the benefit under Section 54EC.
ASN 8 ITXA-3731.10sxw 30/10/2006 As the REC bonds were still not available, the respondents invested Rs.50,00,000/- in fixed deposits issued by the State Bank of India. The respondents by a letter dated 30/10/2006 instructed the State Bank of India to invest Rs.50,00,000/- in FDs stating that the same will be withdrawn and invested in bonds when available.
31/12/2006 Last date for investing in bonds to avail of the benefit under Section 54EC as per the CBDT Circular dated 30/6/2006.
22/1/2007 REC bonds once again available (as stated in a letter to dated 10/4/08 from REC Ltd. to the respondent.) 31/1/2007 31/1/2007 Respondents purchased REC bonds.
11) In their return of income the respondents appended a Note stating some of the above facts.
12) The Assessing Officer by his order dated 26/9/2008 disallowed the benefit of Section 54EC to the respondent and subjected to tax to entire capital gain of Rs.49.36 lacs.
13) The Commissioner of Income Tax (Appeals) by an order dated 5/2/2009 dismissed the respondent-assessee's appeal and upheld the order dated 26/9/2009 of the Assessing officer. He held that even in terms of the said Circular the investments in the bonds for the benefit of Section 54EC of the Act had to be made on or before 31/12/2006, whereas the respondent admittedly purchased the REC bonds only thereafter on 31/1/2007.
14) The Tribunal by its order dated 19/6/2010 allowed the respondent's appeal. The Tribunal held that it was impossible for the ASN 9 ITXA-3731.10sxw respondent to comply with the condition of Section 54EC of the said Act as the REC bonds were not available and for that reason the CBDT had issued the Circular dated 30/6/2006 extending the time. Further, the Tribunal held that the fact that the respondent had deposited the amount of Rs.50/- lacs with the State Bank of India with a specific direction that the bonds would be purchased out of the aforesaid amount as soon as they were available, supported the stand of the respondents that the REC bonds were not available.
15) Mr. Suresh Kumar, the learned counsel for the revenue submitted that the Tribunal could not have extended the benefit of Section 54EC to the respondents for three reasons.
16) Firstly, he submitted that the respondents purchased the bonds beyond the period of six months from the date of sale of the factory building and even beyond the extended period viz. 31/12/2006 granted by the said CBDT Circular. Secondly, he submitted that the bonds were available during the period from 1/7/2006 to 3/8/2006 as stated in REC's letter dated 10th April, 2008. The respondents could, therefore, have purchased the bonds before 3/8/2006 in case they were desirous of availing the benefit of Section 54EC. Having failed to do so, they are not entitled to the benefit of Section 54EC.
17) The submissions are not well founded. The REC bonds could not be purchased as they were not available throughout the period of six months commencing from the date of the sale of the factory by the respondents and even thereafter till the extended date of 31/12/2006 under the CBDT Circular. That the bonds were available for ASN 10 ITXA-3731.10sxw a limited time during this period between 1/7/2006 to 31/8/2008, makes no difference. The respondents had time till 21/9/2006, to invest in these bonds to avail the benefit under section 54EC. Section 54EC entitles a person to avail of the right conferred thereby at any time during the period of six months from the date of sale of the asset. The respondents cannot be deprived of this right conferred by the Act for no fault of theirs. Thus, the availability of the bonds only for a limited time during this period cannot prejudice the assessee's right to exercise the same upto the last date. The bonds were admittedly not available except during the said period.
18) Lex not cogit impossibila (law does not compel a man to do that which he cannot possibly perform) and impossibilum nulla oblignto est (law does not expect a party to do the impossible) are well known maxims in law and would squarely apply to the present case. The statue viz. Section 54EC of the Act provides for exemption from tax to long term capital gain provided the same is invested in bonds of Rural Electrification Corporation Limited or National Highway Authority of India. However, as the bonds were not available, it was impossible for the respondent-assessee to invest in them within six months of the sale of their factory building. Therefore, in the circumstance one would have to interpret Section 54EC of the Act to ensure that it does not lead to injustice. The Apex Court in the matter of Directorate of Enforcement Vs. Deepak Mahajan reported in 1994(3) SCC 440 observed as under:
"Though the function of the Court is only to
expound the law and not legislate, none the less the
legislature cannot be asked to sit to resolve the
ASN 11 ITXA-3731.10sxw
difficulties in the implementation of its intention and
the spirit of the law. In such circumstances, it is the
duty of the Court to mould or creatively interpret the
legislation by liberally interpreting the statue".
Therefore, in the present facts, the six months provided for investing in bonds may be reasonably extended in view of the non availability of bonds till 22/1/2007.
19) The contention of the appellant revenue that Rural Electrification bonds were available upto 3/8/2006 and the respondent assessee should have purchased the bonds before 3/8/2006 is not sustainable as the time given by the statue to invest in bonds under Section-54EC of the Act is six months from the date of sale and, therefore, the respondent was entitled in law to wait till 21/9/2006 to invest in the bonds.
20) There remains an important aspect of some difficulty to be considered viz. the extent to and precise period during which the extension ought to be granted to avail the benefit of the provisions of section 54EC when the bonds referred to therein are not available. These aspects would have to be determined, based on two factors -
the duration when the bonds were not available, and the period during which to wit the point of time during the six months or the extended period, if any, when they were not available. For instance, the bonds may not have been available at the commencement of the six months period or for a broken period or periods during the six months or towards the end of the six months.
21) It is difficult to lay down any particular rule in this regard.
ASN 12 ITXA-3731.10sxw We think it both prudent and proper to consider only the case before us and only to the extent where the bonds were not available prior to the expiry of the six month period, including the last day. A person is entitled, as we have held earlier, to invest in the said bonds upto the last available date. If that be so, it must follow that the extension ought to be granted at least for the period prior to the expiry of six months when the bonds were not available and upto the date on which they were ultimately made available. In any event, in such a case an assessee would be entitled to a reasonable extension which must then be decided, depending upon the facts of each case. A person cannot be expected to make the investment on the first possible date on which the bonds were made available after the expiry of the six months period or any extended date prescribed by the CBDT. During the period the bonds were unavailable a person is likely to invest the amount elsewhere. To expect or require him not to do so would be unjust for reasons too obvious to state. He cannot then be expected at a day's notice to break the investment and transfer the same to the bonds stipulated in Section 54EC.
22) In the present case, the bonds were not available from 4/8/2006 to 22/1/2007. The last date for investment in the normal course would have been 21/9/2006 which was extended upto 31/12/2006. The respondents ought to be entitled to an extension of the number of days between 4/8/2006 to 21/9/2006 at the very least and, in any event, to a reasonable extension. The respondents admittedly invested in the bonds on 31/1/2007 i.e. within nine days of their being available once again from 22/1/2007. Considering that the bonds were not available for such a long period, an extension of ASN 13 ITXA-3731.10sxw merely nine days is extremely reasonable in the present facts.
23) The first two grounds are, therefore, rejected.
At the cost of repetition, we make it clear that we have not expressed any opinion as to the extent and specific period of extension in any other situation, including where the bonds may not have been available only for a day or two prior to the expiry of the six months period.
24) Thirdly, Mr. Suresh Kumar submitted that the respondent in any case could have purchase the bonds of the National Highway Authority which was an alternative mode of investment provided for availing the benefit of Section 54EC. As the respondent-assessee has not chosen to purchase the bonds of National Highway Authority of India it cannot claim the benefit of Section 54EC of the said Act and the amount of Rs.49.36 lacs is correctly chargeable to capital gain tax.
25) This submission is also not well founded. Section 54EC of the Act having given the respondent a choice of investing either in the bonds of Rural Electrification Corporation Limited or the National Highway Authority, the revenue cannot insist that the respondent ought to have invested its capital gain on sale of property in the bonds of the National Highway Authority.
26) The statue itself provides that the assessee, who is subject to long terms capital gain tax, can avail of exemption under Section 54EC of the Act if he invests in bonds of either the National Highway ASN 14 ITXA-3731.10sxw Authority of India or the Rural Electrification Corporation Limited. The choice of investing in one of the two organizations is with the respondent and the appellant revenue contrary to the statue cannot force the respondent to invest only in the bonds of one in preference to the other. The choice of which bonds to purchase is entirely with the respondent and in case the bonds of respondent's choice are not available as is proved in the present case, the time to invest in the bonds get automatically extended till the bonds are available in the market and the assessee can purchase the same.
27) In view of the above we answer question (a) in the negative i.e. in favour of the appellant revenue and against the respondent. So far as questions (b) and (c) are concerned the same are answered in favor of the respondent assessee and against the appellant-revenue.
28) The appeal is disposed of in the above terms. No order as to costs.
( M.S. SANKLECHA, J. ) ( S. J. VAZIFDAR, J.)
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