Itta/124/2001 Of The Commissioner Of Incometax V.wada v. D.ramakrishna Guntur

THE HON’BLE SRI JUSTICE L.NARASIMHA REDDYANDTHE HON’BLE SRI JUSTICE CHALLA KODANDA RAMI.T.T.A.No.124 of 2001 JUDGMENT: (Per LNR,J) This is a typical case, in which the hyper technicalinterpretation of almost a highest order was placed uponSection 54E of the Income Tax Act, 1961 (for short ‘theAct’) as well as the schemes framed in relation thereto bythe Income Tax Officer. A piece of land owned by the respondent wasacquired by the Government in the assessment year1981-82, by invoking the provisions of the LandAcquisition Act. Compensation of Rs.41,12,864/- whichincluded the interest of Rs.26,81,121/- became payable. At the relevant point of time, the amount answered thedescription of ‘Capital Gains’. However, Section 54-E ofthe Act provided for exemption under certaincircumstances. One such is that if the amount is investedin certain named organizations, such as National RuralDevelopment Bonds. Obviously because thecompensation was not received by the respondent, whenthe schemes were in vogue, he did not make depositthereof in those organizations. The amount was receivedonly in the year 1993 and soon thereafter, it was investedin UTI Capital Gains Scheme, 1983. The Income TaxOfficer did not recognize this as an investment providedfor under Section 54E of the Act. The appeal preferred bythe respondent before the Commissioner of Income Tax(Appeals) did not materialise. Therefore, he filed ITANo.151/H/96 before the Income Tax Appellate Tribunal. The Visakhapatnam Bench of the Tribunal allowed theappeal, through order, dated 30.10.2000. Hence, thisappeal under Section 260A of the Act, by the Department.Heard Sri J.V.Prasad, learned counsel for theappellant and Sri Bathina Pavindra, learned counsel forthe respondent. The definition of ‘capital gains’ takes into its fold, anyconsideration received by the owner of the property, on itsbeing sold or otherwise transferred. In the context ofcompensation paid under the Land Acquisition Act, inrespect of any acquired land, there are certainexemptions, such as where the acquired land was beingput to agricultural use. In the instant case, the land did notanswer that description. Therefore, the compensationpayable to the respondent was liable to be treated as‘capital gains’. Here again, the Parliament intended toprovide certain buffers. Section 54-E of the Act providedfor exemption, in case the amount is invested in specifiedinstruments, obviously to encourage savings andinvestments in certain public agencies. Such schemeswere in vogue in the assessment year 1981-82, when thecompensation was awarded to the respondent. Since theamount was not received, though awarded, therespondent could not invest. It was only in the year 1993,that the amount was received and by that time, thescheme of National Rural Development Bonds wasdiscontinued. The respondent invested the amount in theyear UTI Capital Gains Scheme, 1983. The Income TaxOfficer treated this investment as not qualified underSection 54E of the Act. When the respondent did notreceive any amount in the assessment year 1981-82, it isjust un-understandable as to how he could have beenexpected to invest in National Rural Development Bonds. The Tribunal has rightly allowed the I.T.A. We are not inclined to take any different view. Therefore, the appeal is dismissed. The miscellaneous petition filed in this writ appealshall also stand disposed of. There shall be no order asto costs. ____________________ L.NARASIMHA REDDY, J ______________________ CHALLA KODANDA RAM, J Date: 09.07.2014JSU THE HON’BLE SRI JUSTICE L.NARASIMHA REDDYAND THE HON’BLE SRI JUSTICE CHALLA KODANDA RAM JSU I.T.T.A.No.124 of 2001 Date: 09.07.2014