Whether when assessee receives payments on sale of property in parts, piecemeal deposits of same under capital gains scheme disentitles assessee from Sec 54EC benefits - NO, rules ITAT

 THE issues before the Bench are - Whether when the assessee receives payments on sale of propperty in parts, the piecemeal deposits of the same under capital gains scheme disentitles the assessee from Sec 54EC benefits; Whether it is necessary for the assessee to make deposit of the entire sale consideration at one time under the scheme and Whether the period of six months for making deposits is to be counted from the date of sale receipts or the date of agreement. And the answer goes in favour of the assessee.

Facts of the case

Assessee is an individual. He filed his ROI claiming exemption under section 54EC. The AO during the course of assessment proceedings examined the issue of exemption and allowed the claim of the assessee.
The CIT exercising his power u/s 263 revised the order of AO and directed him to frame the assessment once again and also observed that the assessee had invested the amount in capital gain scheme in scattered manner which meant some amount invested by the assessee when he received part payment and the balance on the receipt of balance payment. The CIT was of the view that assessee ought to have deposited the entire amount in capital gain scheme and hence the order of the AO allowing the exemption in relation to piece meal investments was erroneous and prejudicial to the interest of revenue. The AO following the direction of CIT (A) disallowed the claim of the assessee. CIT (A) affirmed the order of AO.

On appeal, the ITAT held that,

++ from the date of receipt of sale consideration and date of deposits with NABARD clearly reveals that deposit is made within one month of the receipt of sale consideration. It is a fact that these two brothers sold part of his immovable property and received first payment from CPI(M) on 01.07.2004 and from remaining three purchasers on 02.07.2004 as part payment although the possession was also handed over to these purchasers. It is also a fact that the sale deed was registered, in the case of CPI(M) on 27.06.2005 and in the case of other three purchasers on 28.09.2005. The assessee has deposited the sale consideration within one month of receipt with NABARD for availing exemption u/s. 54EC of the Act. In such circumstances whether the assessee is eligible for claim of exemption or not?

++ in our view, in this type of case, the period of six months for making deposit u/s. 54EC of the Act should be reckoned from the dates of actual receipt of the consideration, because in the present case the assessee has received part payment as on the date of execution of agreement and handing over of possession of the property and received part payment after six months at the time of registration of sale deed or even after that in few of instances, as is evidently clear from the chart. We are of the view that if the period is reckoned from the date of agreement and receipt of part payment at the first instance, then it would lead to an impossible situation by asking assessee to invest money in specified asset before actual receipt of the same. This view of ours is supported by the decision of Andhra Pradesh High Court in the case of S.Gopal Reddy Vs. CIT (1990) 181 ITR 378 (AP), wherein similar situation of delayed receipt of compensation amount on acquisition of property, the High Court observed that if the investment in specified asset was made within a period of six months from the date of receipt of compensation, as against the date of acquisition of the property denoting transfer thereof, the same should be considered to be sufficient compliance for the purpose of claiming exemption u/s. 54E of the Act. The High Court observed that a taxing statute or any other statute has to be construed reasonably and every effort should always be made to ascertain the intention of Parliament from the words employed and, as far as possible, an interpretation which leads to absurdity should be avoided.

++ though equity and taxation are often strangers, attempts should be made that these do not remain always so and if a construction results in equity rather than in injustice, then such construction would be preferred to the literal construction