Saturday, 12 September 2015

Three Imp Verdicts On S. 54EC Capital Gains + S. 153A/ 153D Assmnt + Keyman Insurance Policy

ACIT vs. Kamlakar Moghe (Bombay High Court)

S. 54EC: If REC Bonds are not available during the prescribed period, time for investment has to be extended. Fact that NHAI Bonds were available is irrelevant. Amount paid to sisters as per family arrangement for permitting transfer of property is decutible u/s 49(1)
The bonds were admittedly not available during the said period. The fact that the Bonds issued by the National Highway Authority of India were available and hence the assessee ought to have invested in those bonds within the stipulated period of six months is not acceptable. Section 54EC gives assessee an option to invest either in bonds of National Highway Authority of India or then in bonds of Rural Electrification Corporation Limited. The said provision does not stipulate that the investment has to be in any bond whichever is available. Both bonds carry different benefits and hence deliberately the Parliament has given option to the assessee to invest in any one out of two as per his choice. In a given case, the assessee may choose to invest in both. However, discretion is conferred upon the assessee, who is the best judge of his own needs and interests. He cannot be forced to invest in the bond whichever is available because period of six months is about to expire. This option or discretion given by the Parliament to the assessee needs to be honoured here. If said option was available when period of six months was to expire and could have been expressed by the assessee when said period was about to expire, the situation would have been otherwise
 

Shreelekha Damani vs. DCIT (ITAT Mumbai)

S. 153A/ 153D: Approval to the assessment order granted by the Addl. CIT in a casual and mechanical manner and without application of mind renders the assessment order void
The Legislative intent is clear inasmuch as prior to the insertion of Sec.153D, there was no provision for taking approval in cases of assessment and reassessment in cases where search has been conducted. Thus, the legislature wanted the assessments/reassessments of search and seizure cases should be made with the prior approval of superior authorities which also means that the superior authorities should apply their minds on the materials on the basis of which the officer is making the assessment and after due application of mind and on the basis of seized materials, the superior authorities have to approve the assessment order. The Addl Commissioner/Joint Commissioner is required to apply his mind to the proposals put up to him for approval in the light of the material relied upon by the AO. The said power cannot be exercised casually and in a routine manner.
 

Suri Sons vs. ACIT (ITAT Amritsar)

S. 10(10D): Keyman Insurance: Even a "United Linked Endowment Assurance Plan" with the main object of guaranteed returns rather than life insurance is a "keyman insurance" as defined in s. 10(10D). The fact that policy was termed as a "keyman insurance" and the fact that the IRDA Guidelines disapproved the issue of such policies is irrelevant
All that is required for an insurance policy to meet the requirements of Section 10(10D), therefore, has to be – (a) it should be a life insurance policy; (b) it should be taken by the assesse on the life of another person who is, or was, an employee of the assesse or is related to the business of the assesse is any manner. As long as a policy is an insurance policy, whether it involves a capital appreciation or is under any other investment scheme, it meets the tests laid down under section 10(10D). Even if such an inference is desirable, as long as it does not emerge from the plain words of the statute, it cannot be open to supply the same. The concepts of term policy, pure life policy and the IRDA guidelines find no mention in the statutory provisions. But even if these concepts ought to be incorporated in this statutory provision of the Income Tax Act to make it more meaningful and workable, it cannot be open to any judicial forum to supply these omissions. The IRDA guidelines, no matter how relevant as these guidelines may be, have no role to play in the interpretation of the statutory provisions. The fact that the insurance policies in question were not termed as keyman insurance policies is irrelevant. The keyman insurance policy is a defined concept and as long as it meets the requirements of this definition, the terminology given by the insurers have no relevance for the purposes of the Income Tax Act.

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