By C. N. Vaze, Shailesh Kamdar, Chartered Accountants
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New Page 2
30 (2008) 114 TTJ 803 (Del.)
ITO v. Smt. Saraswati Ramanathan
ITA No. 2624 (Del.) of 2007
A.Y. 2004-05. Dated : 19-7-2007
S. 54EC of the Income-tax Act, 1961 — Exemption cannot be
denied when investment in notified bonds is made in joint names of assessee and
her son and not in her own name exclusively.
During the relevant assessment year, the assessee invested
her capital gains income in notified bonds and claimed exemption u/s.54EC. The
Assessing Officer denied the exemption on the ground that the investment in the
bonds was in the joint names which is not permitted under the above Section
under which it is the assessee who has to invest the gains in her own name. The
CIT(A), however, held that there is no such requirement in the Section and since
the assessee had invested the sale proceeds of the shares in the REC bonds
without any contribution from her son, the Section was complied with and the
exemption cannot be denied.
The Tribunal, relying on the decisions in the following
cases, allowed the exemption :
(a) Jt. CIT v. Smt. Armeda K. Bhaya, (2006) 99 TTJ
(Mum.) 358, (2005) 95 ITD 313 (Mum.)
(b) R. B. Jodha Mal Kuthiala v. CIT, (1971) 82 ITR
570 (SC)
(c) CGT v. N. S. Getti Chettiar, 1972 CTR (SC) 349,
(1971) 82 ITR 599 (SC)
The Tribunal observed as under :
(1) If development of infrastructure is the object of S.
54EC, it would hardly matter whether the investment is made in the name of the
assessee exclusively or in the joint names of the assessee and somebody else.
The only condition is that the funds used for the investment must be traceable
to the sale proceeds of the capital asset.
(2) The assessee was 69 years old at the relevant time and
it was only a matter of convenience and to avoid any problem in future that
the son’s name was included.
(3) It is difficult to imagine that it would have been the
intention of the Act to place restrictions on such freedoms given to the
citizens of the country or on their right to take such precautions in the
interests of a secure future. Income tax is only one aspect of life and that
too for a minuscule part of the citizens of this country.
(4) While everyone is given the freedom to make investments
in any name he likes, there is no reason why such freedom should be taken away
in the case of Income-tax assessees, when the substantial ingredients of the
Section are complied with and the sale proceeds of the capital asset are
channelled into the assets in the national interest which is the main and
vital requirement of the Section.
(5) It is a well-settled rule of interpretation in IT law
that a beneficial Section has to be construed liberally, having due regard to
the object which it intends to serve.
(6) The Assessing Officer has interpreted the word
‘invested’ in S. 54EC to mean “invested in the assessee’s name”, an approach
which has no justification as it adds words into the Section and also ignores
the purpose which the Section is intended to serve.
