UNION OF INDIA Vs. JOSEPH VILANGATIL FR

JUDGEMENT

(1.) RESPONDENTS Nos. 1 and 2 in 0. P. No. 2379 of 1986 (the Revenue) (See Fr. Joseph Vilengetil v. Union of India [1990] 186 ITR 63) are the appellants herein. The petitioner in the original petition is the sole respondent herein. He is an assessee to income-tax. He filed a return for the assessment year 1983-84, wherein he disclosed an amount of Rs. 3,11,065 in Part III of the return, being advance paid to him on March 11, 1983, towards compensation to be yet finally determined in respect of the agricultural land acquired by the Government and of which the Government took advance possession on November 19, 1982. The award was passed by the Land Acquisition Officer on March 31, 1984. Deducting the advance amount paid in the sum of Rs. 3,11,065, a further sum of Rs. 4,26,150.58 was paid to the assessee on April 30, 1984. Within six months from the date of the advance payment of Rs. 3,11,065, on August 26, 1983, the assessee invested a sum of Rs. 3,10,200 in the Seven Year National Rural Development Bonds (Second Issue). The balance of Rs. 4,26,150.58, received on April 30, 1984, was invested by the assessee on July 28, 1984, in specified units of the Unit Trust. During the assessment stage, the assessee pleaded that capital gains, if any, which arose by acquisition of the agricultural lands, could not be brought to tax in view of the decision of the Bombay High Court in Manubhai A. Sheth v. N. D. Nir-gudkar [1981] 128 ITR 87. In the alternative, it was also pleaded that, by reason of the investments made by him in approved assets on August 26, 1983 and July 28, 1984, within six months of the receipt of the instalments of the award of compensation, he is entitled to the benefit of Section 54E of the Income-tax Act. Both the pleas were rejected by the Income-tax Officer. The Income-tax Officer held that both the investments were made beyond the period of six months from November 19, 1982, when the Government took advance possession of the lands in question and title to the said lands vested in the Government. The date on which the Government took possession of the land was taken as the date of transfer from which alone the period for investment is to be reckoned. On this basis, it was further held that the investments made by the petitioner in VII Year National Rural Development Bonds and Unit Trust were not specified assets for the purpose of Section 54E of the Act on the said date. So stating, exhibit P-1 order dated February 17, 1986 was passed, denying the benefit of Section 54E of the Act to the assessee. The assessee filed the original petition and assailed exhibit P-1 on various grounds. K. A. Nayar J. by judgment dated March 22, 1990 [(See Fr. Joseph Vilengetil v. Union of India [1990] 183 ITR 63 (Ker)], quashed exhibit P-1 and directed the second respondent (Income-tax Officer) to rework the benefit available to the assessee in the light of the observations in the judgment. The learned judge, following the Bench decision of the Andhra Pradesh High Court in S. Gopal Reddy v. CIT [1990] 181 ITR 378, held that exhibit P-1, in so far as it construed the date of transfer as November 19, 1982, for getting the benefit of Section 54E of the Income-tax Act, is erroneous. It was held that the second proviso to Sub-section (1) of Section 54E is only clarificatory in nature, that in the case of compulsory acquisition of property under the statute, if the full amount of compensation awarded for such acquisition is not received by the assessee on the date of such transfer, the period of six months referred to in Sub-section (1) of Section 54E shall, in relation to so much of such compensation as is not received on the date of transfer, be reckoned from the date on which such compensation is received by the assessee and the said provision should be deemed to have prevailed from the date of the enactment of Section 54E of the Act. The learned single judge further concluded that the National Rural Development Bonds (Second Issue) 1983, has been notified as a specified security in pursuance of Sub-clause (iii) of Clause (c) of Explanation 1 to Sub-section (1) of Section 54E of the Income-tax Act, 1961. The investment made by the petitioner on August 26, 1983, in the National Rural Development Bonds (Second Issue), 1983, is an investment in a specified security. The second investment made on July 28, 1984, in the special series of units issued under the Capital Gains Unit Scheme of 1983 was held to be notified as a specified security by Notification No. G. S. R. 804(E) dated October 27, 1983 (See [1983] 144 ITR (St.) 63). Both the investments were held to be in specified securities enabling the assessee to avail of the benefit under Section 54E of the Income-tax Act. The original petition was allowed. Aggrieved by the said judgment of the learned single judge, dated March 22, 1990 (See [1990] 186 ITR 63), the Revenue has come up in writ appeal. The judgment of the learned single judge is reported in Fr. Joseph Vilengetil v. Union of India [1990] 186 ITR 63 (Ker) ; [1990] 2 KLT 137.

(2.) WE heard counsel for the Revenue, Mr. N. R. K. Nair. The relevant statutory provisions with which we are concerned are Section 54E(1) and the second proviso to Section 54E (1) of the Act They are as follows :

(3.) IN the light of the above, we hold that the learned single judge was justified in quashing exhibit P-1 and directing the INcome-tax Officer to rework the benefit available to the assessee in the light of the observations contained in his judgment.