CIT vs. Cello Plast (Bombay High Court)

DATE: (Date of pronouncement)
DATE: August 17, 2012 (Date of publication)

Click here to download the judgement (cello_plast_54EC_time_limit_investment.pdf)

Fact that s. 54EC bonds were available during the 6 months & that there were alternative bonds available irrelevant if the bonds not available on the last date

The assessee sold factory building on 22.3.2006 and earned LTCG of Rs.49.36 lakhs. The LTCG was invested in s. 54EC bonds of Rural Electrification Corporation (“REC Bonds”) on 31.1.2007, beyond the period of 6 months (21.9.2006) specified in s. 54EC. The assessee claimed that the delay was due to the fact that for the period from 4.8.2006 to 22.1.2007, the bonds were not available and the investment was made when available. The Tribunal allowed the assessee’s claim (included in file). Before the High Court, the department argued that (a) even if the bonds were not available for a part of the period, they were available for some time in the period after the transfer (1.7.2006 to 3.8.2006) and the assessee ought to have invested then & (b) the s. 54EC bonds issued by National Highway Authority (NHAI) were available and the assessee could have invested in them. HELD by the High Court dismissing the appeal:

(i) The department’s contention that the assessee ought to have invested in the period that the s. 54EC bonds were available (1.7.2006 to 3.8.2006) after the transfer is not well founded. The assessee was entitled to wait till the last date (21.9.2006) to invest in the bonds. As of that date, the bonds were not available. The fact that they were available in an earlier period after the transfer makes no difference because the assessee right to buy the bonds upto the last date cannot be prejudiced. Lex not cogit impossibila (law does not compel a man to do that which he cannot possibly perform) and impossibilum nulla oblignto est (law does not expect a party to do the impossible) are well known maxims in law and would squarely apply to the present case;

(ii) The department’s contention that the assessee ought to have purchased the alternative s. 54EC NHAI bonds is also not well founded because if s. 54EC confers a choice investing either in the REC bonds or the NHAI bonds, the revenue cannot insist that the assessee ought to have invested in the NHAI bonds.

See also Mahesh Nemichandra Ganeshwade (ITAT Pune) & Chanchal Kumar Sircar 50 SOT 289 (Kol) where the “impossibility” principle was applied to cases of late receipt of consideration from the buyer

3 comments on “CIT vs. Cello Plast (Bombay High Court)
  1. Prathamesh Deshmukh says:

    good interpretation of law, but needs to clarify about how alternative bonds are available though Dept. plea is dis allowed??

  2. vswami says:

    The ongoing debate and battle of wits in judicial forums on the point which should prevail – is it the letter or spirit of the law OR the Principles of Natural Justice has been rather a vexing experience to taxpayers, kept in an animated suspension all the time.

    It is noteworthy that there has been a welcome change in judicial thinking in recent years; in that, the Judiciary has been increasingly veering round to prefer to take a pragmatic view, based on sound principles of natural justice; in preference to letter or spirit or both letter and spirit of man made law.

    A look at the write-up @ [DOC] date of challan.doc – Yimg…/date+of+challan.d…,
    however, bears testimony to the fact that because of mutually contradicting government rules and Executive circulars, tampered with not infrequently the controversy and the resulting prolongation of litigation continues to be kept alive.

    The opinion handed down by the Bombay HC on the point of issue raised u/s 54 EC deserves to be applauded as very well reasoned and grounded on sound logic.

    If critically looked at and analysed in detail, to one’s mind, there appears to be no rhyme or reason in failing to consider why the same logic should not hold good and be extended to like problems faced by taxpayers in satisfying the requiurement of time limit laid down by law; at least, in those cases in which a strict compliance with such requirement is beyond the control of humans i.e. taxpayers. For instance, as is the common experience, it is invariably the vendor of property, particularly of flats or apartments, who, having vested interests, is solely responsible for any delay in taxpayer fulfilling the requirement of purchase of a new asset within the time limit e.g. for tax exemption u/s 54.

    With a view to putting an end to the prevailijg agony meted out to taxpayers and the resultant ongoing prolonged ltigation, it is for the Executive, so also the government / legislature, to come out with suitable remdial steps and measures, on a war footing,

  3. prakashsabnani says:

    54 ec , 80 hhc

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