High Court Of Karnataka
Motor Industries Company Ltd. vs. Union Of India & Ors.
Section 54EC
D.V. Shylendra Kumar, J.
Writ Petn. No. 17754 of 2006
12th December, 2006
Counsel Appeared
K.P. Kumar for King & Partridge, for the Petitioner
JUDGMENT
D.v. Shylendra Kumar, J. :
The writ petitioner is a company registered under the provisions of the Indian Companies Act, 1913, and an assessee under the provisions of the IT Act, 1961 (for short “the Act”). The petitioner is aggrieved due to the frustration of its intention to avail of certain benefits extended to an assessee in terms of s. 54EC of the Act.
2. If an assessee has made investment from out of the profits arising from the transfer of “longterm capital assets” in the notified bonds in terms of s. 54EC of the Act, then such income otherwise taxable as gains from the transfer of an asset is exempted from tax in terms of s. 54EC of the Act. Sec. 54EC of the Act reads as under : “54EC. Capital gain not to be charged on investment in certain bonds.—(1) Where the capital gain arises from the transfer of a long-term capital asset (the capital asset so transferred being hereafter in this section referred to as the original asset) and the assessee has, at any time within a period of six months after the date of such transfer, invested the whole or any part of capital gains in the long-term specified asset, the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say,— (a) if the cost of the long-term specified asset is not less than the capital gain arising from the transfer of the original asset, the whole of such capital gain shall not be charged under s. 45; (b) if the cost of the long-term specified asset is less than the capital gain arising from the transfer of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of acquisition of the long-term specified asset bears to the whole of the capital gain, shall not be charged under s. 45. (2) Where the long-term specified asset is transferred or converted (otherwise than by transfer) into money at any time within a period of three years from the date of its acquisition, the amount of capital gains arising from the transfer of the original asset not charged under s. 45 on the basis of the cost of such long-term specified asset as provided in cl. (a) or, as the case may be, cl. (b) of sub-s. (1) shall be deemed to be the income chargeable under the head ‘Capital gains’ relating to long-term capital asset of the previous year in which the long-term specified asset is transferred or converted (otherwise than by transfer) into money. Explanation.—In a case where the original asset is transferred and the assessee invests the whole or any part of the capital gain received or accrued as a result of transfer of the original asset in any long-term specified asset and such assessee takes any loan or advance on the security of such specified asset, he shall be deemed to have converted (otherwise than by transfer) such specified asset into money on the date on which such loan or advance is taken. (3) Where the cost of the long-term specified asset has been taken into account for the purposes of cl. (a) or cl. (b) of sub-s. (1), a deduction from the amount of income-tax with reference to such cost shall not be allowed under s. 88. Explanation.—For the purposes of this section,— (a) ‘cost’, in relation to any long-term specified asset, means the amount invested in such specified asset out of capital gains received or accruing as a result of the transfer of the original asset; (b) ‘long-term specified asset’ means any bond redeemable after three years, issued,— (i) on or after the 1st day of April, 2000, by the National Bank for Agriculture and Rural Development established under s. 3 of the National Bank for Agriculture and Rural Development Act, 1981 (61 of 1981) or by the National Highways Authority of India constituted under s. 3 of the National Highways Authority of India Act, 1988 (68 of 1988); (ii) on or after the 1st day of April, 2001, by the Rural Electrification Corporation Ltd., a company formed and registered under the Companies Act, 1956 (1 of 1956); (iii) on or after the 1st day of April, 2002, by the National Housing Bank established under sub-s. (1) of s. 3 of the National Housing Bank Act, 1987 (53 of 1987) or by the Small Industries Development Bank of India established under sub-s. (1) of s. 3 of the Small Industries Development Bank of India Act, 1989 (39 of 1989).”
With this background the relief which the petitioner is claiming in the context of an exemption Notification dt. 29th June, 2006, copy at Annex. A [Notification No. 142 of 2006 : (2006) 203 CTR (St) 23] to the petition, issued by the Central Government which has restricted the scope for such investment by notifying that the issue of the bonds wherein the petitioner had an opportunity for investment is restricted to a maximum of Rs. 1,500 crores (redeemable after three years) and to the misfortune of the petitioner, the bonds it appears came to be fully subscribed within a short time from the date of issue, though the financial year would end only by 31st March, 2007; that in spite of transfer of certain assets effected on 26th April, 2006, the petitioner finds no way of effecting investments in terms of the provisions of s. 54EC for the purpose of claiming benefit and therefore, is aggrieved by issue of Annexs. A-1 and A-2 notification, which has drastically reduced the scope for such investment and has approached this Court seeking for issue of a writ of mandamus. The submission of Sri K.P. Kumar, learned senior counsel appearing for the petitioner, is that whereas the provisions of s. 54EC itself do not impose any limit or restriction on the scope of such investments, since the notification confines the eligible investment to the total of Rs. 1,500 crores, which benefit is available to the public at large; that the notified bonds that are issued having been subscribed, there is no scope for such investment any further and therefore, virtually the provisions of s. 54EC of the Act are rendered nugatory and therefore a writ of mandamus should be issued to compel the Central Government, which has issued the notification and to issue writs as under : Issue a writ in the nature of mandamus or any other appropriate writ, order or direction to respondent No. 1 to remove the limit or ceiling prescribed under Annexs. A-1 and A-2, thereby enabling respondent Nos. 2 and 3 to accept investment from the petitioner;
Issue a writ, order or direction to respondent No. 1 to act in furtherance of s. 54EC of the Act to enable the petitioner to avail of the benefit of exemption thereunder; Issue a writ, order or direction to respondent Nos. 2 and 3 to accept investment from the petitioner as having been made under s. 54EC of the Act; Issue a writ, order or direction to respondent No. 4 to extend the time for investment in the specified bonds beyond 31st Dec., 2006, till such time as the petitioner has an adequate opportunity to make an investment in the tax exemption bonds issued by respondent Nos. 2 and 3; Issue a writ, order or direction to respondent No. 5 restraining him from denying the benefit of exemption under s. 54EC of the Act solely because respondent Nos. 1 to 4 have made it impossible for the petitioner to invest in the requisite bonds; Issue a writ of prohibition to respondent No. 5 ordering and directing him not to levy income-tax on the capital gain or not to deny the benefit of exemption under s. 54EC only by reason of the fact that the petitioner is unable to invest in the bonds on account of respondent No. 1 not lifting the ceiling on investment imposed on respondent Nos. 2 and 3.
5. The notification at Annexs. A-1 and A-2, while no doubt is one, which indicates that investment in such an issue also enables an assessee under the instructions to claim benefit of s. 54EC primarily is not one for the purpose of s. 54EC as can be seen. But is a notification for the purpose of raising funds for the use of national highways under the National Highways Act, 1988. A notification of this nature though incidentally to provide benefits to assessees under the IT Act, is one essentially permitting funds raised to issue bonds upto the limit mentioned. It is not necessarily one issued only for the purpose of availing of the benefits in terms of s. 54EC of the Act. It is not incumbent upon the Central Government to compel such undertaking like the National Highways Authority or the Rural Electrification Corporation Ltd. to borrow more funds from the public only to enable or facilitate persons like the petitioner, who might have missed the bus earlier to reap the benefits of the concessions under s. 54EC of the Act.
6. Be that as it may, in matters of this nature where the legislature extends certain benefits, particularly like tax concession to assessees, it is essentially a matter of policy to decide as to which sector should be encouraged and should be given a concession in payment of income-tax, etc. As to what amount of bonds should be notified for claiming a concession under s. 54EC is also a matter of consideration within the realm of the legislature and its delegate, the Central Government. It is not for the Courts to enter into such areas, particularly for issue of directions to the Government to compel them to extend or enlarge the scope of issue of such bonds or otherwise. The well accepted and celebrated legal principle is that no mandamus will be issued to the legislature. Such being the nature of the matter, I find no scope for interference for issue of a writ in the nature of mandamus as sought for by the petitioner, a writ of mandamus is declined, the writ petition is dismissed.
7. It is open to the petitioner to move such authorities or such functionaries which may enable the petitioner to claim such benefits under the provisions of the Act by pointing out the anomaly, if any, in the matter.
[Citation : 289 ITR 134]
