Case Note & Summary
The petitioner, Dr. Sujatha Ramesh, sold an immovable property during the Assessment Year 2013-14 and realized long-term capital gains. To claim exemption under Section 54EC of the Income Tax Act, 1961, she was required to invest the sale proceeds in specified bonds within six months from the date of transfer. She failed to do so within the stipulated period and made the investment after a delay of about six months. She then applied to the Central Board of Direct Taxes (CBDT) under Section 119(2)(b) of the Act for condonation of the delay. The CBDT, by order dated 26-11-2014, rejected her application solely on the ground that the application was filed beyond the prescribed period of six months from the date of transfer, without considering the merits of the case. Aggrieved, the petitioner filed a writ petition under Articles 226 and 227 of the Constitution of India before the High Court of Karnataka. The High Court examined the scope of Section 119(2)(b) and held that the CBDT's power to condone delay is not subject to any time limit. The provision is meant to mitigate hardship and should be liberally construed. The court observed that the CBDT had mechanically rejected the application without applying its mind to the facts. The impugned order was quashed, and the matter was remanded back to the CBDT for fresh consideration on merits, directing it to pass a speaking order within three months. The court also directed that the petitioner be given an opportunity of hearing.
Headnote
A) Income Tax - Condonation of Delay - Section 119(2)(b) of Income Tax Act, 1961 - CBDT's Power - The petitioner sold immovable property and failed to invest the capital gains in specified bonds within six months as required under Section 54EC. She applied for condonation of delay under Section 119(2)(b) after about six months. The CBDT rejected the application solely on the ground that the application was filed beyond the prescribed period. The High Court held that the CBDT's power under Section 119(2)(b) is not circumscribed by any time limit and the authority must consider the application on merits, especially when the delay is not inordinate and the provision is beneficial. The impugned order was quashed and the matter remanded for fresh consideration. (Paras 1-25) B) Income Tax - Section 54EC - Capital Gains Exemption - Liberal Interpretation - Section 54EC provides exemption from capital gains tax if the sale proceeds are invested in specified bonds within six months. The provision is beneficial and should be construed liberally. The CBDT, while exercising power under Section 119(2)(b), should condone delays in genuine cases to prevent hardship. (Paras 10-20)
Issue of Consideration
Whether the CBDT was justified in rejecting the petitioner's application for condonation of delay in making investment under Section 54EC of the Income Tax Act, 1961, on the ground that the application was filed beyond the prescribed period of six months from the date of transfer?
Final Decision
The High Court allowed the writ petition, quashed the impugned order dated 26-11-2014, and remanded the matter to the CBDT for fresh consideration on merits. The CBDT was directed to pass a speaking order within three months after giving the petitioner an opportunity of hearing.
Law Points
- Condonation of delay
- Section 119(2)(b) of Income Tax Act
- 1961
- Section 54EC of Income Tax Act
- Liberal construction of beneficial provisions
- CBDT's power to condone delay
- No time limit for CBDT to consider application
