B.P. Jeevan Reddy, J.
1. Under section 256(1) of the Income-tax Act, 1961, the Income-tax Appellate Tribunal had referred the following question :
'Whether, on the facts and in the circumstances of the case, the assessee is entitled to the relief under section 54E of the Income-tax Act, 1961, in respect of the sum of Rs. 50,000 placed in a fixed deposit on February 7, 1981 ?'
2. Survey No. 422 in Atmakur Village was owned by the assessee (Gopal Reddy) and Ramachandra Reddy. The said land was acquired by the State of Andhra Pradesh under the provisions of the Land Acquisition Act, 1894. Notification under section 4(1) was made on August 25, 1977, and possession of the property taken on January 10, 1978. It is not clear from the record whether possession was taken under section 17(1) or otherwise. Be that as it may, all the authorities under the Act have acted on the footing that January 10, 1978, is the date of the transfer. Award was passed on July 17, 1978, but, for reasons which are not clear, the notice of the award was given only on August 1, 1980, to the assessee. Compensation was received by him on August 19, 1980. The assessee got Rs. 66,605.13 as his share. On February 7, 1981, he invested a sum of Rs. 50,000 out of the said compensation in a fixed deposit in the Bank of Baroda and claimed relief under section 54E(1) for the amount deposited. The assessee's case was that inasmuch as he received the compensation only on August 19, 1980, the deposit made by him on February 7, 1981, is within six months of the receipt and, hence, he is entitled to the benefit of section 54E(1). The Income-tax Officer rejected the said claim on the ground that the deposit was not made within six months from the date of the transfer, i.e., January 10, 1978. His view was confirmed on appeal by both the appellate authorities, whereupon the present reference was obtained by the assessee. The assessment year concerned herein is 1978-79.
3. Section 54E was introduced by the Finance (No. 2) Act of 1977. Sub-section (1), in so far as it is relevant, read as follows at the relevant time :
'54E. Capital gain on transfer of capital assets not to be charged in certain cases. - (1) Where the capital gain arises from the transfer of a capital asset, not being a short-term capital asset (the capital asset so transferred being hereafter in this section referred to as the original asset), and the assessee has, within a period of six months after the date of such transfer, invested or deposited the full value of the consideration or any part thereof received or accruing as a result of such transfer in any specified asset (such specified asset being hereafter in this section referred to as the new asset), the capital gain shall be dealt with in accordance with the following provisions of this section, this is to say...'
4. The assessing authority as well as the appellate authorities have rejected the assessee's claim on the ground that, inasmuch as the deposit made by him was not within six months of the date of the transfer (which in this case is January 10, 1978), he is not entitled to the benefit of the said provision. The assessee's case, however, is that though the date of the transfer in this case may be January 10, 1978 (because that is the date on which possession was taken), not a pie was paid to him on that date. The award was passed later and the compensation amount was paid to him only on August 19, 1980. It is also contended by him that the notice of award was given to him only on August 1, 1980, though the award may have been passed two years earlier. It is submitted that without the money being made available to him, he could not have deposited the consideration in the specified asset within six months of January 10, 1978. Mr. Y. Ratnakar, learned counsel for the assessee, argues that by taking the view which the authorities below have taken, they are asking the assessee to do the impossible. Such an interpretation, he says, should be avoided. He stresses the words 'consideration or any part thereof received' in the said sub-section and wants us to hold that the period of six months in such a situation should be computed from the date of receipt of the consideration. He brought to our notice the second proviso to sub-section (1) of section 54E, inserted by the Taxation Laws (Amendment) Act, 1984, with effect from April 1, 1984, which specifically provides for such a situation. The proviso reads :
'Provided further that in a case where the transfer of the original asset is by way of compulsory acquisition under any law and 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 this sub-section shall, in relation to so much of such compensation as it not received on the date of the transfer, be reckoned from the date immediately following the date on which such compensation is received by the assessee'.
5. Learned counsel submits that this proviso is merely clarificatory in nature; that even prior to April 1, 1984, the very same position obtained and that, according to the said position, the period of six months should be computed from the date when the original, or enhanced compensation, as the case may be, is received. Mr. Ratnakar further submitted that section 54E confers a benefit upon the assessees; it goes to reduce the burden of tax. In such a case, he says, the provision should be construed liberally and beneficially. It should be construed in a reasonable manner, which means, according to learned counsel, avoiding a situation where the law would be asking an assessee to do the impossible.
6. On the other hand, Sri M. Suryanarayana Murthy, learned standing counsel for the Revenue, submits that the second proviso to section 54E(1) is not clarificatory in nature and that prior to the insertion of the said proviso, the benefit under section 54E(1) was available only where the consideration was deposited within six months of the date of the transfer. He submits that in a taxation law, there is no room for equity. Equity and the taxation law are strangers, he says. Section 54E(1) is in the nature of an exception to section 45; it is a benefit conferred by law subject to certain conditions. If an assessee wishes to take advantage of the said benefit, he has to comply strictly with the conditions specified. It is not permissible for this court to extent the benefit or relax or modify the conditions subject to which the benefit is conferred. He submits that merely because there is some difficulty for the assessee in such a case, it is not permissible for this court to read words into the statute. This court, he says, cannot take over the legislative functions and amend the provision just because it is faced with a hard case.
7. Both counsel stated that there is no decision on the points arising herein. They have, however, cited several decisions laying down the rules of interpretation in the case of a taxing statute, in the case of an exception and in the case of a provision conferring a benefit upon an assessee. We do not, however, think it necessary to refer to them. It is true that section 54E is in the nature of a special provision. Whether it can be called an exception to section 45 or not, is immaterial. It indeed confers a benefit upon the assessees; it also serves a public purpose. The idea was to encourage investment in specified assets, all of which are, generally speaking, of a public nature. It provides that where the consideration received in lieu of transfer of a capital asset is invested, within six months from the date of the transfer, in a specified asset, and for the period specified, the said consideration shall not be chargeable to capital gains tax. Whether it is a taxing statute or any other statute, it has to be construed reasonably. The effort should always be to ascertain the intention of Parliament from the words employed, as far as possible; an interpretation which leads to absurdity should be avoided. In this case, we are not dealing with a voluntary transfer - and it is important to stress this aspect. The property of the assessee was acquired compulsorily by the State in exercise of its power of eminent domain. Possession of the property was taken before the award was passed - and it is the common case of the parties that the date of the transfer is the date on which possession of the property was taken, i.e., January 10, 1978. But, the assessee was not paid a single pie on that date or within six months thereof. Compensation was paid to him only on August 19, 1980, i.e., more than 2 1/2 years later. If sub-section (1) of section 54E is construed literally, the assessee ought to have deposited the consideration within six months of January 10, 1978, if he wanted to avail of the benefit provided by the said provision. But it was impossible for the assessee to do so, because he was not paid the compensation on the date of the transfer or within six months thereof. The law could not have contemplated that the assessee, if at all he wanted to take advantage of the said provision, should invest some other amount/income in the specified asset. After all, what is to be invested is the consideration received by the assessee and not any other amount. It is precisely to meet such a situation that the second proviso was inserted by the Taxation Laws (Amendment) Act, 1984. Section 16 of the said Amendment Act, no doubt, does not say that the said proviso shall have retrospective effect; but, in our opinion, it would be consistent with reason to construe the said proviso as merely clarificatory. In other words, we are inclined to hold that even prior to April 1, 1984, the very same situation as has been expressly provided by the said Amendment Act obtained. Now, the said proviso says that in the case of compulsory acquisition of property under a 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) shall, in relation to so much of such compensation as is not received on the date of the transfer, be reckoned from the date on which such compensation is received by the assessee. The proviso takes note of the situation obtaining under the Land Acquisition Act which is the primary statute relating to compulsory acquisition of property. Normally speaking, possession of the property acquired is taken after the award is passed and the property vests in the State on the date possession is taken. However, the Act also provides for taking possession of the property even before the passing of the award, viz., section 17. In such a case, the property vests in the State on the date possession is taken, though the award is passed later. Prior to the Land Acquisition (Amendment) Act 68 of 1984, the Act did not provide for payment of any compensation on the date possession of the property is taken under section 17. The owner was obliged, all the same, to wait until the award is passed, for compensation. Then again, the Act provides for a reference to the civil court, in case the owner is not satisfied with the compensation awarded by the Land Acquisition Officer. A further appeal is provided to the High Court and yet another appeal to the Supreme Court under article 136 of the Constitution. It may happen in a given case that compensation is enhanced by the civil court, then again by the High Court and yet again by the Supreme Court. It is to meet such a situation where full compensation is not received by the claimant/assessee at one stage that the said proviso was made. The proviso does not apply to voluntary acquisition, but only to compulsory acquisition under a statute. The reason is obvious. The owner of the property has no choice in the matter; he has no choice in the matter of acquisition, nor has he any choice in the matter of receipt of compensation. All that he has to do is to receive the compensation awarded by the Land Acquisition Officer, and if dissatisfied with it, fight for enhancement in accordance with law. In such a situation, and for the further reason that what the law contemplates is investment of consideration in the specified asset, we are inclined to hold that in the case of compulsory acquisition, the period of six months should be reckoned from the date of receipt of compensation, as and when received. In other words, the provision made by the second proviso to sub-section (1) should be deemed to have prevailed even prior to April 1, 1984, i.e., with effect from the date of enforcement of section 54E.
8. There was a controversy before us as to the very meaning of the second proviso to section 54E(1). The contention of learned standing counsel for the Revenue was that it is applicable only to enhanced compensation, but not to original compensation. (The expression 'original compensation' means and refers to the compensation awarded by the Land Acquisition Officer). We do not, however, think that this should be the meaning or purport of the said proviso. There is no reason why the proviso should not be made applicable to the original compensation as well where it is received not on the date of the transfer, but on a different, subsequent, date.
9. We are not impressed by the argument of learned standing counsel that by adopting the interpretation which we have done, we would be reading words into the statute, or that we would be modifying or amending the statute. We may emphasis that what is to be invested in specified assets is 'the consideration or any part thereof,' and unless the consideration is received or accrues, there is no question of investing it. At this stage, we must refer to yet another submission of learned standing counsel. He submits that section 54E(1) uses not only the expression 'received' but also the expression 'accruing'. Emphasis is upon the words 'the consideration or any part thereof received or accruing as a result of such transfer.' We are prepared to agree that the word 'accruing' may have been used to meet certain situations; but, the said expression has certainly no relevance in a situation like the present one. There is no question of consideration, arising from a compulsory transfer, accruing to an assessee, like the assessee concerned herein. Therefore, whatever purpose the said expression may have intended to serve, it has no relevance on the issue arising herein.
10. Before parting with this case, a brief reference to some of the decisions cited at the Bar may be in order. In CIT v. Gotla (J.H.) , the Supreme Court observed (headnote) : 'though equity and taxation are often strangers, attempts should be made that these do not remain always so and if a construction results in equity rather than in injustice, then such construction should be preferred to the literal construction'. Again in Saroj Aggarwal v. CIT : [1985]156ITR497(SC) , the Supreme Court observed (headnote) : 'Courts should, whenever possible, unless prevented by the express language of any section of compelling circumstances of any particular case, make a benevolent and justice-oriented inference...'
11. Learned standing counsel brought to our notice certain decisions rendered under section 184 and 185 of the Income-tax Act and stressed the principle thereof, viz., inasmuch as the said provisions confer a benefit upon the assessees, the assessees must strictly comply with the conditions prescribed in that behalf, if they wish to avail of the benefit. There can be no quarrel with the said proposition. We do not, however, see how the said principle should induce us to construe section 54E(1) in a manner which leads to an absurd or impossible situation, and which situation was, in fact, recognised by Parliament and provided for by enacting the second proviso thereto.
12. For the above reasons, we answer the question referred in the affirmative, i.e., in favour of the assessee and against the Revenue. No costs.