2013 (7) TMI 948 - AT - Income Tax

Applicability of provisions of Sec. 50C - Held that - In the interest of justice and fair play, we restore this issue back to the files of the AO. The AO is directed to verify whether the impugned land was a leasehold land in the hands of the assessee and what has been transferred is only leasehold rights. The assessee is directed to file all necessary related documents/evidences before the AO. The AO is expected to give a reasonable opportunity of being heard to the assessee. If the AO is convinced that what has been transferred is a leasehold right, then the issue is to be decided in the light of the decision of the Tribunal in the case of Atul G. Puranik (2011 (5) TMI 576 - ITAT, Mumbai ). Disallowance of exemption claimed by the assessee u/s. 54EC - Held that - The claim has been denied because the assessee has invested in the REC Bonds beyond the period of limitation prescribed under the said section. It is the say of the Ld. Counsel that such Bonds were not available during the period of limitation, therefore, the assessee could not have purchased the Bonds within the specified period. Therefore, we restore this issue also back to the files of the AO. The AO is directed to verify whether REC bonds were available during the period of limitation and if the Bonds were not available, then the assessee cannot be penalized for doing something impossible to perform because REC Bonds are Government Bonds and if they are not available in the market, the Revenue cannot expect the assessee to fulfill the conditions of Sec. 54EC of the Act.

Summary

Issues:
1. Applicability of Sec. 50C of the Act
2. Granting of exemption u/s. 54EC of the Act

Analysis:

Issue 1: Applicability of Sec. 50C of the Act
The case involved the assessee disputing the applicability of Sec. 50C of the Act regarding the sale of land and claiming it was a transfer of leasehold rights, not land itself. The Assessing Officer (AO) had recomputed capital gains using Stamp Duty value as full consideration and disallowed exemption u/s. 54EC. The Tribunal noted that lower authorities did not address this issue. The Tribunal referred to a similar case and held that Sec. 50C applies only to "land or building or both," not lease rights. The Tribunal directed the AO to verify if the land was leasehold and if only leasehold rights were transferred, requiring the assessee to provide related documents for a fair decision.

Issue 2: Exemption u/s. 54EC of the Act
The second issue concerned the disallowance of exemption claimed u/s. 54EC due to investment in REC Bonds beyond the prescribed period. The Tribunal directed the AO to investigate if REC Bonds were available during the limitation period. The assessee argued that as the Bonds were unavailable, penalizing for non-investment was unjust. The Tribunal restored this issue to the AO for verification, instructing the assessee to prove the unavailability of Bonds during the limitation period. Both grounds were remanded to the AO for further examination.

In conclusion, the Tribunal allowed the appeal for statistical purposes, emphasizing the need for a fair assessment based on the specific circumstances of the case. The judgment highlighted the importance of proper verification and consideration of all relevant factors before making tax-related decisions, ensuring justice and adherence to legal provisions.