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2016 (6) TMI 1279 - AT - Income TaxExemption claimed u/s 54EC - Capital gain not to be charged on investment in certain bonds - Held that - For the purpose of section 54EC, the date of investment is to be regarded as the dates of investment/the payment received by the authorized bank. It is noted that section 54EC of the Act has no restriction if the specified investment of ₹ 50 lakh is made in two different financial years. The exemption u/s 54EC is available to an assessee, if the long term capital gains, earned by the assessee, is invested in the specified long term asset and such investment is made within six months from the date of transfer of such long term asset. As per the proviso to section 54EC, the investment in any Financial Year is restricted to ₹ 50 lakh and since the assessee has made the investment of ₹ 50 lakh each in different two Financial Years but within six month from the date of transfer of the asset. - Decided in favour of assessee.
Issues:
Interpretation of section 54EC of the Income Tax Act regarding investment limits and exemptions. Analysis: The case involved a dispute over the application of section 54EC of the Income Tax Act, specifically regarding the investment limits and exemptions provided therein. The assessee, a retired senior citizen, had sold shares resulting in capital gains of &8377;1,11,63,450, out of which &8377;1 crore was invested in REC Bonds on two different dates. The Assessing Officer disallowed the exemption claimed under section 54EC, as the total investment exceeded the prescribed limit of &8377;50 lakhs. The dispute centered around whether the investment of &8377;50 lakhs each in two different financial years was permissible under the law. The Commissioner of Income Tax (Appeal) had deleted the addition, ruling in favor of the assessee, leading to the Revenue's appeal before the Tribunal. Upon analysis of the relevant provisions of section 54EC, the Tribunal emphasized that the date of receipt or accrual of the capital gains was crucial for determining the eligibility for exemption under the section. The Tribunal cited precedents and highlighted that the law does not compel an individual to perform an impossible task. It was clarified that the investment must be made within six months of receiving the sale consideration, and the date of transfer is when the assessee actually collects the amount. The Tribunal noted that there was no restriction in the law if the specified investment of &8377;50 lakhs was made in two different financial years, as long as it was within six months of the transfer of the asset. The Tribunal referenced decisions from various benches, including Mumbai and Chennai, to support its conclusion that the exemption under section 54EC is available if the long-term capital gains are invested in the specified asset within the stipulated timeframe. The Tribunal also highlighted the proviso to section 54EC, which restricts the investment in any financial year to &8377;50 lakhs. Since the assessee had invested &8377;50 lakhs each in two different financial years within the specified timeframe, the Tribunal found no fault with the Commissioner's decision to allow the exemption. The Tribunal dismissed the Revenue's appeal, upholding the Commissioner's order in favor of the assessee. In conclusion, the Tribunal's detailed analysis of section 54EC of the Income Tax Act, along with relevant precedents and legal interpretations, led to the dismissal of the Revenue's appeal. The decision clarified the permissible limits and conditions for claiming exemptions under the specified provisions, emphasizing the importance of compliance with the statutory requirements for availing tax benefits on capital gains investments.
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