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2016 (9) TMI 1421 - AT - Income TaxDeduction u/s 54EC - time limit for investment in six months - Held that - Section 54EC(1) of the Act restricts the time limit for the period of investment after the property has been sold to six months. There is no cap on the investment to be made in bonds. The first proviso to section 54EC(1) of the Act, specifies the quantum of investment and it states that the investment so made on or after 01/04/2007 in the long term specified asset, by an assessee, during any Financial Year does not exceed fifty lakhs rupees. Prior to amendment, the time limit of ₹ 50 lakhs as prescribed u/s 54EC of the Act is per year and if the assessee invest ₹ 50 lakh each in two different years, otherwise fulfilling other conditions of section 54EC, such appellant will be entitle to the benefit of ₹ 1 crore and not merely ₹ 50 lakhs. In the case of the assessee, the capital gains arose on account of two distinct capital asset, arising from two distinct and separate agreements, one vide agreement dated 28/04/2008 and another vide agreement dated 14/10/2008, therefore, there are two separate computation of capital gains, for each assets. The assessee while computing capital gains has sought reinvestment benefit by investing, in the bonds prescribe u/s 54EC on 30/09/2008 against capital gain on 28/04/2008 and on 09/04/2009 against capital gain on 14/10/2008, therefore, the case of the assessee is clear, consequently, in view of the foregoing decision this ground of the assessee, in both appeals, is allowed.
Issues Involved:
1. Confirmation of the action of the Assessing Officer under sections 147 and 143(3) of the Income Tax Act. 2. Deduction under section 54EC of the Income Tax Act, specifically the limit on investments in specified bonds. Issue-Wise Detailed Analysis: 1. Confirmation of the Action of the Assessing Officer: - Dismissal of Grounds: During the hearing, the counsel for the assessee did not press grounds 1.1 and 1.2 related to the confirmation of the Assessing Officer's actions under sections 147 and 143(3) of the Income Tax Act. Consequently, these grounds were dismissed as not pressed. 2. Deduction under Section 54EC of the Income Tax Act: - Contention by Assessee: The assessee argued that the issue of deduction under section 54EC was covered by various judicial decisions, including those from the Hon'ble Madras High Court and other ITAT orders. The primary contention was that the assessee should be allowed a deduction of ?1 crore instead of the restricted ?50 lakh, as the investments were made in two different financial years. - Tribunal's Consideration: The Tribunal considered the rival submissions and reviewed the material on record. It referred to a previous decision in the case of ACIT vs Prakash Gunaji Sawardekar, where it was held that the investment limit of ?50 lakh specified under section 54EC applies per financial year, and investments made in different financial years should be considered separately. - Relevant Provisions and Interpretation: The Tribunal analyzed section 54EC, which provides for exemption from tax on long-term capital gains if invested in specified bonds within six months of the transfer. The first proviso to section 54EC(1) restricts the investment to ?50 lakh per financial year. The Tribunal noted that the provision does not cap the total investment but restricts it per financial year. - Legislative Intent and Amendments: The Tribunal acknowledged an amendment by the Finance (No.2) Act, 2014, effective from 01/04/2015, which clarified that the total investment in specified bonds should not exceed ?50 lakh in the financial year of transfer and the subsequent financial year. However, this amendment applies prospectively from the assessment year 2015-16. - Judicial Precedents: The Tribunal cited various judicial decisions supporting the view that investments made in different financial years should be considered separately for the ?50 lakh limit. This includes decisions from the Hon'ble Madras High Court and other ITAT benches. - Conclusion: The Tribunal concluded that prior to the amendment effective from 01/04/2015, the limit of ?50 lakh under section 54EC applies per financial year. Therefore, if the assessee invests ?50 lakh each in two different financial years, they are entitled to a total deduction of ?1 crore, provided other conditions of section 54EC are met. - Specific Case Analysis: In the specific case of the assessee, the capital gains arose from two distinct capital assets, with investments made in specified bonds in two different financial years. Hence, the assessee was entitled to the claimed deduction of ?1 crore. Final Judgment: - Both appeals were partly allowed, with the Tribunal granting the assessee the benefit of the higher deduction under section 54EC based on investments made in two different financial years. This order was pronounced in the open court on 17/08/2016, in the presence of representatives from both sides.
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