2014 (8) TMI 72 - HC - Income Tax

Capital gains u/s 54EC Investment in REC bonds beyond stipulated period - Whether the Tribunal has jurisdiction and was right in holding that the assessee is entitled to capital gains exemption u/s 54EC Held that - The assessee can make his choice based on what is available or wait for a better option - assessee chose to wait but by the meantime, the option ran out and hence had to wait till the next opportunity Relying upon Commissioner of Income Tax v. Cello Plast 2012 (8) TMI 527 - BOMBAY HIGH COURT - the bonds were available for a limited time during this period between 1.7.2006 to 3.8.2006, makes no difference - The respondents had time till 21.9.2006, to invest in these bonds to avail the benefit u/s 54EC assessee cannot be deprived of this right conferred by the Act for no fault of theirs - the availability of the bonds only for a limited time during the period cannot prejudice the assessee s right to exercise the same upto the last date - The bonds were admittedly not available except during the said period no substantial question of law arises for consideration Decided against Revenue.

Summary

Issues:
1. Interpretation of Section 54EC for capital gains exemption.
2. Availability of REC Bonds within the stipulated time period.

Analysis:
Issue 1:
The case involved a dispute over the interpretation of Section 54EC of the Income Tax Act regarding capital gains exemption. The appellant challenged the order of the Income Tax Appellate Tribunal, arguing that the assessee invested in REC Bonds beyond the six-month period specified in the section, thus questioning the entitlement to the exemption. The Commissioner of Income Tax (Appeals) upheld the disallowance of the exemption, stating that the bonds were available for investment within the stipulated period. However, the Tribunal, referring to a Bombay High Court decision, ruled in favor of the assessee, emphasizing that the unavailability of REC Bonds during a specific period justified the delayed investment. The High Court concurred with the Tribunal's interpretation, highlighting that the statutory benefit should not be curtailed due to unforeseen circumstances, and upheld the decision, dismissing the appeal.

Issue 2:
The second issue revolved around the availability of REC Bonds within the prescribed time frame for investment. The appellant contended that the assessee had the opportunity to invest in REC Bonds during a period when they were available, and thus, the delayed investment should not warrant capital gains exemption. However, the High Court emphasized that the absence of REC Bonds in the market for over 51 days created a situation where the assessee could not exercise the investment option within the entire six-month period. Citing the Bombay High Court decision, the High Court reiterated that the statute should not compel individuals to perform the impossible and extended a reasonable interpretation of Section 54EC to accommodate the unavailability of bonds. The Court concluded that the assessee's right to invest within the stipulated period should not be prejudiced by circumstances beyond their control, ultimately dismissing the appeal and upholding the Tribunal's decision.