2015 (8) TMI 754 - AT - Income Tax

Deduction u/s. 54EC - amount invested in REC bond in subsequent financial year - AO has taken a view that the assessee can be invested upto ₹ 50 Lac. out of capital gain only and if the assessee has invested in two difference assessment years within six months, then he is not entitled for deduction u/s. 54EC - CIT(A) allowed claim - Held that - The issue in controversy is covered by the decision of ITO Vs. Ms. Rania Faleiro reported in ( 2013 (11) TMI 518 - ITAT MUMBAI ). Amendment will come into force from A.Y. 2015-16 onwards and the amendment has been made in Sec. 54EC of the Act wherein it is amended that investment made by an assessee in the long-term specified asset, from capital gains arising from transfer of one or more original assets, during the financial year in which the original asset or assets are transferred and in the subsequent financial year does not exceed fifty lakh rupees. We find that this amendment is not applicable in this assessment year i.e. A.Y. 2008-09, therefore, ld. CIT(A) is justified in passing the impugned order. Decided against revenue.

Summary

Issues Involved:
Appeals filed by the Department against separate orders of ld. CIT (A) for A.Y. 2008-09; Disposal of appeals by consolidated order; Allowance of deduction u/s. 54EC exceeding limit; Interpretation of proviso inserted w.e.f. 01/04/2007 in sec. 54EC(1); Assessment of capital gains and exemption claimed; Application of amendment in Sec. 54EC from A.Y. 2015-16 onwards.

Analysis:

1. Appeals and Consolidated Order:
The Department filed two appeals against separate orders of ld. CIT (A) for A.Y. 2008-09, with a common issue. The Tribunal decided to dispose of both appeals through a consolidated order to address the shared concern efficiently.

2. Deduction u/s. 54EC and Exceeding Limit:
The Department raised grounds opposing the ld. CIT (A)'s order, particularly questioning the allowance of deduction u/s. 54EC exceeding the prescribed limit of Rs. 50,00,000 invested in REC bond in the subsequent financial year. The issue revolved around the interpretation of the proviso in sec. 54EC(1) regarding the investment ceiling.

3. Interpretation of Proviso in Sec. 54EC(1):
The case involved the interpretation of the proviso inserted w.e.f. 01/04/2007 in sec. 54EC(1) concerning the investment limit of Rs. 50,00,000 in a financial year for availing exemption u/s. 54EC. The assessee's argument emphasized a liberal interpretation in favor of the taxpayer, citing the intention behind the proviso and the equitable distribution of bonds.

4. Assessment of Capital Gains and Exemption Claimed:
The assessee derived income from a nursing home and had capital gains, claiming exemption u/s. 54EC for a significant amount. The Tribunal reviewed the capital gains from various asset sales and the investment in REC bonds to determine the eligibility for the claimed exemption, considering the specific circumstances of the case.

5. Application of Amendment in Sec. 54EC:
The Tribunal discussed the applicability of the amendment in Sec. 54EC from A.Y. 2015-16 onwards, highlighting that the specific amendment regarding investment limits in subsequent financial years did not apply to the assessment year in question (A.Y. 2008-09). This clarification influenced the decision-making process and the dismissal of the Department's appeals.

6. Conclusion:
The Tribunal, after considering the arguments and precedents, dismissed both appeals of the Department based on the findings related to the interpretation of the proviso in sec. 54EC(1) and the non-applicability of the specific amendment for the relevant assessment year. The decision was pronounced in an open court on 10th February 2015, providing clarity on the issues raised in the appeals.