2014 (6) TMI 1044 - AT - Income Tax

Exemption u/s 54EC - assessee has invested the sale consideration in REC bonds beyond the prescribed time limit of six months - assessee is 94 years old, a retired army officer AND chartered accountant appearing for the assessee, the assessee fell ill and could not attend the work of depositing the sale consideration in the bonds within the rigidity of the time frame - HELD THAT - Assessee was prevented from investing his money within the period of six months because of his illness. The assessee was making efforts to locate a suitable house for him. The moment he came to know that it was not possible for him to find out a house immediately, he sought for the alternative remedy suggested by the statute to invest the funds in eligible bonds. Once he decided to invest in bonds, he fell ill and was prevented from purchasing the bonds within the stipulated period. As soon as he recovered from the illness, he purchased the bonds and complied with the provisions of sec.54EC even though by a normal gap of 59 days. Assessee is excused by the Doctrine of supervening impossibility. It was not possible for the assessee to purchase the bonds on or before 3rd December, 2007 because of his illness. He purchased the bonds immediately after recovering from the illness. Nominal delay of 59 days is excused by Law. When the delay is excused on a principle of law, we have to see that the assessee is entitled for the exemption on the ground that the delay is to be ignored. Therefore, we find that it is necessary to construe that the assessee has purchased the bonds within due date and, therefore, entitled for exemption provided under sec.54EC. - Decided in favour of assessee.

Summary

Issues:
1. Interpretation of sec.54EC for exemption from capital gains taxation.
2. Delay in investing sale proceeds in REC bonds.
3. Application of the Doctrine of supervening impossibility in tax law.

Analysis:
1. The appeal involved the interpretation of sec.54EC of the Income-tax Act, 1961, regarding exemption from capital gains taxation. The assessee, a retired army officer aged 94, sold a property in Delhi with the intention of moving to Chennai to be closer to family. However, due to the inability to find a suitable property in Chennai within the prescribed time, the assessee deposited the sale proceeds in REC bonds after a delay of 59 days. The Assessing Officer and the Commissioner of Income-tax(Appeals) rejected the claim under sec.54EC due to this delay.

2. The Tribunal acknowledged that technically, the delay in investing in REC bonds exceeded the six-month limit prescribed by sec.54EC. However, the Tribunal considered the unique circumstances of the case. The assessee, being a senior citizen, fell ill after the property sale, which hindered timely investment. The delay of 59 days was deemed reasonable considering the age and health condition of the assessee. The Tribunal applied the Doctrine of supervening impossibility to excuse the delay and held that the assessee should be entitled to the exemption under sec.54EC.

3. The Tribunal emphasized that the decision to excuse the delay was based on the specific facts and circumstances of the case. It was noted that the assessee acted diligently once recovered from illness and promptly invested in the bonds. The Tribunal directed the assessing authority to extend the benefit of sec.54EC to the assessee and revise the assessment accordingly. If eligible, the Tribunal ordered a refund to be issued within 45 days. The appeal filed by the assessee was allowed based on the application of the Doctrine of supervening impossibility in the context of tax law.

This judgment illustrates the importance of considering individual circumstances and applying legal principles judiciously, even in cases involving technical non-compliance with statutory timelines.