2020 (2) TMI 1686 - AT - Income Tax

Revision u/s 263 - Eligibility of deduction u/s 54EC - HELD THAT - There is no dispute between the parties about the two dates each of receipt of sale consideration of painting(s) followed by reinvestment in REC bonds. The assessee s reinvestment falls within six months from the date of transfer. He is entitled for the impugned section 54EC deduction. We make it clear that the legislature has amended section 54EC by inserting 2nd proviso to sub-section(1) of the Act by the Finance Act 2014 w.e.f. 01.04.15 restricting the reinvestment amount to a lumpsum of Rs.50,00,000/-; even if it involves more than one financial year, w.e.f 01.04.15 only without having retrospective effect. We wish to reiterate here that we are dealing with assessment year 2014-15. It emerges from the case records that the learned special bench had came across the concerned assessee s date of receipt of sale consideration as 10.06.08 and reinvestment of the corresponding capital gains on 17.12.08 only. We therefore adopt the reasoning Alkaben B. Patel 2014 (3) TMI 842 - ITAT AHMEDABAD mutatis mutandis and hold that the assessee s impugned reinvestment dated 28.04.14 after receiving final amount of consideration on 01.11.13 as very well beyond six months and therefore, he is entitled for the impugned section 54EC deduction. PCIT s impugned revision action in the above-narrated facts and circumstances is not sustainable since the Assessing Officer s alleged failure in either or not examining the case or disallowing the above-stated deduction relief has not caused any prejudice to interest of the Revenue. His assumption of section 263 revision jurisdiction stands reversed therefore. AO s regular assessment herein stands revived as a necessary corollary. Coming to remaining eight assessees cases both the learned representatives are ad idem that the same also involve identical facts since they had received the sale consideration of painting(s) on more than one occasion containing different dates followed by reinvestment thereof in REC bonds on similar two dates only. More particularly qua the latter one being beyond a period of six months from the date of transfer of the relevant capital asset(s). PCIT s revision direction in these eight cases are also stood reversed therefore.

Summary

Issues Involved:
1. Validity of the Principal Commissioner of Income Tax (PCIT)'s invocation of revision jurisdiction under section 263 of the Income Tax Act.
2. Eligibility of the assessees to claim deduction under section 54EC of the Income Tax Act.
3. Determination of the correct date of transfer for computing Long-Term Capital Gains (LTCG) and the corresponding six-month period for reinvestment.

Issue-wise Detailed Analysis:

1. Validity of the PCIT's Invocation of Revision Jurisdiction Under Section 263:

The PCIT invoked section 263 revision jurisdiction, terming the regular assessment as erroneous and prejudicial to the interest of the Revenue. The PCIT noted that the Assessing Officer (AO) had not examined the sale agreement during the assessment proceedings, which was crucial for determining the date of transfer and the eligibility for the section 54EC deduction. The PCIT directed the AO to re-examine the validity of the sale agreement and the date of transfer, stating that the assessment order was erroneous and prejudicial to the Revenue's interest.

2. Eligibility of the Assessees to Claim Deduction Under Section 54EC:

The assessees claimed deductions under section 54EC by reinvesting the LTCG in REC bonds. The PCIT disputed the eligibility for the deduction, arguing that the second investment was made beyond the six-month period from the date of transfer. The assessees contended that the sale was completed on 19.10.2013, the date of the final payment, and both investments were within six months from this date. The Tribunal noted that various judicial precedents support the view that the six-month period should be reckoned from the actual receipt of sale consideration. Therefore, the Tribunal held that the assessees' reinvestments fell within the six-month period, making them eligible for the section 54EC deduction.

3. Determination of the Correct Date of Transfer for Computing LTCG and the Corresponding Six-Month Period for Reinvestment:

The PCIT argued that the date of transfer should be 07.08.2013, the date of the sale bill, making the second investment on 28.04.2014 beyond the six-month period. The assessees argued that the date of transfer should be 19.10.2013, the date of the final payment and delivery of the painting. The Tribunal referred to judicial precedents, including the Special Bench decision in Alkaben B. Patel vs. ITO, which held that the six-month period should be read as six British calendar months rather than specific dates. The Tribunal concluded that the assessees' reinvestments were within six British calendar months from the date of transfer, making them eligible for the section 54EC deduction.

Conclusion:

The Tribunal held that the PCIT's invocation of section 263 revision jurisdiction was not sustainable as the AO's assessment did not cause any prejudice to the interest of the Revenue. The Tribunal reversed the PCIT's revision action and restored the AO's regular assessment. The Tribunal also held that the assessees were eligible for the section 54EC deduction as their reinvestments were within six British calendar months from the date of transfer. Consequently, the appeals of the nine assessees were allowed.