2018 (10) TMI 67 - AT - Income Tax

Disallowing deduction u/s 54EC - AO disallowed the claim of the assessee for the investment made in NHAI bonds which was invested in the second time for ₹ 50,00,000/- - no investment in these bonds within the time prescribed - Held that - We find that in the identical facts and circumstance this tribunal in the case of Aspi Ginwala, Shree Ram Engg. & Mfg. Industries vs. ACIT 2012 (4) TMI 195 - ITAT AHMEDABAD held that there is no dispute about the fact that subscription of eligible bonds was closed during this period till 26-52008 and on the 1st day of the reopening of the subscription, the assessee made this investment. Under the circumstances, the assessee was prevented by sufficient cause which was beyond his control in making investment in these bonds within the time prescribed. Further various judicial authorities have taken a view that exemption should be granted in such cases where there is a delay in making investment due to non-availability of the bonds and have held that it is a reasonable cause and the exemption should be granted. - Decided in favour of assessee Deduction u/s 54F denied - non deposit any amount under the capital gain account scheme - Held that - there was no need to deposit any amount under the capital gain account scheme. In holding so we find support & guidance from the judgment of Hon ble Karanatka High Court in the case of CIT Vs. K. Ramachandra Rao 2015 (4) TMI 620 - KARNATAKA HIGH COURT - No disallowance u/s 54F can be made in the instant case on account of non-deposit of money in capital gain account scheme. Therefore, we have no hesitation in reversing the order of authorities below. Hence ground of appeal of the assessee is allowed.

Issues Involved:
1. Restriction of exemption under Section 54EC of the Income Tax Act.
2. Date of investment for Section 54EC exemption.
3. Consideration of jurisdictional Tribunal decisions.
4. Disallowance of exemption under Section 54F of the Income Tax Act.
5. Alternative claim under Section 54F.
6. Levy of interest under Sections 234A, 234B, and 234C.
7. Initiation of penalty proceedings under Section 271(1)(c).

Issue-Wise Detailed Analysis:

1. Restriction of Exemption under Section 54EC:

The assessee claimed a deduction of ?1 crore under Section 54EC by investing in NHAI bonds. The AO restricted the exemption to ?50 lakh, citing the provision's limit. The AO referenced the Hon’ble Tribunal of Jaipur's decision in ACIT vs. Shri Rajkumar Jain & Sons (HUF), which supported the restriction. The CIT(A) upheld the AO's decision, emphasizing that the legislature intended only one investment per financial year, as indicated by the term "investment" in Section 54EC. The CIT(A) also noted both investments were made in the same financial year, thus limiting the exemption to ?50 lakh.

2. Date of Investment for Section 54EC Exemption:

The assessee argued that the date of payment/encashment of the cheque should determine the investment date, not the allotment date. The assessee cited the ITAT Bangalore Bench's decision in Shri Vivek Jairazbhoy vs. DCIT, which held that the date of cheque payment is relevant. The Tribunal found merit in this argument, noting that the investment was made within the statutory six-month period, thus entitling the assessee to the full exemption of ?1 crore under Section 54EC.

3. Consideration of Jurisdictional Tribunal Decisions:

The assessee contended that the CIT(A) failed to consider binding decisions from the jurisdictional Tribunal. The Tribunal acknowledged this oversight, referencing its own decision in Aspi Ginwala, Shree Ram Engg. & Mfg. Industries vs. ACIT, which allowed exemption for investments spanning two financial years. The Tribunal also cited the Madras High Court's decision in CIT vs. C. Jaichander, which supported the assessee's position.

4. Disallowance of Exemption under Section 54F:

The assessee claimed a ?15 lakh deduction under Section 54F for purchasing and constructing a residential property. The AO disallowed this, arguing the purchase was for a plot, not a house, and the construction was incomplete within three years. The AO also noted the assessee did not deposit the capital gain in a specified account. The CIT(A) upheld the AO's decision, finding no evidence of a residential property purchase or construction completion.

5. Alternative Claim under Section 54F:

The assessee argued that if the Section 54EC claim was disallowed, the investment in the residential property should be considered under Section 54F. The Tribunal found that the assessee had invested in a plot and completed construction within three years, supported by property tax receipts and photographs. The Tribunal held that the purchase of land is part of constructing a residential house, reversing the CIT(A)'s decision and allowing the Section 54F exemption.

6. Levy of Interest under Sections 234A, 234B, and 234C:

The Tribunal did not specifically address the levy of interest under Sections 234A, 234B, and 234C in the provided judgment.

7. Initiation of Penalty Proceedings under Section 271(1)(c):

The Tribunal did not specifically address the initiation of penalty proceedings under Section 271(1)(c) in the provided judgment.

Conclusion:

The Tribunal allowed the appeal, granting the assessee the full ?1 crore exemption under Section 54EC and the ?14.45 lakh exemption under Section 54F. The Tribunal emphasized the importance of considering the date of cheque payment for Section 54EC and recognized the completion of residential construction for Section 54F, reversing the lower authorities' decisions.

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