2019 (3) TMI 205 - AT - Income Tax

Deduction u/s 54EC - Reopening of assessment - scope of amendment - HELD THAT - When the case of the assessee was reopened on 14.03.2014, this amendment was not in existence and therefore restrictions imposed by statue under first proviso of section 54EC will not be applicable here. Thus we find substance in the argument advanced by the AR. Taking into consideration the order passed by the Learned Tribunal we are of the view that the assessee is entitled to exemption on the investment made of ₹ 50 lacs in NHAL bond on 13.04.2011 for long term capital gain since the same was invested within 6 months from the transfer of the capital asset. We delete the addition made by the authorities below. - Decided in favour of assessee.

Summary

Issues:
1. Interpretation of Section 54EC of the Income Tax Act, 1961 regarding deduction limit.
2. Reopening of assessment under section 147 based on excess claim of deduction.
3. Claim for exemption of long term capital gain on investment in NHAI bonds.

Issue 1: Interpretation of Section 54EC regarding deduction limit
The appeal was against an order confirming the deduction limit u/s 54EC at ?50 Lacs instead of ?1 Crore claimed by the assessee. The assessee sold a property and invested in NHAI bonds, claiming deduction u/s 54EC. The AO disallowed the excess claim as the maximum permissible deduction was ?50 Lacs. The AO relied on the Financial Act, 2014 which clarified the ambiguity in Section 54EC. The tribunal noted a similar case where the deduction of ?1 Crore was allowed, as the amendment restricting the deduction to ?50 Lacs was not in effect during the assessment year. Therefore, the tribunal allowed the deduction of ?50 Lacs invested in NHAI bonds within six months from the property sale.

Issue 2: Reopening of assessment under section 147 based on excess claim of deduction
The assessee's case was reopened under section 147 due to an excess claim of deduction u/s 54EC. The reasons for reopening stated that the assessee claimed ?1 Crore deduction under section 54EC, exceeding the permissible limit of ?50 Lacs. The assessee argued that the original return should be considered as compliance with the notice u/s 148. The tribunal found that the reopening was not valid as the amendment restricting the deduction to ?50 Lacs was not in effect during the assessment year.

Issue 3: Claim for exemption of long term capital gain on investment in NHAI bonds
The assessee invested in NHAI bonds within six months of selling a property to claim deduction u/s 54EC. The AO disallowed the excess claim beyond ?50 Lacs, bringing the remaining amount to tax. The tribunal allowed the deduction of ?50 Lacs invested within six months of the property sale, following a similar decision by a coordinate bench. The tribunal held that the assessee was entitled to exemption on the investment made within the specified timeframe, deleting the addition made by the authorities below.

In conclusion, the tribunal allowed the assessee's appeal, holding that the deduction of ?50 Lacs invested in NHAI bonds within six months of the property sale was permissible, based on the interpretation of Section 54EC and relevant judgments.