2020 (9) TMI 490 - AT - Income Tax

Exemption u/s 54EC - Investment in two different financial years - investment made in NHAI bonds - A.O. concluded that both the investment in NHAI bonds happened in the same financial year i.e. in the financial year 2013-14 - HELD THAT - As per the provision of section 54EC(1) of the Act and its first proviso, it is clear that the time limit for investment is six months from the date of transfer and even if such investment falls under two financial years, the benefit claimed by the assessee cannot be denied. The amendment in Finance (No.2 Act) 2014 relate to assessment year 2015-16 (i.e. insertion of second proviso to section 54EC(1) and the same applies prospectively for and from assessment year 2015-16. Since assessee had invested ₹ 71 lakhs in two different financial years and within six months from the date of transfer of the capital assets, the limit of ₹ 50 lakhs is per financial year. Hence, the assessee is eligible for deduction of ₹ 71 lakhs u/s 54EC - Decided in favour of assessee.

Summary

Issues involved:
1. Denial of exemption u/s 54EC of the Income Tax Act for a sum of ?21 lakhs invested in NHAI bonds.

Analysis:

Issue 1: Denial of exemption u/s 54EC

The case involved an appeal against the CIT(A) order denying exemption u/s 54EC of the Income Tax Act for an investment of ?21 lakhs in NHAI bonds. The assessee had declared capital gains from the sale of a residential property for the assessment year 2013-14 and claimed deduction u/s 54EC for the investment made in NHAI bonds. The Assessing Officer (A.O.) did not allow the deduction for the ?21 lakhs invested, stating that both investments were made in the same financial year, 2013-14. The CIT(A) upheld the A.O.'s decision, relying on a Tribunal order. The appellant contended that the investments were made in two different financial years within the six-month period from the date of transfer of the asset, as required by section 54EC(1) of the Act.

The Tribunal analyzed the provisions of section 54EC(1) and its first proviso, emphasizing the six-month time limit for investment from the date of transfer. It noted that even if the investment spans two financial years, the benefit cannot be denied to the assessee. Referring to an amendment in the Finance Act 2014, the Tribunal clarified that the new provision applies prospectively from the assessment year 2015-16. Citing precedents from the Bengaluru Bench, the Tribunal highlighted that the limit of ?50 lakhs is per financial year for claiming deduction u/s 54EC. Since the assessee had invested ?71 lakhs in two different financial years within the stipulated time frame, the Tribunal ruled in favor of the assessee, allowing the deduction of ?71 lakhs u/s 54EC.

In conclusion, the Tribunal allowed the appeal filed by the assessee, emphasizing the eligibility for deduction of ?71 lakhs u/s 54EC of the Act based on the investments made in two different financial years within the prescribed time limit from the date of transfer of the capital asset.

This detailed analysis of the judgment comprehensively covers the issues involved in the case, highlighting the legal interpretation and application of relevant provisions to arrive at the final decision in favor of the assessee.