2022 (3) TMI 248 - AT - Income Tax

Claim of exemption u/s. 54EC - Time limit for investment of long-term capital asset - HELD THAT - Time limit for investment of long-term capital asset, is six months from the date of transfer and even if such investment falls under two financial years the benefit of investment of ₹ 50 Lakhs individually in each financial year as claimed by the Assessee herein, cannot be denied. Consequently, the order under challenge is liable to be set aside while allowing appeal of the Assessee, hence ordered accordingly.

Summary

Issues Involved:
Claim of exemption u/s. 54EC of the Income Tax Act, 1961 for the assessment year 2009-10.

Analysis:
1. The appellant, an assessee, filed a return of income for the assessment year 2009-10, declaring total income. Subsequently, it was found that the assessee had sold two immovable properties during the FY 2008-09. The case was reopened under section 147 of the Act, and the issue revolved around the deduction claimed under section 54EC of the Act for investments in REC bonds. The assessing officer disallowed a portion of the claimed deduction, citing provisions of section 54EC and relevant circulars.

2. The assessee challenged the disallowance before the Commissioner of Income Tax (Appeals), who partially allowed the appeal, relying on a judgment by the Jaipur Bench of ITAT. The Commissioner restricted the addition and deletion of the disallowed amount based on the interpretation of section 54EC. The assessee then appealed against this decision.

3. The ITAT Delhi considered the case, emphasizing the provisions of section 54EC regarding the investment of capital gains in specified assets. The tribunal noted conflicting decisions from different benches, including one from the Jaipur Bench and another from the Delhi Tribunal. The Delhi Tribunal upheld the deletion of a similar addition, following the judgment of the Madras High Court in a related case.

4. The ITAT analyzed the legislative intent behind the amendments to section 54EC and the insertion of a second proviso, effective from 1-4-2015. The tribunal highlighted the importance of the timing of investments in relation to the date of transfer and the financial years involved. The tribunal also referenced the memorandum of understanding regarding the amended provisions and concluded that the assessee's claim for deduction under section 54EC was valid.

5. Considering the specific facts and circumstances of the case, the ITAT allowed the appeal of the assessee, setting aside the order under challenge. The tribunal held that the benefit of investment of ?50 lakhs individually in each financial year, as claimed by the assessee, could not be denied. Therefore, the appeal filed by the assessee was allowed, and the order was pronounced in open court on 22/02/2022.