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Issues involved: Appeal against order directing Assessing Officer to allow exemption u/s 54EC of Income-tax Act to assessee.
Summary: 1. The appeal was filed by the department against the order of the CIT(A) directing the Assessing Officer to allow exemption under section 54EC of the Income-tax Act to the assessee, an individual who sold shares and invested the proceeds in Rural Electrification Bonds. 2. The Assessing Officer denied the exemption on the ground that the investment in the bonds was in joint names, which is not permitted under section 54EC. However, the CIT(A) held that there is no such requirement in the section and allowed the appeal, noting that the investment was made without any contribution from the son and for the convenience of the assessee to avoid future hassles. 3. The Tribunal found that the main requirement of section 54EC is that the sale proceeds of the capital asset must be invested in specified assets like bonds of certain corporations established for infrastructure development. The Tribunal emphasized that the investment being in joint names does not affect the eligibility for exemption as long as the funds used for the investment are traceable to the sale proceeds. 4. The Tribunal further noted that including the son's name was a practical decision by the 69-year-old assessee to avoid future problems, which is a common practice especially for individuals of advanced age. It highlighted that tax laws should be interpreted reasonably and liberally, and the Assessing Officer's restrictive interpretation of the section was unjustified. 5. In line with a decision by the Mumbai Bench, ITAT, the Tribunal held that it is sufficient compliance with the section if the investment is made in joint names, as long as the sale consideration is invested in the specified asset. The appeal filed by the revenue was dismissed, confirming the assessee's eligibility for exemption u/s 54EC. End of Summary
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