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2012 (3) TMI 257 - AT - Income TaxClaim of deduction u/s 54EC - Revenue filled an appeal that CIT(A) Ajmer has erred in allowing the claim of deduction u/s 54EC bynot appreciated the facts that the deemed date of allotment of Bond1 is beyond the time limit of 6 months as per section 54EC from the date of transfer - The assessee claimed deduction in respect of Long Term Capital Gain amounting to ₹ 1.00 Crore as the date of the investment by the assessee must be regarded as the date on which payment was made and received by the National Housing Bank. This was within a period of six months from the date of transfer of the asset thus the provisions of section 54EC were complied - Held that - It was provided in Section 54EC that in case the amount of Long term capital gain is invested in the long term specified asset then the assessee is not required to pay the capital gain tax - No more bonds will be issued by any person, if he has already made an investment of an amount aggregating more than ₹ 50 lakhs in the bonds already notified in notification no. 963E dated. 29 June, 206 or 964E dated 29th June - Investment within 06 months is the investment for that financial year in which transfer has taken place. Hence, subsequent investment is to be considered as part of the investment of financial year in which transfer has taken place - appeal in the favour of revenue was allowed.
Issues Involved:
1. Whether the assessee is entitled to claim deduction of Rs. 1,00,00,000 under Section 54EC by splitting the investment into two financial years. 2. Interpretation of the proviso to Section 54EC regarding the limit of Rs. 50,00,000 investment in any financial year. 3. Validity and applicability of the conditions imposed by the Central Government notifications on the investment limits under Section 54EC. Detailed Analysis: Issue 1: Entitlement to Deduction of Rs. 1,00,00,000 under Section 54EC The assessee, an HUF, filed a return of income declaring a capital gain of Rs. 1,14,09,880 from the sale of property and claimed a deduction under Section 54EC for Rs. 1,00,00,000 invested in specified bonds. The investment was split into Rs. 50,00,000 on 31.03.2008 and another Rs. 50,00,000 on 10.06.2008. The Assessing Officer (AO) restricted the deduction to Rs. 50,00,000, citing the proviso to Section 54EC which limits the investment to Rs. 50,00,000 in any financial year. The CIT(A) held that the assessee was entitled to a deduction of Rs. 1,00,00,000 as the investments were made in two different financial years, within six months from the date of transfer. The CIT(A) interpreted the proviso to mean that the limit of Rs. 50,00,000 applies separately to each financial year. Issue 2: Interpretation of the Proviso to Section 54EC The revenue argued that the proviso to Section 54EC should be interpreted to mean that the total investment for the purpose of claiming deduction should not exceed Rs. 50,00,000, regardless of whether the investment spans two financial years. The revenue contended that allowing the assessee to claim Rs. 1,00,00,000 by splitting the investment into two financial years would lead to discrimination among taxpayers, depending on the timing of the transfer of assets. The assessee argued that the proviso should be interpreted to allow investments of up to Rs. 50,00,000 in each financial year, provided the total investment is within six months from the date of transfer. The assessee cited various case laws to support the interpretation that the date of investment, not the date of allotment, should be considered for claiming the deduction. Issue 3: Validity and Applicability of Central Government Notifications The Tribunal examined the conditions imposed by the Central Government notifications, which restrict the investment in specified bonds to Rs. 50,00,000. The Tribunal referred to the case of Areva T & D India Ltd. v. Asstt. CIT, where the Madras High Court upheld the validity of such conditions. The Tribunal noted that the proviso to Section 54EC, introduced by the Finance Act 2007, limits the investment to Rs. 50,00,000 in any financial year. The Tribunal concluded that the interpretation allowing an investment of Rs. 1,00,00,000 by splitting it into two financial years would lead to inconsistencies and unfair advantages for certain taxpayers. The Tribunal held that the assessee is entitled to a deduction of only Rs. 50,00,000 under Section 54EC, as the investment should be considered as part of the financial year in which the transfer took place. Conclusion: The Tribunal upheld the AO's decision to restrict the deduction under Section 54EC to Rs. 50,00,000, reversing the CIT(A)'s order. The Tribunal emphasized that the investment limit of Rs. 50,00,000 applies to any financial year, and the assessee cannot claim a higher deduction by splitting the investment into two financial years. The appeal of the revenue was allowed.
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