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2013 (11) TMI 518 - AT - Income TaxDeduction u/s 54EC - Investment in two years - The Assessee claimed the exemption of the Capital Gains amounting to Rs. 1,00,00,000 by making investment - The Assessee claims that he has invested the funds within 6 months and therefore is entitled for exemption under Section 54EC - Interpretation of proviso of Section 54EC(1) - Held that - The plain reading of the section as well as the proviso clearly suggests the same interpretation. There is no ambiguity in the interpretation. Had there been an intention of the legislature to restrict the exemption to Rs.50,00,000/-, the legislature would have provided the embargo in this regard. Restriction relates only to the investment made in any financial year by the assessee. Making of the investment is a condition for availing of the exemption. Condition for availing of the exemption requires that the investment can be made within a period of 6 months. If 6 months falls within a different financial year, as has happened in this case, in our opinion, this Tribunal cannot add the embargo that the assessee cannot make the investment to avail of the exemption under Section 54EC in the different financial year if he had already made the investment in the financial year in which the capital asset is transferred. In our opinion, the language of Section 54EC is clear and unambiguous and it leads to the interpretation that the assessee can make the investment in two different financial years provided in a financial year the investment made did not exceed Rs.50,00,000/-. We have also gone through the circular no. 3/2008 dtd. 12.3.2008 issued by the CBDT being an explanatory note on the provisions relating to direct taxes in Finance Act, 2007 - it is apparent that the Government only intended to restrict the investment in a particular financial year and accordingly has fixed the limit of Rs. 50,00,000/- as permissible limit in a particular financial year. The Government did not intend to restrict the maximum amount of exemption permissible under Section 54EC. Legislature in our opinion has consciously used the words in a financial year in the proviso to Sec. 54EC of the Act. If the legislature wanted to restrict the exemption itself to Rs. 50,00,000/-, it could have have simply dispensed with using the words in a financial year - Following decision of Vikrant Tyres Ltd. v. First ITO 2001 (2) TMI 129 - SUPREME Court and CIT v. Vegetable Products Ltd. 1973 (1) TMI 1 - SUPREME Court - Decided against Revenue.
Issues Involved:
1. Interpretation of the provisions of Section 54EC of the Income Tax Act. 2. Determination of the allowable exemption limit under Section 54EC for investments in long-term specified assets within a financial year. 3. Validity of the investments made within six months but spanning two financial years. Issue-wise Detailed Analysis: 1. Interpretation of the provisions of Section 54EC: The primary issue in this appeal is the interpretation of the proviso to Section 54EC of the Income Tax Act, which states, "provided that the investment made on or after the first day of April, 2007 in the long-term specified asset by an assessee during any financial year does not exceed fifty lakh rupees." The Revenue argued that the allowable exemption under Section 54EC is limited to Rs. 50,00,000/- per financial year, thereby restricting the total exemption to Rs. 50,00,000/- even if the investments span two different financial years. 2. Determination of the allowable exemption limit under Section 54EC for investments in long-term specified assets within a financial year: The Assessee had invested Rs. 50,00,000/- in REC Bonds on 31.3.2008 and another Rs. 50,00,000/- on 30.6.2008, claiming a total exemption of Rs. 1,00,00,000/-. The Assessing Officer allowed only Rs. 50,00,000/- as exemption, adding the remaining Rs. 50,00,000/- to the Assessee's income. The CIT(A) deleted this addition, allowing the full exemption of Rs. 1,00,00,000/-. The Tribunal noted that the issue is covered in favor of the Assessee by decisions of the Bangalore Bench in Vivek Jairazbhoy v. Dy. CIT and the Ahmedabad Bench in Aspi Ginwala, Shree Ram Engg. & Mfg. Industries v. Asstt CIT. In these cases, it was held that the Assessee is entitled to an exemption of Rs. 1 crore under Section 54EC if the six-month investment period spans two financial years, allowing Rs. 50,00,000/- investment in each financial year. 3. Validity of the investments made within six months but spanning two financial years: The Tribunal emphasized that the language of Section 54EC and its proviso is clear and unambiguous, indicating that the exemption limit of Rs. 50,00,000/- is per financial year. The Tribunal also referred to CBDT Circular No. 3/2008, which clarifies that the ceiling on investment is to ensure equitable distribution among investors, not to restrict the total exemption. The Tribunal further supported its decision by citing the Hon'ble Supreme Court's rulings in IPCA Laboratory Ltd. v. Dy. CIT and Vikrant Tyres Ltd. v. First ITO, emphasizing that the interpretation of tax statutes should adhere to the clear wording of the provision. The Tribunal concluded that the Assessee could make investments in two different financial years, each not exceeding Rs. 50,00,000/-, and thus claim a total exemption of Rs. 1 crore. Conclusion: The Tribunal upheld the CIT(A)'s order, allowing the Assessee's claim for exemption under Section 54EC amounting to Rs. 1 crore, as the investments were made within six months but spanned two financial years. The appeal filed by the Revenue was dismissed.
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