2014 (1) TMI 482 - AT - Income Tax

Restriction of claim u/s 54EC of the Act Held that - Both the purchases made by the assessee were within the six months period - the exemption provision has to be construed not transaction-wise but, financial year-wise - if the assessee is able to keep the six months limit from the date of transfer of capital asset, but, still able to place investment of Rs. 50 lakhs each in two different financial years, the restrictive proviso will limit the claim to Rs. 50 lakhs only - the assessee here had placed Rs. 50 lakhs in two different financial years but within six months period from the date of transfer of capital asset, assessee was definitely eligible to claim exemption upto Rs. 1 Crore Following Aspi Ginwala Shree Ram Engg. & Mfg. Industries v. Asstt. CIT 2012 (4) TMI 195 - ITAT AHMEDABAD - Claim of the assessee for exemption upto Rs. 1 Crore has to be allowed in accordance with Section 54EC of the Act Decided in favour of Assessee.

Summary

Issues:
Claim of exemption under Section 54EC restricted to Rs. 50 lakhs by CIT(Appeals).

Detailed Analysis:

1. Issue of Exemption Claim Restriction:
- The appellant challenged the restriction imposed by the CIT(Appeals) on her claim of exemption under Section 54EC of the Income-tax Act, 1961, reducing it from Rs. 1 Crore to Rs. 50 lakhs.

2. Investments Made by the Assessee:
- The appellant sold a property and invested the sale proceeds in various assets within the stipulated time frame.
- The Assessing Officer (A.O.) contended that the second investment of Rs. 50 lakhs in NHAI Bonds was not eligible for exemption as it exceeded the statutory limit of Rs. 50 lakhs for a financial year.

3. Arguments Before CIT(Appeals):
- The appellant argued that the ceiling mentioned in the proviso to Section 54EC(1) applied on a financial year basis, not transaction-wise.
- CIT(Appeals) upheld the transaction-wise interpretation, emphasizing equitable distribution of benefits among investors.

4. Contentions Before ITAT:
- The appellant contended that the restrictions were financial year-wise, and since both investments were made within six months of the capital asset transfer, each investment should be considered separately.
- The Departmental Representative (D.R.) supported the A.O.'s view based on the Explanatory Memorandum to the Finance Act, 2007.

5. ITAT's Decision:
- ITAT reviewed the statutory provisions and the Explanatory Memorandum, concluding that the restriction of Rs. 50 lakhs applied per financial year.
- Citing a similar case precedent, ITAT ruled in favor of the appellant, allowing the exemption claim of Rs. 1 Crore as the investments were made within the specified time frame but in different financial years.

6. Conclusion:
- The appeal filed by the assessee was allowed, granting the exemption claim of Rs. 1 Crore under Section 54EC of the Income-tax Act, 1961.