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2016 (10) TMI 533 - AT - Income TaxEligibility to exemption u/s 54EC(1) - Held that - Respectfully following the decision of the Hon ble Madras High Court in the case of CIT v. C. Jaichandar (2014 (11) TMI 54 - MADRAS HIGH COURT ) we hold that the language of the provisions of section 54EC(1) of the Act clearly and unambiguously mandate that the assessee can make the investments in two different financial years, provided the investment in a financial year does not exceed ₹ 50.00 lakhs. In the factual and legal matrix of the case on hand, we, therefore, reverse the findings of authorities below and direct the Assessing Officer to allow the assessee exemption of ₹ 1.00 crore under section 54EC(1) of the Act in respect of the investment of ₹ 50.00 lakhs each made by it in specified bonds on 30/9/2008 and 9/4/2009 i.e. in two separate financial years, pursuant to compensation received from CIDCO in respect of certain properties on 28/4/2008 and 14/10/2008.
Issues Involved:
1. Initiation of re-assessment proceedings under section 147/148 of the Income Tax Act. 2. Restriction of exemption claimed under section 54EC of the Income Tax Act to ?50 lakhs instead of ?1 crore. Detailed Analysis: 1. Initiation of Re-assessment Proceedings: - Grounds 1.1 and 1.2: The assessee did not press these grounds in the appeal. Consequently, these grounds were rendered infructuous and dismissed. 2. Restriction of Exemption under Section 54EC: - Grounds 2.1 to 2.3: The core issue here was whether the assessee could claim an exemption of ?1 crore under section 54EC of the Income Tax Act by making investments of ?50 lakhs each in two different financial years. Facts and Arguments: - The assessee received additional compensation from CIDCO and claimed exemption under section 54EC by investing ?50 lakhs each in two different financial years (30/09/2008 and 9/04/2009). - The Assessing Officer (AO) restricted the exemption to ?50 lakhs, interpreting the provisions of section 54EC to limit the exemption to ?50 lakhs per financial year. - The CIT(A) upheld the AO's decision, relying on the ITAT Jaipur Bench decision in ACIT vs. Sri Rajkumar Jain & Sons (HUF) and the amendment introduced by the Finance (No.2) Act, 2014, effective from 1/04/2015. Assessee's Contention: - The assessee argued that the investments were made in two different financial years and thus, the exemption of ?1 crore should be allowed. - The assessee cited several judicial pronouncements supporting this view, including CIT vs. C. Jaichander, CIT vs. Coromandal Industries Ltd., and others. Revenue's Contention: - The Revenue supported the AO's and CIT(A)'s decisions, restricting the exemption to ?50 lakhs. Tribunal's Observations and Decision: - The Tribunal noted that the issue was whether the first proviso to section 54EC(1) restricted the benefit of investment in bonds to a single financial year or allowed it over multiple financial years within the six-month period. - The Tribunal referred to the decision in CIT vs. C. Jaichander, where it was held that the first proviso to section 54EC(1) did not cap the total investment but restricted the investment in any financial year to ?50 lakhs. - The Tribunal observed that the amendment introduced by the Finance (No.2) Act, 2014, effective from 1/04/2015, clarified the ambiguity and restricted the total investment to ?50 lakhs across financial years, but this was applicable only from assessment year 2015-16 onwards. - The Tribunal concluded that, for the assessment year in question (2009-10), the assessee could claim exemption of ?1 crore by making investments of ?50 lakhs each in two different financial years. Conclusion: - The Tribunal reversed the findings of the authorities below and directed the AO to allow the assessee an exemption of ?1 crore under section 54EC, as the investments were made in two separate financial years. - Consequently, the assessee’s grounds at S.Nos. 2.1 to 2.3 were allowed, and the appeal was partly allowed. Order Pronounced: - The order was pronounced in the open court on 24/08/2016.
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