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2018 (7) TMI 1550 - AT - Income TaxDeduction u/s 54EC - Held that - We notice that the assessee has sold the property on 28/03/2013 and made 1st investment on 25/03/2013 and second investment on 12/04/2013. The assessee has to make investment within 6 months from the date of sale i.e. before 28/09/2013. In this case, the limitation period of 6 months falls in 2 financial years. Since the provision allows to invest ₹ 50 lakhs during any financial year. Assessee intends to take the advantage of the above proviso u/s 54EC. This kind of transactions are made eligible by the judicial precedents in the case of Shri Upendra C Parekh (2017 (9) TMI 377 - ITAT MUMBAI). Further, we notice that the legislature has notices that this proviso was applied as tax planning to take additional deduction under this section 54EC. Therefore, they introduced the 2nd proviso to this section with effect from 01/04/2015 (AY 2016-17) prospectively. Since the present appeal relates to AY 2013-14, the amended provision will not apply to the present case as decided in the case of CIT Vs. C. Jainchander (2014 (11) TMI 54 - MADRAS HIGH COURT). Therefore, the grounds raised by the revenue are dismissed.
Issues Involved:
1. Eligibility for Deduction under Section 54EC. 2. Interpretation of the Proviso to Section 54EC. 3. Application of Judicial Precedents. 4. Prospective Application of the Second Proviso to Section 54EC. Issue-wise Detailed Analysis: 1. Eligibility for Deduction under Section 54EC: The primary issue revolves around the eligibility for deduction under Section 54EC of the Income Tax Act. The assessee claimed a deduction of ?1,00,00,000/- by investing ?50,00,000/- in two different financial years. The Assessing Officer (AO) restricted the deduction to ?50,00,000/- per sale transaction, disallowing the additional ?50,00,000/-. The CIT(A) deleted the disallowance, accepting the assessee's contention that the investment was made within the stipulated time and allowed the appeal. 2. Interpretation of the Proviso to Section 54EC: The AO's interpretation was that the threshold limit for claiming exemption under Section 54EC is ?50,00,000/- per sale transaction. However, the CIT(A) and subsequent judicial precedents interpreted that the proviso allows an assessee to invest ?50,00,000/- in each financial year if the six-month period for investment spans over two financial years. The Tribunal relied on various judicial precedents, including the case of Shri Upendra C. Parekh, which supported the assessee's interpretation. 3. Application of Judicial Precedents: The Tribunal considered multiple judicial precedents, including decisions from the Bangalore Bench in Vivek Jairazbhoy Vs. Dy. Commissioner of Income-tax and the Ahmedabad Bench in Aspi Ginwala, which held that an assessee could claim exemption up to ?1,00,00,000/- if the six-month investment period spans two financial years. These precedents emphasized the clear and unambiguous language of the proviso to Section 54EC, allowing such investments. 4. Prospective Application of the Second Proviso to Section 54EC: The second proviso to Section 54EC, inserted by the Finance (No.2) Act 2014, effective from 01-04-2015, restricts the total investment to ?50,00,000/- irrespective of the financial years involved. The Tribunal noted that this amendment is prospective and does not apply to the assessment year 2013-14. The Tribunal referenced the decision in CIT Vs. C. Jaichander, which clarified that the amendment applies from AY 2015-16 onwards, thus supporting the assessee's claim for AY 2013-14. Conclusion: The Tribunal dismissed the revenue's appeal, upholding the CIT(A)'s decision to allow the assessee's claim for a deduction of ?1,00,00,000/- under Section 54EC. The Tribunal concluded that the assessee's interpretation of the proviso to Section 54EC was correct and supported by judicial precedents. The prospective nature of the second proviso, effective from AY 2015-16, further reinforced the assessee's position for the assessment year in question. The Tribunal's decision was pronounced in the open court on 20th July 2018.
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