2019 (5) TMI 1641 - AT - Income Tax

Exemption u/s 54EC - REC Bonds - investment within six months from the date of transfer of the capital asset - investment made in REC Bonds was made in two tranches i.e., ₹ 50 lakh on 31st March 2007 and further ₹ 50 lakh on 1st August 2007 - HELD THAT - As per the condition of section 54EC Series VIA Bonds, the maximum amount one can invest is ₹ 50 lakh. Therefore, the assessee could not have invested more than ₹ 50 lakh in the said Bonds on 31st march 2007. This restriction was also as per the conditions imposed by the CBDT in its notification issued on 29th June 2006. Undisputedly, after 31st March 2007, REC Bonds were not available in the market and REC Bonds Series VII was again available from 2nd July 2007 to 31st March 2008. It is a fact that the assessee had invested further amount of ₹ 50 lakh on 01.08.2007 after REC Bond Series VII became available. In the meanwhile, the six month period from the date of transfer of the capital asset expired on 18th June 2007. The assessee could not have invested in the REC Bonds within the stipulated period of six months as provided u/s 54EC as it was not possible on the part of the assessee to do so due to non availability of the bonds. That being the case, the claim of deduction in respect of balance amount of ₹ 50 lakh cannot be disallowed since the assessee has demonstrated that non investment in REC Bonds within the stipulated period was due to non availability of bonds in the market. This view of ours is supported by the decision of the Hon'ble Jurisdictional High Court in case of CIT Vs. Celloplast 2012 (8) TMI 527 - BOMBAY HIGH COURT Therefore, the delay in investment has to be condoned as the assessee cannot be expected to do or perform an impossible act. Whether the claim of deduction u/s 54EC is available if the investments are spread over two financial years ? - HELD THAT - We are of the considered opinion that there was no bar in section 54EC for allowing deduction in respect of investment made in two financial years. The provision as contained in section 54EC r/w its proviso would make it clear that the cap is with regard to the amount to be invested in a particular financial year and it does not restrict the claim deduction even if the investments are made in excess of ₹ 50 lakh spread over two financial years. The decisions cited by the learned Authorised Representative clearly support this view. Therefore, on over all consideration of facts and material on record, we are of the view that the claim of deduction u/s 54EC in respect of the amount of ₹ 1 crore is allowable. Accordingly, we direct the Assessing Officer to allow assessee s claim of deduction in respect of the balance amount of ₹ 50 lakh also. Grounds raised are allowed. Disallowance of claim of TDS - additional ground - HELD THAT - It is seen from the record, while deciding the appeal arising out of original assessment order, CIT(A) had directed the Assessing Officer to give credit for TDS as per law. Therefore, the issue raised in the additional ground can be decided on the basis of facts and material available on record. That being the case, though, we admit the additional ground, however, we restore the issue to the Assessing Officer for verifying assessee s claim vis a vis the facts and material on record including the TDS certificate furnished by the assessee and allow credit for TDS as per law. The additional grounds are allowed for statistical purposes.

Summary

Issues:
1. Disallowance of assessee's claim of exemption under section 54EC of the Income-tax Act, 1961 for an amount of ?50 lakh.
2. Disallowance of claim of TDS of ?1,75,429.

Issue 1: Disallowance of assessee's claim of exemption under section 54EC of the Income-tax Act, 1961 for an amount of ?50 lakh:

The appeal challenged the order disallowing the assessee's claim of exemption under section 54EC of the Income-tax Act, 1961 for ?50 lakh. The Assessing Officer disallowed the claim as the second investment of ?50 lakh was made after the prescribed period of six months from the date of transfer of the capital asset. The Commissioner (Appeals) upheld the disallowance, stating the delay was not due to non-availability of REC Bonds. The assessee argued that REC Bonds were not available for investment during the stipulated period and invested the balance amount when the Bonds became available. The Tribunal noted that in the original assessment, a similar disallowance was made but was later directed to be verified by the Assessing Officer. The Tribunal found the assessee's contention acceptable, as per the conditions imposed, the maximum investment was ?50 lakh during the relevant period. The Tribunal held that the delay in investment due to non-availability of Bonds was justified and allowed the claim of deduction for the balance amount of ?50 lakh. The Tribunal also clarified that there was no restriction in the Act for allowing deductions for investments made in two financial years.

Issue 2: Disallowance of claim of TDS of ?1,75,429:

The additional ground raised by the assessee was regarding the disallowance of the claim of TDS of ?1,75,429. The Tribunal noted that the Commissioner (Appeals) had directed the Assessing Officer to give credit for TDS as per law in the original assessment order. The Tribunal decided to admit the additional ground and restored the issue to the Assessing Officer for proper verification of the claim of TDS, including the TDS certificate filed by the assessee, and to allow credit for TDS as per law. The additional ground was allowed for statistical purposes.

In conclusion, the Tribunal partially allowed the appeal, directing the Assessing Officer to allow the assessee's claim of deduction under section 54EC of the Act for the balance amount of ?50 lakh and restoring the issue of TDS claim for further verification.