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2019 (7) TMI 420 - AT - Income TaxDeduction u/s 54EC - amount of investment made in the purchase of REC Bonds - denial of claim as assessee has not invested in the REC bonds within the time prescribed under section 54EC, i.e., within a period of 6 months from the date of transfer - HELD THAT - In the instant case the assessee has not invested the amount in the specified bonds within the specified period prescribed as per the provisions of section 54EC. It is not the case of the assessee that the bonds were not available in the market at the stipulated time. Although the assessee had filed certain legal notices as available in the paper book the copy of the agreement to sell of the said property is not filed in the paper book. The argument of the assessee that beneficial provisions should be interpreted liberally is also not applicable in the instant case since in my opinion such interpretations cannot be stretched to an extent so as to make the provisions of the Act redundant. In any case, since the assessee has not fulfilled the conditions laid down in the provisions of section 54EC by not depositing the amount in the specified bonds, therefore, the assessee is not eligible for the claim of exemption under section 54EC - Decided against assessee.
Issues Involved:
1. Denial of deduction under Section 54EC of the Income-tax Act, 1961 for investment in REC Bonds beyond the stipulated period. Issue-wise Detailed Analysis: 1. Denial of Deduction under Section 54EC: The assessee, an individual deriving income from other sources and long-term capital gain, filed a return of income declaring a total income of ?7,160 after claiming a deduction of ?49,63,932 under Section 54EC of the Income-tax Act, 1961. The assessee sold a property on 17th March 2011 and subsequently invested the sale proceeds in REC Bonds on 19th March 2012, which were allotted on 31st March 2012. The Assessing Officer (AO) denied the exemption under Section 54EC, stating that the investment in REC Bonds was not made within six months from the date of transfer of the asset, as required by the Act. Consequently, an addition of ?49,63,932 was made to the total income of the assessee. Before the Commissioner of Income Tax (Appeals) [CIT(A)], the assessee argued that she initially intended to purchase a residential property and had paid ?60 lakhs to the sellers. However, the deal did not materialize, and she received ?55 lakhs back after issuing legal notices. This amount was then invested in REC Bonds. The CIT(A) upheld the AO's decision, emphasizing that the investment in REC Bonds was made beyond the six-month period stipulated under Section 54EC. The CIT(A) also noted that the assessee did not fulfill the conditions under Section 54, as she neither purchased another house property within the stipulated period nor invested in REC Bonds within the required timeframe. The assessee appealed to the Tribunal, reiterating that the investment in REC Bonds was made after the failed property purchase and subsequent legal proceedings. The assessee's counsel argued for a liberal interpretation of Section 54EC, citing various judicial precedents and CBDT Circular No. 359, which advocated for a lenient approach to beneficial provisions. The counsel referenced several court decisions where extensions were granted due to non-availability of specified bonds or investments made prior to the transfer of the property. The Departmental Representative (DR) supported the orders of the AO and CIT(A), asserting that the assessee did not meet the conditions under Section 54EC, as the investment was made more than one year after the sale, exceeding the six-month limit. The Tribunal considered the arguments and noted that the assessee sold the property on 17th March 2011 and invested in REC Bonds on 19th March 2012, beyond the six-month period. The Tribunal acknowledged the various judicial precedents cited by the assessee but found them distinguishable from the present case. The Tribunal emphasized that the assessee did not invest in the specified bonds within the stipulated period and that the bonds were available in the market at the relevant time. The Tribunal concluded that the beneficial provisions should not be interpreted in a manner that renders the statutory requirements redundant. Conclusion: The Tribunal upheld the CIT(A)'s order, confirming the denial of exemption under Section 54EC, as the assessee did not invest in REC Bonds within the prescribed six-month period. The appeal filed by the assessee was dismissed, and the decision was pronounced in open court on 26.03.2019.
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