2024 (10) TMI 1270 - AT - Income Tax

Excess exemption claimed u/s.54EC - AO restricting the exemption u/s.50EC of the Act to Rs.50 Lakhs only - DR said limit of Rs.50 Lakhs in the investment of bonds as stipulated u/s.54EC of the Act was cumulative investment in respect of each transaction of transfer of long term capital asset and that the law doesn t envisage differential treatment on the basis of date of transfer HELD THAT - The decision in the case of M/s. Areva T D India Limited 2008 (9) TMI 510 - MADRAS HIGH COURT was considered in the subsequent decision in the case of Coromandel Industries Ltd. 2014 (12) TMI 852 - MADRAS HIGH COURT and the Hon ble High Court had held that exemption of Rs.50 Lakhs each claimed in two financial years, within six months period from the date of transfer of capital asset, was eligible for exemption u/s 54EC Co-ordinate Bench of this Tribunal in the case of Shri Atushbhai B. Amin 2017 (3) TMI 890 - ITAT AHMEDABAD held that the investment of Rs.1 Crore claimed in two financial years was allowable as deduction. CIT(A) was not correct in holding that the assessee was eligible for deduction of Rs.50 Lakhs only u/s. 54EC of the Act. As the assessee had fulfilled all the necessary conditions as stipulated in Section 54EC of the Act at the relevant point of time, he was eligible for deduction of Rs. 1 Crore as claimed u/s.54EC of the Act. Accordingly, the addition of Rs.50 Lakhs on account of excess exemption u/s.54EC of the Act is deleted. Appeal of the assessee is allowed.

Summary

Issues:
Interpretation of Section 54EC of the Income Tax Act regarding the quantum of investment allowed for exemption.

Analysis:
The appeal was filed against the order of the National Faceless Appeal Centre for the Assessment Year 2012-13. The original assessment was completed under Section 143(3) of the Income Tax Act, 1961, and later reopened under Section 147 due to claimed exemption u/s.54EC not in accordance with the Act. The re-assessment resulted in an addition of Rs.50 Lakhs on account of excess exemption claimed u/s.54EC. The First Appellate Authority dismissed the appeal, leading to a second appeal before the Appellate Tribunal.

The main issue revolved around the interpretation of Section 54EC of the Act regarding the quantum of investment allowed for exemption. The assessee had invested Rs.1 Crore in NHAI and REC bonds, spread over two financial years, to claim exemption u/s.54EC. The Revenue contended that the investment should be limited to Rs.50 Lakhs in each financial year. However, the Appellate Tribunal noted that the cap of total investment of Rs.50 Lakhs in two financial years was introduced only from 01.04.2015, and not applicable to the current year. The Tribunal found that the assessee had fulfilled all necessary conditions as per Section 54EC and was entitled to the deduction of Rs.1 Crore as claimed.

The Tribunal referred to various judicial pronouncements, including decisions of the Madras High Court, which supported the assessee's claim for deduction of Rs.1 Crore. The Tribunal also cited a Co-ordinate Bench decision that allowed the investment of Rs.1 Crore claimed in two financial years. Consequently, the Tribunal held that the assessee was eligible for the deduction of Rs.1 Crore u/s.54EC, and the addition of Rs.50 Lakhs was deleted.

In conclusion, the appeal of the assessee was allowed, and the addition on account of excess exemption u/s.54EC was deleted. The Tribunal's decision was based on the interpretation of Section 54EC and relevant judicial precedents, supporting the assessee's claim for the full deduction of Rs.1 Crore.