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TMI Blog2018 (7) TMI 1550X X X X Extracts X X X X X X X X Extracts X X X X ..... I 54 - MADRAS HIGH COURT). Therefore, the grounds raised by the revenue are dismissed. - ITA No. 269/Hyd/2017 - - - Dated:- 20-7-2018 - SMT P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER For The Revenue : Smt. Komali Krishna For The Assessee : Smt Geetinder Mann ORDER PER S. RIFAUR RAHMAN, A.M.: This appeal filed by the assessee is directed against the order dated 25/11/2016 of CIT(A) 1, Hyderabad for AY 2013-14. 2. Briefly the facts of the case are, assessee filed his return of income for the AY 2013-14 on 26/07/2013 declaring total income of ₹ 9,50,290/-. The case was selected for scrutiny under CASS to examine the large deduction claimed u/s 54B, 54C, 54D, 54G and 54GA. Against the notice u/s 143(2) issued by the AO, the AR of the assessee filed the required information. 2.1 The AO observed that the assessee claimed deduction u/s 54EC to the extent of ₹ 1,00,00,000/- for one sale transaction i.e. sale property at Plot No. 26A, H. No. 8-3-191/3, Vengalrao Nagar, Hyderabad on 28/03/2013 for a consideration of ₹ 2,75,00,000/-. The AR of the assessee stated that the deduction of ₹ 1 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apital asset during the year under consideration. ( ii) Ld. CIT(A) ought to have appreciated that the limit for deduction u/ s 54EC I.T. Act is only ₹ 50,00,000/- and the said limit of ₹ 50,00,000/- is an investment cap as well as the deduction cap and therefore the assessee is entitled to deduction of ₹ 50,00,090/- only from Capital Gains in respect of transfer of Long Term Capital Asset in a year. ( iii) Ld. CIT (A) ought to have considered even if the specified time period of six months for investment u/s 54EC falls in two financial years, assessee cannot take advantage of the investment of ₹ 50,00,000/- each in two financial years to derive excess benefit than what is contemplated under the law. ( iv) Ld. CIT(A) ought to have further appreciated that the 2nd proviso to section 54EC inserted by the Finance (No.2) Act 2014 with effect from 01-04-2015 is clarificatory in nature as the Memorandum explaining the provisions clearly state that the intended limit for relief u/s 54EC is only ₹ 50,00,000/-. ( v) Without prejudice to the above, the Ld. CIT(A) ought to have appreciated that assessee was not eligible for deduction u/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on or before 21-04-2008 in order to avail exemption u/s 54EC of the Act. There is no dispute about ₹ 50 lakhs Shri Upendra C. Parekh invested on 31-12-2007 in REC Bonds. The dispute is only about further investment of ₹ 50 lakhs in NHAI Bonds made on 26-05-2008. Since six months in this case involves two financial years, the assessee's case is that if he had deposited another ₹ 50 lakhs from 1st April, 2008 to 21- 04-2008, he was entitled for exemption u/s 54EC of the Act. As during this period from 01-04-2008 to 26-05-2008 subscription in eligible investment was closed, the investment made by the assessee on 26-05-2008 i.e. 1st day of the reopening of the subscription of eligible investment in NHAI Bonds should be treated in time. There is also no dispute about the fact that subscription to the eligible investment was closed during the period 01-04-2008 to 26-05- 2008. The dispute which remains to be decided by us in this case is whether as per the provisions of section 54EC the assessee is entitled for exemption of ₹ 1 Crore as six months period for investment in eligible investment involves two financial years. If the answer to this question is yes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subscription of eligible Bonds was closed during this period till 26-05-2008 and on the 1st day of the reopening of the subscription, the assessee made this investment. Under the circumstances, we are of the considered opinion that the assessee was prevented by sufficient cause which was beyond his control in making investment in these Bonds within the time prescribed. We further find that various judicial authorities have taken a view that exemption should be granted in such cases where there is a delay in making investment due to non-availability of the bonds and have held that it is a reasonable cause and the exemption should be granted. In the case of Ram Aganval v. Jt. CIT [2002] 81 ITD 163 (Mum), it has been held as under: Before parting we may observe that section 54F is a beneficial provision to encourage assessee to invest in house properties, Keeping in mind the above object behind found by the learned CIT(A) that the bank was closed on 31 -8-1995 on account of strike as certified by the officials of the concerned bank. From the certification given by the bank officials, the assessee had approached the bank officials with the cheque for the amount of deposit on 30- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on relates only to the investment made in any financial year by the assessee. Making of the investment is a condition for availing of the exemption. Condition for availing of the exemption requires that the investment can be made within a period of 6 months. If 6 months falls within a different financial year, as has happened in this case, in our opinion, this Tribunal cannot add the embargo that the assessee cannot make the investment to avail of the exemption under Section 54EC in the different financial year if he had already made the investment in the financial year in which the capital asset is transferred. In our opinion, the language of Section 54EC is clear and unambiguous and it leads to the interpretation that the assessee can make the investment in two different financial years provided in a financial year the investment made did not exceed ₹ 50,00,000/-. We have also gone through the circular no. 3/2008 dtd. 12.3.2008 issued by the CBDT being an explanatory note on the provisions relating to direct taxes in Finance Act, 2007. In para 28.2 thereof the reason for it to set the limit on the quantum of the investment by a person in a financial year are given as under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to the facts of the case and in that process if the tax payer is brought within the net he is caught, otherwise he has to go free. 5. Even in the case of CIT vs. Vegetable Products Ltd., 88 ITR 192 the Hon'ble Supreme Court has taken view that if there are two views possible, the view favourable to the subject should be taken. We also noted that the second proviso has been inserted in section 54EC sub-section (1) w.e.f. 01.04.2005 which reads as under: - Provided further that the investment made by an assessee in the long-term specified asset, from capital gains arising from transfer of one or more original assets, during the financial year in which the original asset or assets are transferred and in the subsequent financial year does not exceed fifty lakh rupees. This proviso has been inserted to take care of the situation as in this case but this proviso is not retrospective and came into effect from 01.04.2005. Shri Upendra C. Parekh Therefore, this amendment, in our view, will not come to the rescue of the Revenue. 6. In view of the aforesaid discussion, we are of the view that no interference is called for in the order of CIT(A) and CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t made in the longterm specified asset during any financial year shall not exceed fifty lakh rupees. However, the wordings of the proviso have created an ambiguity. As a result the capital gains arising during the year after the month of September were invested in the specified asset in such a manner so as to split the investment in two years i.e., one within the year and second in the next year but before the expiry of six months. This resulted in the claim for relief of one crore rupees as against the intended limit for relief of fifty lakhs rupees. Accordingly, it is proposed to insert a proviso in sub-section (1) so as to provide that the investment made by an assessee in the long-term specified asset, out of capital gains arising from transfer of one or more original asset, during the financial year in which the original asset or assets are transferred and in the subsequent financial year does not exceed fifty lakh rupees. This amendment will take effect from 1st April, 2015 and will, accordingly, apply in relation to assessment year 2015-16 and subsequent assessment years._ 10. The legislature has chosen to remove the ambiguity in the proviso to Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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