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TMI Blog2015 (3) TMI 1379X X X X Extracts X X X X X X X X Extracts X X X X ..... during the relevant previous year, claimed deduction of Rs. 1,00,00,000/- under section 54EC of the Act against long-term capital gains of Rs. 3,45,37,014/- and the net capital gain returned was Rs. 2,47,37,014/-. The deduction of Rs. 1,00,00,000/- was on REC bonds invested in two tranches, first of Rs. 50,00,000/- on 01/03/2010 and the second of an equal amount on 27/7/2010. Since the transfer giving rise to the capital gains had happened only in February 2010, argument of the assessee was that, both investments were within the 2 months period mentioned in section 54EC(1) and just because the latter one was beyond the previous year, the deduction could not be denied. However, AO took a view that the second tranche invested in the succeedin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, it would be apposite to refer to Section 54EC(1) of the Act, which reads as under: "Section 54EC. Capital gain not to be charged on investment in certain bonds.- (1) Where the capital gain arises from the transfer of a longterm capital asset (the capital asset so transferred being hereafter in this section referred to as the original asset) and the assessee has, at any time within a period of six months after the date of such transfer, invested the whole or any part of capital gains in the long-term specified asset, the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say,- (a) if the cost of the long-term specified asset is not less than the capital gain arising from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ambiguity in the above said provision, by Finance (No.2) Act, 2014, with effect from 1.4.2015, inserted after the existing proviso to sub-section (1) of Section 54EC of the Act, a second proviso, 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." 9. At this juncture, for better clarity, it would be appropriate to refer to the Notes on Clauses - Finance Bill 2014 and the Memorandum explaining the provisions in the Finance (No.2) Bill, 2014, which read ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f section 54EC of the Act provide that where capital gain arises from the transfer of a long-term capital asset and the assessee has, at any time within a period of six months, invested the whole or any part of capital gains in the longterm specified asset, out of the whole of the capital gain, shall not be charged to tax. The proviso to the said subsection provides that the investment made in the long-term 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s clear that the time limit for investment is six months from the date of transfer and even if such investment falls under two financial years, the benefit claimed by the assessee cannot be denied. It would have made a difference, if the restriction on the investment in bonds to Rs. 50,00,000/- is incorporated in Section 54EC(1) of the Act itself. However, the ambiguity has been removed by the legislature with effect from 1.4.2015 in relation to the assessment year 2015-16 and the subsequent years. For the foregoing reasons, we find no infirmity in the orders passed by the Tribunal warranting interference by this Court. The substantial questions of law are answered against the Revenue and these appeals are dismissed." 6. We therefore find ..... X X X X Extracts X X X X X X X X Extracts X X X X
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