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Income Tax Appellate Tribunal, DELHI BENCH ‘G’, NEW DELHI
Before: Sh. Sudhanshu SrivastavaDr. B. R. R. Kumar
Per Dr. B. R. R. Kumar, Accountant Member:
The present appeal has been filed by the assessee against the order of the ld. CIT(A)-17, New Delhi dated 23.05.2017.
Following grounds have been raised by the assessee:
1. That the Assessing Officer has wrongly and illegally disallowed the deduction u/s 54EC of the Income Tax Act, 1961 and the ld. CIT has further erred in confirming the disallowance of Rs.35,00,000/- made by the Assessing Officer.”
Brief facts of the case are that during the year, the assessee sold share of his property for a consideration of Rs.5.5 Cr. on 25.10.2013 and claimed exemption of Rs.3.32 Cr. and Rs.85 lacs u/s 54 & 54EC of the Income Tax Act, 1961.
2 Virendra Nath Vasudev 4. With regard to the exemption u/s 54EC, the assessee has purchased REC bonds of Rs.50,00,000/- on 22.03.2014 and again on 12.04.2014 for Rs.35,00,000/-. Thus, the total investments in REC bonds of Rs.85,00,000/- has been claimed as exempted u/s 54EC.
The provisions of Section 54EC of the Income Tax Act, 1961 are as under: “54EC. (1) Where the capital gain arises from the transfer of a long-term 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 the transfer of the original asset, the whole of such capital gain shall not be charged under section 45; (b) if the cost of the long-term specified asset is less than the capital gain arising from the transfer of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of acquisition of the long-term specified asset bears to the whole of the capital gain, shall not be charged under section 45 :
[Provided that the investment made on or after the 1st day of April, 2007 in the long-term specified asset by an assessee during any financial year does not exceed fifty lakh rupees.]”
3 Virendra Nath Vasudev 6. The date of sale in the instant case was 25.10.2013 and hence the due date of purchase of shares would be 22.03.2014. The assessee has invested Rs.50,00,000/- on 22.03.2014 i.e. in the financial year 2013-14 and Rs.35,00,000/- on 12.04.2014 i.e. Financial Year 2014-15.
We have gone through the provisions of the Act as mentioned above and the provisions relating to direct taxes in the Finance Bill, 2014 which is reproduced as under:
“FINANCE (No. 2) BILL, 2014 PROVISIONS RELATING TO DIRECT TAXES Capital gains exemption on investment in Specified Bonds The existing provisions contained in sub-section (1) of section 54EC of the Act provide that where capital gain arises from the transfer of a long-term capital asset and the assessee has, within a period of six months, invested the whole or part of capital gains in the long-term specified asset, the proportionate capital gains so invested in the long-term specified asset, out of the whole of the capital gain, shall not be charged to tax. The proviso to the said sub-section 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 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 lakh 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 4 Virendra Nath Vasudev 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. [Clause 23]”
From the concurrent reading of the provisions of the Act and the Memorandum to the Finance Bill, 2014 leads us to the undisputable conclusion that the assessee is eligible to invest Rs.50,00,000/- in eligible bond and claim exemption “in each financial year”. This provision has been changed prospectively from the assessment year 2015-16. Since, the case of the assessee pertains to the assessment year 2014-15, the assessee is eligible to invest Rs.50,00,000/- in each year and claim exemption u/s 54EC. Accordingly, the appeal of the assessee is allowed.
In the result, the appeal of the assessee is allowed. Order Pronounced in the Open Court on 1/02/2021.