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Income Tax Appellate Tribunal, MUMBAI BENCH “D”, MUMBAI
Before: Shri Joginder Singh & Shri G Manjunatha
Date of hearing 07-02-2018 Date of pronouncement 14-03-2018 O R D E R
Per G Manjunatha, AM :
This appeal filed by the revnue is directed against order of the CIT(A)- 34, Mumbai dated 02-05-2016 and it pertains to AY 2012-13. The revenue has raised the following grounds of appeal:-
1. On facts and in law and in the circumstances of the case in law, the Ld. CIT(A)-34, Mumbai erred in disallowing the investment made in Capital Gains Bonds u/s. 54EC to the extent of Rs. 1,00,00,0007- in two financial year on the basis of series of judgments, ignoring the facts." 2. "On the facts and in the circumstances of the case and in law, the Ld. GIT (A)-34, Mumbai has erred in directing to delete the addition of Rs. 92,85,7417- made by the Assessing Officer on account of investment made in capital gain account for the subsequent year, which is incorrect and is against the provision of the Income Tax Act solely relying on the series of judgments, ignoring the facts."
The brief facts of the case are that the assessee has filed his return
2 ITA 4782/Mum/2016 of income for the assessment year 2012-13 on 30-07-2012 declaring total income of Rs.1,07,85,377. The case has been selected for scrutiny and statutory notices u/s 143(2) and 142(1) of the Act were issued. In response to notices, the authorized representative of the assessee appeared from time to time and produced details called for. During the course of assessment proceedings, the AO noticed that the assessee had sold one property during the year under consideration for Rs.13 crores which was jointly held by assessee and Binita Cooper. The said property was purchased on 15-05-2006. The assessee has computed long term capital gain of Rs.1,01,00,270 after deducting indexed cost of acquisition of the property at Rs.3,50,01,370 and exemption u/s 54 for Rs.1.50 crores and u/s 54EC for Rs.1 crore. The AO called upon the assessee to furnish details of computation of long term capital gain from sale of property and also to justify deduction claimed u/s 54 & 54EC of the Act, with necessary evidences. The AO, considering relevant submissions of the assessee and also on analysis of provisions of section 54EC, observed that the maximum deduction allowed against capital gain is Rs.50 lakhs as against which the assessee had claimed deduction of Rs.1 crore being investment made in capital gain bonds in two different financial years of Rs.50 lakhs each. The AO further observed that as per clause (b) of section 54EC, if the cost of long term specified asset is less than capital gain, proportionate deduction is to be 3 ITA 4782/Mum/2016 allowed and accordingly worked out proportionate deduction of Rs.7,14,259 and disallowed balance amount of Rs.92,85,741 out of total deduction claimed by the assessee of Rs.1 crore u/s 54EC of the Act.
Aggrieved by the assessment order, assessee preferred appeal before the CIT(A). Before the CIT(A), the assessee has filed elaborate written submissions which has been reproduced by the Ld.CIT(A) in his order at para 4 on pages 3 to 6. The assessee also relied upon certain judicial precedents, including the decision of Ahmedabad ITAT in the case of Shri Aspi Gunwala in ITA No.326/Ahd/2011. The sum and substance of the arguments of the assessee is that as per the provisions of section 54EC, assessee is eligible for exemption upto Rs.50 lakhs in each financial year, provided such investment is within six months from the date of transfer of asset.
The CIT(A), after considering relevant submissions of the assessee and also relying upon various judicial precedents, including the decision of Hon’ble Madras High Court in the case of CIT vs Coramandal Industries Ltd 370 ITR 386 (Mad), observed that plain reading of provisions of section 54EC(1) and also the CBDT circular dated 12-02- 2008 creates a primary impression that the statute is mainly referring to investment and not deduction while elaborating about the ceiling limit of Rs.50 lakhs. It also creates an impression that the reference to the financial year is without further specification about the situations in which 4 ITA 4782/Mum/2016 there can be opportunities for any assessee to make investment in 2 different financial years. With these observation, the CIT(A) deleted addition made by the AO towards disallowance of investment in capital gain bonds u/s 54EC of the Income-tax Act, 1961. Aggrieved by the order of CIT(A), the revenue is in appeal before us.
The Ld.DR submitted that the Ld.CIT(A) erred in deleting additions made by the AO towards disallowance of investment made in capital gain bonds u/s 54EC without appreciating the fact that the upper limit prescribed for investment in capital gain bonds is Rs.50 lakhs in any financial year which is clear from the Proviso provided to section 54EC and also which was further clarified by the Second Proviso inserted by the Finance Act 2014 w.e.f. 01-04-2015 wherein it was clarified that 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 50 lakhs rupees.
The Ld.DR also referred to clause (b) of section 54EC to argue that the Ld.CIT(A) failed to give any finding on proportionate deduction allowed by the AO as per the provisions of sub clause (b) as per which the assessee is eligible for proportionate deductions if the cost of the long term specified asset is less than the capital gain arising from the transfer of original asset.
5 ITA 4782/Mum/2016 6. The Ld.AR for the assessee, on the other hand, strongly supporting the order of the CIT(A) submitted that the issue is squarely covered by the decision of ITAT, Mumbai A-Bench in the case of Lilavati M Sayani vs ITO (2014) 32 ITR (Trib) 174 (Mum), wherein it was categorically held that where the assessee transfers its asset after 31st September of the financial year he gets an opportunity to make an investment of Rs.50 lakhs each in two different financial years and is able to claim exemption upto Rs.1 crore u/s 54EC of the Act. The Ld.AR further referring to the decision of Hon’ble Madras High Court in the case of CIT vs C Jaichandar (2015) 370 ITR 579 (Mad), submitted that the Hon’ble Madras High Court clarified the position of law insofar as quantum of deduction available u/s 54EC and held that if the assessee makes investment of Rs.50 lakhs in any financial year it would have the benefit of section 54EC(1) and such investments falls under two financial years, the benefit claimed by the assessee cannot be denied. The CIT(A), after considering relevant provisions, has rightly deleted addition made by the AO and his order should be upheld.
We have heard both the parties, perused the material available on record and gone through the orders of authorities below. The only issue involved in the appeal of the revenue is whether deduction contemplated u/s 54EC(1) is restricted to Rs.50 lakhs or Rs.1 crore if such investment is made within the prescribed time limit provided under the Act. The 6 ITA 4782/Mum/2016 issue is no longer res integra. The ITAT, Mumbai Bench “A” in the case of Mr. Lilavati M Sayani (supra) has considered a similar issue in the light of provisions of section 54EC and after considering certain case laws held that the provisions of section 54EC makes it clear that where the assessee transferred a capital asset after 30th September of the financial year, he gets an opportunity to make an investment of Rs.50 lakhs each in two different financial years and is able to claim exemption upto Rs.1 crore, then said benefit cannot be denied if such investment is within the prescribed time limit provided under the Act. This legal proposition is further strengthened by the decision of Hon’ble Madres High Court, in the case of CIT vs C Jaichandar (supra) wherein it was held that if an assessee was able to invest Rs.50 lakhs each in two different financial years within a period of six months from the date of transfer of the capital asset, it could not be said to be inadmissible.
Therefore, we are of the considered view that the assessee is eligible for exemption u/s 54EC of Rs.1 crore even though such investment exceeds the maximum limit prescribed under the Act, as the assessee has made investment in two different financial years within the time prescribed under the provisions of section 54EC of the Act. The CIT(A), after considering relevant submissions of the assessee has rightly deleted addition made by the AO. We do not find any error in the order of the CIT(A); hence, we are inclined to uphold the findings of the 7 ITA 4782/Mum/2016 CIT(A) and dismiss appeal filed by the revenue. Order pronounced in the open court on 14th March, 2018.