2012 (4) TMI 195 - AT - Income Tax

Appellant granted exemption under Section 54EC for investment in NHAI Bonds spanning two financial years

Aspi Ginwala Versus Assistant Commissioner of Income-tax, Circle-5, Baroda

The Tribunal held that the appellant is entitled to an exemption of Rs. 1 crore under Section 54EC as the investment period spanned two financial years. ... Deduction u/s 54EC – LTCG - sale of residential property on 22.10.2007 - deduction u/s 54EC allowed in respect of investment of ₹ 50 lacs made in REC bonds on 31.12.2007 - denial of deduction in respect of investment of ₹ 50 lacs in NHAI bonds made on 26.05.2008 on ground of it being made beyond the prescribed time of 6 months – assessee contended that subscription to the eligible investment was closed during the period 01-04-2008 to 26-05-2008 - investment of more than ₹ 50 lacs cannot be made in one F.Y. – Held that:- Proviso to Section 54EC restricts investment of more than ₹ 50 lacs in a F.Y.. However, if assessee transfers his capital asset after 30th September of the F.Y. he gets an opportunity to make an investment of ₹ 50 lakhs each in two different F.Ys. In present case, assessee could have invested in eligible investment within six months (on or before 21-04-2008) involving two financial years. Therefore, assessee is entitled to get exemption upto ₹ 1 Crore if investment is made upto 21.04.2008.Further investment of ₹ 50 lacs is made by assessee on 26.05.2008. It is undisputed that subscription to the eligible investment was closed during the period 01-04-2008 to 26-05-2008 thus assessee was prevented by sufficient cause which was beyond his control in making investment in these Bonds within the time prescribed. Therefore, investments made by the assessee on 26-05-2008 even though beyond six months is eligible for exemption – Decided in favor of assessee. Issues Involved:1. Assessment of Long Term Capital Gain.2. Deduction under Section 54EC of the Income Tax Act.3. Time limit for investment in specified bonds under Section 54EC.Detailed Analysis:1. Assessment of Long Term Capital GainThe primary issue was the assessment of Long Term Capital Gain (LTCG) at Rs. 1,80,32,450/- by the Assessing Officer (AO) as opposed to Rs. 1,30,32,450/- declared by the appellant. The appellant contended that the AO's assessment was erroneous and requested the Tribunal to delete the addition/disallowance.2. Deduction under Section 54EC of the Income Tax ActThe appellant claimed a deduction of Rs. 1,00,00,000/- under Section 54EC for investments made in REC Bonds and NHAI Bonds. The AO allowed only Rs. 50,00,000/- citing that the investment in NHAI Bonds was made beyond the six-month period prescribed under Section 54EC.The appellant argued that:- The investment was made in compliance with Section 54EC.- There was no delay on their part as the specified bonds were unavailable for subscription between 1/4/2008 and 26/5/2008.- The appellant had kept the funds ready and subscribed to the bonds on the first day they were available.- The appellant cited various judicial precedents and a CBDT press note extending the time limit in similar situations to support their claim.3. Time Limit for Investment in Specified Bonds under Section 54ECThe Tribunal examined whether the appellant was entitled to an exemption of Rs. 1 crore under Section 54EC, considering the six-month period involved two financial years. The Tribunal found that:- The proviso to Section 54EC allows an investment of Rs. 50 lakhs in each financial year, enabling a total exemption of Rs. 1 crore if the six-month period spans two financial years.- The appellant was prevented by sufficient cause from making the investment within the prescribed time due to the unavailability of the bonds.- Judicial precedents support granting exemptions in cases where delays were caused by factors beyond the taxpayer's control.Conclusion:The Tribunal held that:- The appellant is entitled to an exemption of Rs. 1 crore under Section 54EC as the six-month investment period spanned two financial years.- The investment made on 26-05-2008 in NHAI Bonds is eligible for exemption despite being beyond the six-month period, as the bonds were unavailable for subscription during the prescribed period.- Both appeals were allowed, and the AO's disallowance was quashed.Final Judgment:The Tribunal concluded that the appellant's investments were within the specified time and eligible for the claimed exemptions, thereby allowing both appeals.