ITAT Chennai: Full Deduction Allowed Under Section 54EC

The Appellate Tribunal ITAT Chennai held that the assessee was eligible for the full deduction of Rs. 1.00 crore under section 54EC of the Income Tax Act. The Tribunal interpreted the proviso limiting the claim to Rs. 50 lakhs on a financial year basis, allowing the assessee's investment of Rs. 50 lakhs in two different financial years within the six-month period. Emphasizing equitable distribution of benefits, the Tribunal rejected the Revenue's argument and allowed the appeal, citing a similar decision and noting the inapplicability of a relied-upon case law.

---

---

Issues:
- Whether the assessee is eligible for deduction under section 54EC for Rs. 50.00 lakhs or Rs. 1.00 crores.

Analysis:
The appeal before the Appellate Tribunal ITAT Chennai involved the eligibility of the assessee for deduction under section 54EC of the Income Tax Act. The assessee had sold a property and invested Rs. 50.00 lakhs each in two different assessment years in REC Bonds within six months. The Revenue contended that the deduction should be limited to Rs. 50.00 lakhs only, while the assessee argued for the full deduction of Rs. 1.00 crores. The Tribunal considered a similar case precedent where it was held that the assessee is eligible to claim a deduction of Rs. 50.00 lakhs in each assessment year. The Tribunal analyzed the relevant provisions of Section 54EC(1) and noted that the proviso limiting the claim to Rs. 50 lakhs should be construed on a financial year basis. As the assessee had invested Rs. 50 lakhs in two different financial years within the six-month period from the date of transfer of the capital asset, the Tribunal concluded that the assessee was eligible to claim the full exemption of Rs. 1.00 crore.

The Tribunal emphasized that the Explanatory Memorandum clarified the intention behind the limitation on investment, aiming for equitable distribution of benefits among investors. The Tribunal rejected the Revenue's argument that the restrictive proviso should limit the claim to Rs. 50 lakhs, as the assessee had adhered to the six-month limit from the date of transfer and invested Rs. 50 lakhs in two different financial years. The Tribunal cited a similar decision by the Ahmedabad Bench to support its conclusion. The Tribunal found no evidence to suggest that the decision was modified or reversed by a higher court, hence, it allowed the ground raised by the assessee and allowed the appeal.

Regarding the case law of Areva T&D India Ltd., the Tribunal noted that the decision relied on by the Revenue was not applicable to the present case, as the High Court had dismissed writ petitions challenging the amendment to section 54EC. Therefore, the Tribunal allowed the appeal filed by the assessee, resulting in the appeal standing allowed.

---