Tribunal allows appeal on exemption claim for REC Bonds under Income Tax Act

The Tribunal allowed the appeal of the assessee in a case concerning a claim of exemption under section 54EC of the Income Tax Act for investing in REC Bonds. The Tribunal overturned the decision of the CIT(Appeals) that denied the exemption due to the delay in investing after the specified time limit, citing the unavailability of REC Bonds in the market. Relying on a Bombay High Court decision, the Tribunal held that the delay was justified within the statutory time limit, emphasizing the exceptional circumstances of non-availability during the specified period.

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Issues:
Claim of exemption under section 54EC of the Income Tax Act for investment in REC Bonds.

Analysis:
The appeal was against the order of the Commissioner of Income Tax (Appeals) regarding the disallowance of exemption claimed under section 54EC of the Income Tax Act for an investment in REC Bonds. The assessee had earned long term capital gains and invested in REC Bonds after the specified time limit of six months from the date of sale of the original asset. The Assessing Officer denied the claim based on this delay. The CIT(Appeals) upheld the denial stating that non-availability of REC Bonds on the last date to invest did not entitle the assessee to extend the time limits. The assessee argued that the bonds were not available in the market during the specified period, relying on a decision of the Bombay High Court. The Tribunal considered the case and reversed the CIT(Appeals) order, allowing the appeal of the assessee based on the precedent set by the Bombay High Court, emphasizing that the delay in investing due to non-availability of REC Bonds was justified within the statutory time limit.

The Tribunal found that the assessee had sold the capital asset and claimed exemption under section 54EC by investing in REC Bonds. Due to the unavailability of REC Bonds in the market between the specified period, the assessee invested in the bonds after the deadline. The Tribunal referred to the Bombay High Court decision, which allowed waiting to invest in bonds until the statutory time limit, and applied the same reasoning to the present case. The Tribunal concluded that the delay in investing in REC Bonds was reasonable considering the circumstances of non-availability during the statutory period, thereby allowing the appeal of the assessee.

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