2015 (3) TMI 1379 - AT - Income Tax

Full Deduction u/s 54EC Upheld: Investments Within Two Financial Years Qualify, Appeal Dismissed.

The HC dismissed the Revenue's appeal, upholding the CIT(A)'s decision to allow the assessee's full deduction under Section 54EC of the Income-tax Act. ... Deduction u/s 54EC - as per AO second tranche invested in the succeeding previous year, would not be eligible for deduction under section 54EC(1) AND the second investment was for a different financial year - DR submitted that investments made in two years when aggregated exceeded the limit of ₹ 50 lakhs set out in the section and therefore assessee ought not to have been given the relief - HELD THAT:- As relying on case C. JAICHANDER [2014 (11) TMI 54 - MADRAS HIGH COURT] from a reading of Section 54EC(1) and the first proviso, it is clear that the time limit for investment is six months from the date of transfer and even if such investment falls under two financial years, the benefit claimed by the assessee cannot be denied. It would have made a difference, if the restriction on the investment in bonds to ₹ 50,00,000/- is incorporated in Section 54EC(1) of the Act itself. However, the ambiguity has been removed by the legislature with effect from 1.4.2015 in relation to the assessment year 2015-16 and the subsequent years. For the foregoing reasons, we find no infirmity in the orders passed by the Tribunal warranting interference by this Court. The substantial questions of law are answered against the Revenue and these appeals are dismissed. We therefore find CIT(A) to be justified in giving the deduction under section 54EC to the assessee in full - Decided against revenue. Issues:Appeal against CIT(A)'s order allowing deduction under section 54EC of the Income-tax Act, 1961.Detailed Analysis:The appeal was filed by the Revenue against the CIT(A)'s order allowing the assessee's claim under section 54EC of the Income-tax Act. The assessee had claimed a deduction of Rs. 1,00,00,000/- against long-term capital gains of Rs. 3,45,37,014/-. The dispute arose from the second tranche of investment in REC bonds, which was made in the succeeding previous year. The AO restricted the claim to Rs. 50,00,000/-, leading to a recomputation of the long-term capital gains. The CIT(A) ruled in favor of the assessee, citing a Tribunal order in a similar case. The Revenue contended that the total investments exceeded the limit set by the section, while the assessee argued that other courts had supported the Tribunal's view.The High Court analyzed the provisions of Section 54EC(1) of the Act, emphasizing the time limit of six months for investment after the property sale. The court noted that there was no cap on the investment amount in bonds, but a limit was set for each financial year. The court highlighted the legislative amendment in 2014 to remove ambiguity in the provision. The court clarified that if the investment falls under two financial years but within the six-month limit, the benefit claimed by the assessee cannot be denied. The court emphasized that the restriction on investment in bonds to Rs. 50,00,000/- was incorporated in the Act from 1.4.2015 onwards. The court found no fault in the Tribunal's orders and dismissed the Revenue's appeal.In conclusion, the CIT(A) was deemed justified in granting the full deduction under section 54EC to the assessee, and no intervention was deemed necessary. The appeal of the Revenue was ultimately dismissed by the court. The judgment was pronounced on 27th March 2015 by the tribunal.