Tribunal allows full Rs. 1 crore exemption under section 54EC for two investments.

The Tribunal allowed the assessee's appeal regarding the restriction of exemption claimed under section 54EC of the Income Tax Act to Rs. 50 lakhs instead of Rs. 1 crore. The Tribunal held that for the assessment year in question, the assessee could claim the exemption of Rs. 1 crore by making investments of Rs. 50 lakhs each in two different financial years. The Tribunal directed the Assessing Officer to allow the assessee the exemption of Rs. 1 crore under section 54EC, reversing the decisions of the lower authorities.

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Issues Involved:
1. Initiation of re-assessment proceedings under section 147/148 of the Income Tax Act.
2. Restriction of exemption claimed under section 54EC of the Income Tax Act to Rs. 50 lakhs instead of Rs. 1 crore.

Detailed Analysis:

1. Initiation of Re-assessment Proceedings:
- Grounds 1.1 and 1.2: The assessee did not press these grounds in the appeal. Consequently, these grounds were rendered infructuous and dismissed.

2. Restriction of Exemption under Section 54EC:
- Grounds 2.1 to 2.3: The core issue here was whether the assessee could claim an exemption of Rs. 1 crore under section 54EC of the Income Tax Act by making investments of Rs. 50 lakhs each in two different financial years.

Facts and Arguments:
- The assessee received additional compensation from CIDCO and claimed exemption under section 54EC by investing Rs. 50 lakhs each in two different financial years (30/09/2008 and 9/04/2009).
- The Assessing Officer (AO) restricted the exemption to Rs. 50 lakhs, interpreting the provisions of section 54EC to limit the exemption to Rs. 50 lakhs per financial year.
- The CIT(A) upheld the AO's decision, relying on the ITAT Jaipur Bench decision in ACIT vs. Sri Rajkumar Jain & Sons (HUF) and the amendment introduced by the Finance (No.2) Act, 2014, effective from 1/04/2015.

Assessee's Contention:
- The assessee argued that the investments were made in two different financial years and thus, the exemption of Rs. 1 crore should be allowed.
- The assessee cited several judicial pronouncements supporting this view, including CIT vs. C. Jaichander, CIT vs. Coromandal Industries Ltd., and others.

Revenue's Contention:
- The Revenue supported the AO's and CIT(A)'s decisions, restricting the exemption to Rs. 50 lakhs.

Tribunal's Observations and Decision:
- The Tribunal noted that the issue was whether the first proviso to section 54EC(1) restricted the benefit of investment in bonds to a single financial year or allowed it over multiple financial years within the six-month period.
- The Tribunal referred to the decision in CIT vs. C. Jaichander, where it was held that the first proviso to section 54EC(1) did not cap the total investment but restricted the investment in any financial year to Rs. 50 lakhs.
- The Tribunal observed that the amendment introduced by the Finance (No.2) Act, 2014, effective from 1/04/2015, clarified the ambiguity and restricted the total investment to Rs. 50 lakhs across financial years, but this was applicable only from assessment year 2015-16 onwards.
- The Tribunal concluded that, for the assessment year in question (2009-10), the assessee could claim exemption of Rs. 1 crore by making investments of Rs. 50 lakhs each in two different financial years.

Conclusion:
- The Tribunal reversed the findings of the authorities below and directed the AO to allow the assessee an exemption of Rs. 1 crore under section 54EC, as the investments were made in two separate financial years.
- Consequently, the assessee’s grounds at S.Nos. 2.1 to 2.3 were allowed, and the appeal was partly allowed.

Order Pronounced:
- The order was pronounced in the open court on 24/08/2016.

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