2018 (3) TMI 889 - AT - Income Tax

Tribunal grants Rs. 1 crore deduction under Section 54EC for AY 2013-14

The Tribunal allowed the appeal, holding that the assessee was entitled to a deduction of Rs. 1 crore under Section 54EC for the assessment year 2013-14. ... Entitlement to the claim of deduction u/s.54EC – investment in the NHAI bonds made in two financial years - Held that:- The expression ‘any financial year’ is explained as including ‘more than one financial year’ for the assessment year under consideration and the judgment of Hon’ble Madras High Court in the case of C. Jaichander (2014 (11) TMI 54 - MADRAS HIGH COURT) and the order of Pune Bench of the Tribunal in the case of ITO Vs. Smt. Bala R. Venkitachalam (2016 (6) TMI 1122 - ITAT MUMBAI) were rightly relied while deciding the issue in favour of the assessee. Issues Involved:1. Deduction under Section 54EC of the Income Tax Act.2. Interpretation of the phrase 'any financial year' in the context of Section 54EC.3. Applicability of amendments brought by Finance (No.2) Act, 2014.Detailed Analysis:1. Deduction under Section 54EC of the Income Tax Act:The primary issue in this appeal was whether the assessee was entitled to a deduction of Rs. 1 crore under Section 54EC of the Income Tax Act, as claimed, or if the deduction should be restricted to Rs. 50 lakhs as determined by the Assessing Officer (AO) and confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)]. The assessee invested Rs. 50 lakhs each in two different financial years (FY 2012-13 and FY 2013-14) within the stipulated six-month period after the sale of land, and claimed a total deduction of Rs. 1 crore.2. Interpretation of the phrase 'any financial year' in the context of Section 54EC:The assessee argued that the phrase 'any financial year' in Section 54EC should be interpreted to mean that the investment limit of Rs. 50 lakhs applies to each financial year separately. Thus, the assessee contended that the investment of Rs. 50 lakhs in FY 2012-13 and another Rs. 50 lakhs in FY 2013-14 was within the permissible limit and should be eligible for the total deduction of Rs. 1 crore. The CIT(A) and AO, however, interpreted the provision to mean that the total investment eligible for deduction under Section 54EC should not exceed Rs. 50 lakhs, irrespective of the number of financial years involved.3. Applicability of amendments brought by Finance (No.2) Act, 2014:The CIT(A) and AO relied on the amendments introduced by the Finance (No.2) Act, 2014, which inserted a second proviso to Section 54EC, effective from 01-04-2015, restricting the total investment eligible for deduction to Rs. 50 lakhs across multiple financial years. The assessee argued that this amendment was prospective and should not apply to the assessment year 2013-14 under consideration. The Tribunal agreed with the assessee, citing the judgment of the Madras High Court in CIT Vs. C. Jaichander, which held that the amendment was prospective and applicable from the assessment year 2015-16 onwards.Tribunal's Findings:The Tribunal concluded that the assessee's interpretation of the phrase 'any financial year' was correct and that the investment limit of Rs. 50 lakhs applies separately to each financial year. The Tribunal noted that the second proviso to Section 54EC, which restricts the total investment eligible for deduction to Rs. 50 lakhs across multiple financial years, was introduced by the Finance (No.2) Act, 2014, and was applicable prospectively from the assessment year 2015-16 onwards. Therefore, the Tribunal held that the assessee was entitled to a deduction of Rs. 1 crore under Section 54EC for the assessment year 2013-14.Supporting Judgments:The Tribunal relied on several judgments, including:- CIT Vs. C. Jaichander (Madras High Court)- ITO Vs. Smt. Bala R. Venkitachalam (Pune Tribunal)- ITO Vs. Ms. Rania Faleiro (Panaji Tribunal)- CIT Vs. Coromandel Industries Ltd. (Madras High Court)These judgments supported the view that the investment limit of Rs. 50 lakhs under Section 54EC applies separately to each financial year and that the amendments introduced by the Finance (No.2) Act, 2014, were prospective.Conclusion:The Tribunal allowed the appeal of the assessee, reversing the order of the CIT(A), and held that the assessee was entitled to a deduction of Rs. 1 crore under Section 54EC for the assessment year 2013-14, based on investments made in two different financial years within the stipulated period.