Tribunal permits Rs. 50 Lacs NHAI bond deduction under Section 54EC

The tribunal allowed the appeal, permitting the deduction of Rs. 50 Lacs invested in NHAI bonds within six months of property sale under Section 54EC. The tribunal held that the amendment restricting the deduction to Rs. 50 Lacs was not applicable during the assessment year, thus allowing the excess claim of deduction and granting exemption on the investment within the specified timeframe.

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Issues:
1. Interpretation of Section 54EC of the Income Tax Act, 1961 regarding deduction limit.
2. Reopening of assessment under section 147 based on excess claim of deduction.
3. Claim for exemption of long term capital gain on investment in NHAI bonds.

Issue 1: Interpretation of Section 54EC regarding deduction limit
The appeal was against an order confirming the deduction limit u/s 54EC at Rs. 50 Lacs instead of Rs. 1 Crore claimed by the assessee. The assessee sold a property and invested in NHAI bonds, claiming deduction u/s 54EC. The AO disallowed the excess claim as the maximum permissible deduction was Rs. 50 Lacs. The AO relied on the Financial Act, 2014 which clarified the ambiguity in Section 54EC. The tribunal noted a similar case where the deduction of Rs. 1 Crore was allowed, as the amendment restricting the deduction to Rs. 50 Lacs was not in effect during the assessment year. Therefore, the tribunal allowed the deduction of Rs. 50 Lacs invested in NHAI bonds within six months from the property sale.

Issue 2: Reopening of assessment under section 147 based on excess claim of deduction
The assessee's case was reopened under section 147 due to an excess claim of deduction u/s 54EC. The reasons for reopening stated that the assessee claimed Rs. 1 Crore deduction under section 54EC, exceeding the permissible limit of Rs. 50 Lacs. The assessee argued that the original return should be considered as compliance with the notice u/s 148. The tribunal found that the reopening was not valid as the amendment restricting the deduction to Rs. 50 Lacs was not in effect during the assessment year.

Issue 3: Claim for exemption of long term capital gain on investment in NHAI bonds
The assessee invested in NHAI bonds within six months of selling a property to claim deduction u/s 54EC. The AO disallowed the excess claim beyond Rs. 50 Lacs, bringing the remaining amount to tax. The tribunal allowed the deduction of Rs. 50 Lacs invested within six months of the property sale, following a similar decision by a coordinate bench. The tribunal held that the assessee was entitled to exemption on the investment made within the specified timeframe, deleting the addition made by the authorities below.

In conclusion, the tribunal allowed the assessee's appeal, holding that the deduction of Rs. 50 Lacs invested in NHAI bonds within six months of the property sale was permissible, based on the interpretation of Section 54EC and relevant judgments.

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