Assessee's Section 54EC exemption denied for late REC Bonds investment. Appeal dismissed.

The Tribunal upheld the CIT(A)'s decision, denying the exemption under Section 54EC of the Income-tax Act. The assessee failed to invest in REC Bonds within the required six-month period after selling the property, leading to the addition of the claimed deduction to their total income. The appeal was dismissed on 26.03.2019.

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Issues Involved:
1. Denial of deduction under Section 54EC of the Income-tax Act, 1961 for investment in REC Bonds beyond the stipulated period.

Issue-wise Detailed Analysis:

1. Denial of Deduction under Section 54EC:

The assessee, an individual deriving income from other sources and long-term capital gain, filed a return of income declaring a total income of Rs. 7,160 after claiming a deduction of Rs. 49,63,932 under Section 54EC of the Income-tax Act, 1961. The assessee sold a property on 17th March 2011 and subsequently invested the sale proceeds in REC Bonds on 19th March 2012, which were allotted on 31st March 2012. The Assessing Officer (AO) denied the exemption under Section 54EC, stating that the investment in REC Bonds was not made within six months from the date of transfer of the asset, as required by the Act. Consequently, an addition of Rs. 49,63,932 was made to the total income of the assessee.

Before the Commissioner of Income Tax (Appeals) [CIT(A)], the assessee argued that she initially intended to purchase a residential property and had paid Rs. 60 lakhs to the sellers. However, the deal did not materialize, and she received Rs. 55 lakhs back after issuing legal notices. This amount was then invested in REC Bonds. The CIT(A) upheld the AO's decision, emphasizing that the investment in REC Bonds was made beyond the six-month period stipulated under Section 54EC. The CIT(A) also noted that the assessee did not fulfill the conditions under Section 54, as she neither purchased another house property within the stipulated period nor invested in REC Bonds within the required timeframe.

The assessee appealed to the Tribunal, reiterating that the investment in REC Bonds was made after the failed property purchase and subsequent legal proceedings. The assessee's counsel argued for a liberal interpretation of Section 54EC, citing various judicial precedents and CBDT Circular No. 359, which advocated for a lenient approach to beneficial provisions. The counsel referenced several court decisions where extensions were granted due to non-availability of specified bonds or investments made prior to the transfer of the property.

The Departmental Representative (DR) supported the orders of the AO and CIT(A), asserting that the assessee did not meet the conditions under Section 54EC, as the investment was made more than one year after the sale, exceeding the six-month limit.

The Tribunal considered the arguments and noted that the assessee sold the property on 17th March 2011 and invested in REC Bonds on 19th March 2012, beyond the six-month period. The Tribunal acknowledged the various judicial precedents cited by the assessee but found them distinguishable from the present case. The Tribunal emphasized that the assessee did not invest in the specified bonds within the stipulated period and that the bonds were available in the market at the relevant time. The Tribunal concluded that the beneficial provisions should not be interpreted in a manner that renders the statutory requirements redundant.

Conclusion:

The Tribunal upheld the CIT(A)'s order, confirming the denial of exemption under Section 54EC, as the assessee did not invest in REC Bonds within the prescribed six-month period. The appeal filed by the assessee was dismissed, and the decision was pronounced in open court on 26.03.2019.

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