Proportionate capital-gains exemption under Section 54GB applies to qualifying eligible start-up equity investments without a monetary ceiling.

Section 54GB permits proportionate exemption of capital gains where investment in eligible start-up equity shares is lower than the net consideration, and the provision contains no specified monetary ceiling. The relevant proviso extends the benefit to residential property transfers completed up to 31 March 2022, covering a September 2021 transfer. The notes state that equity-share subscription, required shareholding and use of funds for new assets were supported by investee-company confirmations and financial material, while contrary observations on manufacturing activity, shareholding and fund utilisation were inconsistent with the record.

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Issues: Whether the assessee was entitled to proportionate deduction of capital gains under Section 54GB for investment in equity shares of an eligible start-up.

Analysis: The applicable proviso extended the benefit for investments in an eligible start-up where the residential property was transferred up to 31 March 2022; hence, a transfer in September 2021 was within the eligible period. Section 54GB contained no Rs.50 lakh ceiling and expressly permitted proportionate non-chargeability of capital gains where the cost of the new asset was lower than the net consideration. The record established subscription to equity shares, the requisite shareholding, and utilisation towards new assets. The appellate findings concerning lack of manufacturing activity, deficient shareholding and non-utilisation were not findings in the assessment order and disregarded confirmations and financial material furnished by the investee company. The adverse findings were therefore contrary to the record.

Conclusion: The assessee was entitled to deduction of Rs.1,48,16,241 under Section 54GB of the Income-tax Act, 1961.

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