TaxTMI 
TaxTMI 
TaxTMI 
2014 (9) TMI 495
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....iew of the proviso to sub- section (1) of Section 54EC of the Act inserted by the Finance Act, 2007, w.e.f. 01.04.2007. The Assessing Officer further observed that the Explanatory Notes on the provisions of the Finance Act, 2007, issued vide CBDT Circular No.3/2008 dated 12.03.2008, by Finance Minister Speech and the notification No.380/2006 dated 22.12.2006. The Assessing Officer made specific reference to paragraph 28.2 of such Explanatory Notes and stated that this clearly specifies "that the Government decided to impose a ceiling on the quantum of investment that could be made in such bonds. Accordingly, the said section has been amended so as to provide for a ceiling on investment by an assessee in such long-term specified assets." Accordingly, the Assessing Officer viewed that the ceiling was on the investment by an assessee and therefore, the limit has to be Rs. 50 lakhs for an assessee; hence, he restricted the exemption to Rs. 50 lakhs and the remaining amount of Rs. 50 lakhs was disallowed and added to the income of the assessee. 4. Before the Commissioner of Income-tax (Appeals), the assessee submitted as under:- "1. The appellant has sold off long term capital asset b....
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....ner of Income-tax (Appeals) held as under:- "2.2 I have carefully considered the submission of the Ld. Counsel as well as the facts of the case and the finding recorded by the Assessing Officer in the assessment order. There is no dispute on the computation of Long Term Capital Gain of Rs. 1,42,35,320/-. However, the appellant had claimed an exemption of Rs. 1,00,00,000/- u/s 54EC(1) of the Act from the said capital gain on account of investment of capital gain in the specified assets. The said claim of the appellant was not entertained by the Assessing Officer. The Assessing Officer had restricted the exemption to Rs. 50 lakhs only in view of the proviso to sub-section (1) of sec. 54EC of the Act inserted by the Finance Act, 2007, w.e.f. from 01.04.2007. It was the contention of the Ld. Counsel of the appellant that the appellant had invested Rs. 50 lakhs in REC bonds on 29th Feb., 2008 i.e. in financial year 2007-08 and another Rs. 50 lakhs in NHAI bonds on 30th June, 2008 i.e. in financial year 2008-09. In his view, it is amply clear from the plain reading of sec. 54EC(1) that the investment in bonds, for the purpose of claiming exemption, in any financial year should not excee....
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....investment was imposed. Investments in such specified assets to avail exemption u/s 54EC(1) on or after 1st day of April, 2007 will not exceed fifty lakhs rupees in a financial year. Reference may be made to page-4 and page-5 of the assessment order for the specific wording of clause- 28 of Circular No. 3/2008 dated 12.03.2008. Reference may also be made to page-4 of the assessment order for the Finance Minister's Speech. The Ld. Counsel has misinterpreted the proviso to sec. 54EC(1) and also the clause-28 of Circular No. 3/2008 dated 12.03.2008. 2.6 The intention of the Legislature in inserting the proviso to sec. 54EC(1) was to restrict the exemption to 50 lakhs in a financial year so that the benefit can be given to many small investors. Though, the language of the section 54EC(1) alongwith proviso is very clear but the same was mis-understood by the Counsel of the appellant. It will be worthwhile to discuss the issue of interpretation of statute which is now well settled. The Hon'ble Supreme Court in the case of CIT vs. Tara Agencies 292 ITR 444 (SC) has held that "The intention of the Legislature has to be gathered from the language used in the statute, which means th....
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....06 was validated but limit of investment of Rs. 50 lakhs for investment in long-term specified assets was incorporated in the section itself. It was held vide para-13 of the decision that it is to be noted that another proviso was also inserted after sub-sec. (1) of sec. 54EC of the Act, which reads as follows: "Provided investment on or after 1st April 2007 in the 'long-term specified asset' by the assessee during the end of the financial year does not exceed Rs. 50 lakhs." By this amendment by Finance Act of 2007, the Central Government limited the investment made on or after 1st April, 2007 in specified long-term asset by the assessee during the end of the financial year to Rs. 50 lakhs and the same has come into effect from 1st April. 2007. From both the amendments (refer opening five lines of para-13 for amendment by Finance Act, 2007) it is clear that the intention of the legislature is to limit the investment in the 'long-term specified asset' to Rs. 50 lakhs. The power to limit on the amount of investment by an assessee in bonds is now incorporated in the section itself. By the proviso to Expln. (b) the bond notified-before 1st April, 2007 with a condition ....
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....partmental Representative however placed before us an earlier judgment, contrary to the decision of the Ahmedabad Bench of the ITAT, rendered by the ITAT, Jaipur Bench in the case of ACIT Vs. Raj Kumar Jain & Sons in ITA No.648/JP/2011 dt.30.1.2012 wherein the Tribunal on similar facts, was of the view that a liberal interpretation will lead to discrimination adversely affecting those who sell a property at any time from April to September of a financial year vis-à-vis those who sell property in the period October to March of the same financial year. In this view of the matter, they came to the conclusion that for the investment to be made within a period of six months, the exemption under section 54EC of the Act is to be restricted to Rs. 50 lakhs only. 9.7 The learned counsel for the assessee placed reliance on circular No.3/2008 dt.12.3.2008 issued by CBDT, being an explanatory note on the provisions relating to Direct Taxes in Finance Act, 2007. In the said para 28.2 thereof the reason for it to set a limit on the quantum of investment by a person in a financial year, reads as under : "28.2 The quantum of investible bonds issued by NHAI and REC being limited, it was fe....
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.... meaning of the language used and then to apply that meaning to the facts of the case and in that process if the tax payer is brought within the net he is caught, otherwise he has to go free." In the case of CWT Vs. Hashmatunnisa Begum reported in 176 ITR 98 (SC), the Hon'ble Apex Court held that while interpreting statutes, literal construction has to be applied regardless of results and that only in a situation where two views are reasonably possible, should reference be given to that view which promotes constitutionality and not where the statute can be read only in a particular way. The following decisions of the Hon'ble Apex Court have laid down the proposition that provisions for deduction, exemption or relief are to be construed liberally in order to advance the objective and not to frustrate it. (i) CIT Vs. Gwalior Rayon Silk Manufacturing Co. Ltd. (196 ITR 149)(SC) (ii) CIT Vs. Vegetable Products Ltd. ( 88 ITR 192) (iii) Bajaj Tempo Ltd. Vs. CIT (196 ITR 188)(SC) Taking into consideration the overall facts and circumstances of the case, the CBDT's Circular No.3/2008, and the principles laid down by the Hon'ble Apex Court for interpreting statutes, we a....
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....see. 10.3 Further, in the case of Aspi Ginwala & Others (supra) cited earlier in this order, the assessee was unable to invest in Bonds within a period of six months as the issue was not open and did so the moment the same was made open to public and thus the allotment was made after the statutory period of six months. The ITAT, Ahmedabad Bench, relying on an earlier decision of the ITAT, Mumbai in the case of Ram Agarwal Vs. JCIT reported in 81 ITD 163 held that the assessee therein was prevented by sufficient cause from investing within the statutorily permitted period of six months and allowed the assessee exemption under section 54EC of the Act in respect of the said investment. In the present case before us, the assessee has made payment for the investment in NHAI which was encashed on 9.6.2008 well within the statutorily permitted period of six months from the date of sale of the property (i.e. upto 13.6.2008). What is to be reckoned here is the date of payment and not the date of allotment as the same is not in the control of the assessee. In this view of the matter, we hold that the date of payment (i.e. date of encashment of cheque) is to be reckoned for calculating the s....
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.....2.2008 and Bonds of NHAI for Rs. 50 lakhs on 30.6.2008. Both these purchases were within the six months' period. Only question that arises is whether proviso to Section 54EC(1) would limit the claim of exemption to Rs. 50 lakhs. Said proviso mentions that investment on which an assessee could claim exemption under Section 54EC(1) shall not exceed Rs. 50 lakhs during a financial year. So, the exemption provision has to be construed not transaction-wise but, financial year- wise. No doubt, Explanatory Memorandum does say that limitation has been placed with a view to ensure equitable distribution of benefits among the prospective investors. Relevant Explanatory Memorandum is reproduced for brevity:- "The quantum of investible bonds issued by NHAI and REC being limited, it was felt necessary to ensure that the benefit was available to all the investors. For this purpose, it was necessary to ensure that the limited number of bonds available for subscription is also available for small investors. Therefore, with a view to ensure equitable distribution of benefits amongst prospective investors, the government decided to impose a ceiling on the quantum of investment that could be ma....
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....ore is entitled for exemption under Section 54EC. The Assessing Officer noted that a proviso which reads as under, has been inserted w.e.f. 1.4.2007 in Section 54EC(1): "provided that the investment made on or after the first day of April, 2007 in the long term specified asset by an assessee during any financial year does not exceed fifty lakh rupees" On the basis of this proviso, the Assessing Officer took the view that the Assessee could have made the investment only upto Rs. 50,00,000/- and he could have therefore got exemption under Section 54EC only for a sum of Rs. 50,00,000/- and accordingly, he allowed exemption for Rs. 50,00,000/- and made the addition of Rs. 50,00,000/-. When the matter went before the CIT(A), the CIT(A) deleted the addition by holding as under : "I have gone through the facts of the case, contents of the assessment order and written submissions of the assessee. The fact is that the assessee has sold the property on 05.02.2008 and Rs. 50,00,000/- was invested in the same financial year and Rs. 50,00,000/- was invested during the next F.Y. As per the proviso to Section 54EC of the Act that the long term specified asset by and assessee during any financi....
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....ption of eligible investment in NHAI Bonds should be treated in time. There is also no dispute about the fact that subscription to the eligible investment was closed during the period 01-04-2008 to 26-05-2008. The dispute which remains to be decided by us in this case is whether as per the provisions of section 54EC the assessee is entitled for exemption of Rs. 1 Crore as six months period for investment in eligible investment involves two financial years. If the answer to this question is "yes", whether investment made by the assessee on 26-05-2008 beyond six months period is eligible for exemption in view of the fact that no subscription for eligible investment was available to the assessee from 1st April, 2008 to 26-05-2008. 8. While going through the proviso of section 54EC, we find that the proviso to section reads as under. - "[Provided that the investment made on or after the 1st Day of April, 2007 in the long term specified asset by an assessee during any financial year does not exceed fifty lakh rupee]" It is clear from this proviso that where assessee transfers his capital asset after 30th September of the financial year he gets an opportunity to make an investment of R....
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....95 on account of strike as certified by the officials of the concerned bank. From the certification given by the bank officials, the assessee had approached the bank officials with the cheque for the amount of deposit on 30-8-1995. The assessee remained unable to obtain receipt on 31-8-1995 due to bank strike and the cheque was cleared on 1-9-1995. In this view of the situation, it can well be said that the deposit of the assessee was in accordance with the provisions of statute as on the last date i.e. the 31-8-1995, the deposit could not be made due to the reason which was beyond the control of the assessee particularly in view that the efforts were made by the assessee a day prior to last date to deposit the requisite amount in the bank to make him entitle for exemption under sec 54F. As mentioned earlier, this position has also been accepted by the learned CIT(A). Therefore, we direct the Assessing officer to allow the necessary exemption to the assessee. Before parting we may observe that section 54F is a beneficial provision to encourage assessee to invest in house properties, Keeping in mind the above object behind the insertion of section 54F and considering the fact that ....
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....para 28.2 thereof the reason for it to set the limit on the quantum of the investment by a person in a financial year are given as under : "28.2 The quantum of investible bonds issued by NHAI and REC being limited, it was felt necessary to ensure that the benefit was available to all the investors. For this purpose, it was necessary to ensure that the limited number of bonds available for subscription is also available for small investors. Therefore, with a view to ensure equitable distribution of benefits amongst prospective investors, the government decided to impose a ceiling on the quantum of investment that could be made in such bonds. Accordingly, the said section has been amended so as to provide for a ceiling on investment by an assessee in such long-term specified assets. Investments in such specified assets to avail exemption under Section 54EC, on or after 1st day of April, 2007 will not exceed fifty lakh rupees in a financial year." From this circular also, it is apparent that the Government only intended to restrict the investment in a particular financial year and accordingly has fixed the limit of Rs. 50,00,000/- as permissible limit in a particular financial year. T....
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.... Rs. 50/- lakhs in the month of March, 2008 i.e. in the financial year 2007-08. Thereafter the assessee further invested a sum of Rs. 50/- lakhs in National Highway Authorities of India bonds in the month of May, 2008 i.e. in the financial year 2008-09. This investment of Rs. 1 crore was deducted from the capital gain while computing the income under the head capital gains and return of income was filed. The return income filed by the assessee was accepted by the A.O. vide assessment order dated 7th May, 2010 passed u/s 143(3) of the Act. 3. Subsequently, on 12th April, 2011 the CIT, Ahmedabad-V issued a show cause notice u/s 263 of the Act intimating that as per the proviso to Section 54EC(1), the investment made in long term specified assets during any financial year should not exceed Rs. 50 lakhs. The CIT further expressed that the assessee claimed deduction for investment of Rs. 1 crore which was allowed by the A.O. and, therefore, the assessment order was erroneous and prejudicial to the interest of the Revenue. Ld. CIT, accordingly, show caused the assessee to make submissions on this issue. Detailed written submissions were filed before ld. CIT and assessee's representa....
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.... amended provision, the long term specified asset was defined to mean any bond redeemable after 3 years and issued by the National Highway Authority of India or by the Rural Electrification Corporation. Subsequently, the Central Govt. issued a Notification No. 380 of 2006 dated 22nd Dec. 2006 which reads as follows. ''SO. No. 2146(E). (1) In exercise of the powers conferred by sub- cl (ii) of cl.(b) of the Explanation to Section 54EC of the Income Tax Act, 1961, the Central Govt. notifies the bonds for an amount of rupees three thousand five hundred crores to be issued by the Rural Electrification Corporation Ltd., a company formed and registered under the Companies Act, 1956, during the period from 26th Dec. 2006 to 31st March 2007 as 'long term specified asset' for the purpose of the said Section subject to the following conditions namely:- (i) a person who has made an investment of an amount aggregating more than fifty lakh rupees in the bonds notified as 'long term specified asset by the Central Govt. for the purpose of Section 54EC of the I.T. Act, 1961 in the Official Gazette vide Notification No. SO No. 963(E) dated 26th June, 2006 or Notification No. S....
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..... Thus the ld. AR of the assessee was of the view that assessee can claim deduction of Rs. 1.00 crore. We had already reproduced Section 54EC while reproducing the submissions of the ld. AR of the assessee. Section 45 says that any profits or gains arising from the transfer of a capital asset effected in the previous year shall be deemed to be an income of the previous year in which the transfer took place save as otherwise provided in Section 54, 54B, 54D, 54E, 54EA, 54EB, 54F, 54G and 54H. Hence, Section 54EC is not mentioned in Section 45 of the Act. As per Section 54EC, the profits or gains arising from the transfer of a capital asset is to be dealt with as per Section 54EC, in case the assessee has invested the whole or any part of the capital gain in the long term capital specified asset. Thus deduction is eligible to the investment. The proviso to Section 54EC provides that an investment made on or after the first date of April, 2007 in the long term specified asset by an assessee during any financial year does not exceed Rs. 50.00 lacs. Hence, the investment should not exceed Rs. 50.00 lacs. The proviso was introduced by the Finance Bill, 2007. In the memo explaining the pr....
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.... on 29.02.2008 i.e. FY 2007-08 and Rs. 50 lakhs on 30.06.2008 i.e. FY 2008-09. Thus, the assessee invested in Rs. 1 crore in specified bonds which are eligible for deduction u/s 54EC of the Act within six months from the date of the transfer of capital asset giving rise to Long Term Capital Gain in the hands of the assessee. Accordingly, the assessee claimed exemption of Rs. 1 crore u/s 54EC of the Act in the return filed for the Assessment Year 2008-09 which was denied by the Assessing Officer in view of the proviso to sub-section (1) of Section 54EC of the Act, inserted by the Finance Act, 2007, w.e.f. 01.04.2007. He further supported his action by the Explanatory Notes on the provisions of Finance Act, 2007 and CBDT Circular No.3/2008 dated 12.03.2008 as well as by the Finance Minister Speech and the notification No.380/2006 dated 22.12.2006, wherein specific reference was made to paragraph 28.2 of such Explanatory Notes which stated that the Government decided to impose a ceiling on the quantum of investment that could be made in such bonds. Accordingly, the said section has been amended so as to provide for a ceiling on investment by an assessee in such long-term specified ass....