2015 (8) TMI 754

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.... grounds are raised by the Department: 1. The order of Ld. CIT(A) is opposed to law and fact of the case. 2. Whether on facts and in the circumstances of the case, Ld. CIT(A) has erred in allowing deduction u/s. 54EC amounting to Rs. 50,00,000/- invested in REC bond in subsequent financial year. 3. Whether on facts and in the circumstances of the case, Ld. CIT(A) has erred in allowing deduction u/s. 54EC exceeding Rs. 50,00,000/- during the relevant financial year 2007-08, which covered the period of investment beyond the financial year i.e. 2008-09 in view of proviso inserted w.e.f. 01/04/2007 in sec. 54EC(1) which reads "Provided that the investment made on or after the first day of April, 2007, in the long term specified asset b....

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....cial year and not qua the aggregate per assessee in different years" and also stated that "Sec. 54EC of the Act is an exemption provision and as such it should be interpreted liberally, reasonably and in favour of the assessee". Assessee further submitted that "viewed from the mischief remedy rule, it is very clear that the limit of Rs. 50 Lac. on investment is only for ensuring that no single person can hoard more than Rs. 50 Lac. in a single financial year so that more equitable balances is achieved in the distribution of the bonds to other persons.". The assessee has sold long term capital assets during the year and earned capital gains as under:-   Asset sold Capital gain/loss A Sale of Comba flat (1,15,807) B ....

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....s identical to that of the instant case. Facts of the case, referred above, is as under: The assessee had sold a property [long-term capital asset] on 05.02.2008 and computed the capital gain at Rs. 1.16 crores. She had invested in the Capital Gains Bonds (REC Bonds] a sum of Rs. 50 lakhs on 31.03.2008 and a sum of Rs. 50 lakhs on 30.06.2008. In the return of income for the assessment year 2008-09, she claim exemption under section S4EC of the capital gain amounting to Rs. 1 crore. The Assessing officer referred to the proviso inserted in section 54EC(1) by the Finance Act, 2007, with effect from 01-O4-2007, and on the basis of this proviso took the view that the assessee could have made the investment only upto Rs. 50 lakhs. Therefor....

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....provided in a financial year the investment made did not exceed Rs. 50 lakhs. From the Circular No.3/2008, dated 12-03-2008 issued by the OBOT being an explanatory note on the provisions relating to direct taxes in the Finance Act, 2007, 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. 5O lakhs as permissible limit in a particular financial year. The Government did not intend to restrict the maximum amount of exemption permissible under section 54EC. Legislature has consciously used the words 'in a financial year' in the proviso to section 54EC. If the legislature wanted to restrict the exemption itself to Rs. 50 lakhs, it could have simp....