TaxTMI 
TaxTMI 
2023 (10) TMI 185
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....nd proviso to Section 54EC is applicable from A.Y. 2015-2016. 2. That the CIT(A) erred in confirming disallowance u/s 54F of Rs. 48,96,993/- considering it as investment in more than one residential house in spite of the fact that the assessee owned other residential house jointly. 3. That the CIT(A) erred in confirming disallowance of expense of Rs. 11,69,488/- against the taxable interest income from firm has also held by Vishnu Anant Mahajan (2012) 22 Taxmann.com (88) (Ahd SB) 4. That all additions of Rs. 50,00,000/-, Rs. 48,96,993/- & Rs. 11,69,488/- may kindly be deleted. 5. The assessee craves leave to add, amend, alter, vary and/ or withdraw any or all the above grounds of Appeal." 3. Now, we shall take these grounds one by one. 4. Ground No. 1 raised by the assessee relates to disallowance u/s 54EC of Rs. 50,00,000/- being investment in NHAI bond in F.Y. 2012-2013 i.e. prior to date of sale which took place on 31/01/2014 though the CBDT circular No 359 dated 10/05/1983 is quite applicable and the amendment to second proviso to section 54EC is applicable from A.Y. 2015-2016. 5. Brief facts of the issue in dispute are stated as und....
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.... therefore invalid and is required to be quashed." 7. The Ld. Counsel for the assessee also submitted written submission in respect of ground no. 1, which is reproduced below: "Disallowance u/s 54EC of Rs. 50,00,000/- Facts: 7. The assessee sold the property on 31.01.2014. The assessee made the investment in NHAI bonds of Rs. 50,00,000/- on 31.03.2013 and further Rs. 50,00,000/- on 31.03.2014. So, assessee made the investment of Rs. 50,00,000/- each in two financial years and therefore the condition of S. 54EC read with first proviso to S. 54EC(1) is complied. The assessee has invested Rs. 50,00,000/- initially out of the advance money received of Rs. 25,00,000/- each received on 25.03.2013 and 28.03.2013 totalling to Rs. 50,00,000/-. In the sale deed, the details of the consideration of Rs. 50,00,000/- received by the assessee are mentioned with amount, name of the bank, cheque no. and date. The assessing officer didn't allow the claim of deduction of Rs. 50,00,000/- in regard to the investment made on 31.03.2013 in NHAI bond on the ground that assessee made the investment before date of the sale relying on the decision of the Honourable ITAT, Ahm....
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....should be equally applicable to S. 54EC also." 8. On the other hand, the Ld. DR for the Revenue, argued that assessee has purchased bond of Rs. 50,00,000/- prior of date of sale of property, therefore exemption under section 54EC of the Act, should be disallowed. 9. We have heard both the parties and carefully gone through the submissions put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the facts of the case including the findings of the ld. CIT(A) and other material brought on record. We note that assessee sold the property on 31.01.2014 and made the investment in NHAI bonds of Rs. 50,00,000/- on 31.03.2013 and further Rs. 50,00,000/- on 31.03.2014. Therefore, assessee made the investment of Rs. 50,00,000/- each in two financial years and therefore the condition of section 54EC read with first proviso to section 54EC(1) is complied with by the assessee. 10. The assessee has invested Rs. 50,00,000/- initially out of the advance money received of Rs. 25,00,000/- each received on 25.03.2013 and 28.03.2013 totalling to Rs. 50,00,000/-. In the sale deed, the details of the consideration of Rs. 50,00,000/- receive....
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....transfer of capital asset. Since the date of transfer in the given is 18.2.2008, six months period will elapse on 17.8.2008. Assessee had purchased REC Bonds worth of Rs. 50 lakhs on 27.2.2008 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 in....
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.... T.C.(A) No. 419 of 2014 and Mr. R. Vijayaraghavan, learned counsel appearing for the respondent in T.C.(A) No. 533 of 2014. 5. The key issue that arises for consideration is whether the first proviso to Section 54EC(1) of the Act would restrict the benefit of investment of capital gains in bonds to that financial year during which the property was sold or it applies to any financial year during the six months period. 6. For better understanding of the issue, it would be apposite to refer to Section 54EC(1) of the Act, which reads as under: "Section 54EC. Capital gain not to be charged on investment in certain bonds.- (1) Where the capital gain arises from the transfer of a long-term capital asset (the capital asset so transferred being hereafter in this section referred to as the original asset) and the assessee has, at any time within a period of six months after the date of such transfer, invested the whole or any part of capital gains in the long-term specified asset, the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say,- (a) if the cost of the long-term specified asset is not less than....
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....23 of the Bill seeks to amend section 54EC of the Income-tax Act relating to capital gain not to be charged on investment in certain bonds. The existing provisions contained in sub-section (1) of section 54EC provide that where capital gain arises from the transfer of a long-term capital asset and the assessee has within a period of six months invested the whole or part of capital gains in the long-term specified asset, the proportionate capital gains so invested in the long-term specified asset out of total capital gain shall not be charged to tax. The proviso to the said sub-section provides that the investment made in the long-term specified asset during any financial year shall not exceed fifty lakh rupees. It is proposed to insert a proviso below first proviso in said sub-section (1) so as to provide that the investment made by an assessee in the long-term specified asset, from capital gains arising from transfer of one or more original assets, during the financial year in which the original asset or assets are transferred and in the subsequent financial year does not exceed fifty lakh rupees. This amendment will take effect from 1^st April, 2015 and will, ac....
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....the first proviso to Section 54EC(1) of the Act, as it stood in relation to the assessees. 11. In any event, from a reading of Section 54EC(1) and the first proviso, it is clear that the time limit for investment is six months from the date of transfer and even if such investment falls under two financial years, the benefit claimed by the assessee cannot be denied. It would have made a difference, if the restriction on the investment in bonds to Rs. 50,00,000/- is incorporated in Section 54EC(1) of the Act itself. However, the ambiguity has been removed by the legislature with effect from 1.4.2015 in relation to the assessment year 2015-16 and the subsequent years. For the foregoing reasons, we find no infirmity in the orders passed by the Tribunal warranting interference by this Court. The substantial questions of law are answered against the Revenue and these appeals are dismissed. No costs." 11. On the identical facts, our view is fortified by the judgment of Hon'ble High Court of Bombay, in the case of Subhash Vinayak Supnekar [2017] 77 taxmann.com 226 (Bombay), wherein it was held that when amount received as advance under an agreement to sell a capita....
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....rs in equal proportion, it cannot be said that assessee is the owner of the house property at the time of the sale for availing the deduction u/s 54F of the Act, therefore assessee is entitled to claim deduction under section 54F of the Act. 16. On the other hand, the Ld. DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer, which we have already noted in our earlier para and is not being repeated for the sake of brevity. 17. We have given our thoughtful consideration to rival contention. We have perused case file as well as paper books furnished by assessee. We note that assessee claimed deduction u/s 54F of the Act to the tune of Rs. 48,96,993/- on the ground that assessee owns only one house at the Oberoi Palace Housing Society in this name at the time of the sale. It is the contention of the assessee that the other two properties are owned jointly with others and therefore it is not required to be considered for the purpose of condition of section 54F of the Act. The assessing officer relied on the order of the Hon`ble Supreme Court in the case of M. J. Siwani v/s. CIT - 53 taxmann.com 318 (SC) where the SLP filed by the taxpayer was dismis....
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.... the assessee. 20. Ground No. 3 raised by the assessee relates to confirming the disallowance of expense of Rs. 11,69,488/- against the taxable interest income from firm. 21. Succinct facts qua the issue are that during the assessment proceedings, the assessing officer observed that the assessee has shown interest income of Rs. 5,04,979/- from firm Arvind Silk Mills and against it has claimed expenses of Rs. 11,69,488/- resulting into loss of Rs. 6,64,509/-. The assessing officer noticed that the assessee was having only interest income from firm but had claimed expenses in nature which were depreciation, petrol, insurance etc. which are nowhere related to earning interest income and therefore assessing officer disallowed the expense of Rs. 11,69,488/-. 22. On appeal, ld CIT(A) confirmed the action of the assessing officer, therefore assessee is in further appeal before us. The Learned Counsel for the assessee, at the outset, argued that during the assessment stage, the assessing officer has not given proper opportunity to the assessee to explain the nature of such expenses. These expenses are very much connected with assessee's business and the assessee have cogent ev....