TaxTMI 
TaxTMI 
2026 (8) TMI 1814
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....2013, declaring a total income of Rs. 3,36,240/-. The case was selected for scrutiny under CASS due to significant deductions claimed under sections 54, 54EC, and 54F of the Income Tax Act, 1961. Statutory notices were issued, and the appellant's authorised representative provided the required details. Upon verification, the Assessing Officer (AO) identified three primary issues. First, interest and bank charges of Rs. 5,42.914/- claimed against interest income were disallowed, as the AO concluded the loan was used for personal benefit and investments in property, thus not eligible under section 54. Second, the deduction of Rs. 36,33,164/- under section 54F was disallowed because the appellant failed to deposit the unutilised sale proceeds in a Capital Gains Account Scheme as required by section 54F(4), nor was proof of such deposit provided. Third, the AO disallowed a deduction of Rs. 1 crore under section 54EC, restricting it to Rs. 50 lakh, as the total deduction under section 54EC cannot exceed Rs. 50 lakhs Consequently, the assessment was completed under section 143(3) at an enhanced income of Rs. 95,11,160/- after making these additions. Aggrieved by the said order, assess....
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....e by allowing the claim of deduction u/s 54 and 54F and partly disallowed the claim u/s 54EC to the extent of Rs. 50,00,000/-. It is a fact that assessee has sold a property on 29.12.2012 and earned a long- term capital gains and in order to avail exemption u/s 54EC, the assessee invested the capital gains in specified bonds in two trenches Rs. 50,00,000/- on 28.03.2013 and Rs. 50,00,000/- on 28.06.2013. It is admitted an undisputed position that both the investments were made within the prescribed period of 6 months from the date of the transaction of the capital assets. The first proviso to Section 54EC stipulates the investments made in such bonds during in financial year shall not exceed Rs. 50,00,000/-. Thus, the statute prescribed two independent conditions, namely the time limit of six months and the monitory ceiling of Rs. 50,00,000/- per financial year. A harmonious and literal reading of provisions along with the proviso makes it clear that restriction of Rs. 50,00,000/- applies to each financial year and not to the transaction as a whole. In the present case, period of 6 months from the date of the transfer overlaps two financial year. We have gone through the order pass....
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....ctive parties, we have perused the order of lower authorities and find that the Ld. AO has denied the claim of exemption on investment in REC made on 23.04.2013 on the ground that the exemption can be claimed on any amount which has not been invested during the year concern. It is pertinent to mention here that the assessee against the above claim of exemption has made investment of Rs. 50 lakhs on 30.03.20133 in bond of NHAI and has further sum of Rs. 50 Lakhs in the bond REC. It is clear that both the above made investment is very much within the period of six months from the date of transfer of asset i.e. 25.03.2013. The assessee has purchased two bonds each of Rs. 50 lakhs of National Highway Authority of India vide cheque no. 588824 and cleared by the bank on 30.03.2013 and re-error of electrification of Corporation Ltd. (REC) vide cheque no. 8582 and the same is cleared by the bank on 23.04.2013. The assessee had deposited Rs. 25 lakhs in CGHS by making fixed deposit on IDBI Bank Ltd. on 20.07.2013 before the due date of filing of return. The first proviso to section 54EC is specified claim of investment and states that investment so made on or before 1st April, 2007 in the l....
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....ginal asset, the whole of such capital gain shall not be charged under section 45 ; (b) if the cost of the long-term specified asset is less than the capital gain arising from the transfer of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of acquisition of the long-term specified asset bears to the whole of the capital gain, shall not be charged under section 45. 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 rupees.' 7. On a plain reading of the above said provision, we are of the view that Section 54EC(1) of the Act restricts the time limit for the period of investment after the property has been sold to six months. There is no cap on the investment to be made in bonds. The first proviso to Section 54EC(1) of the Act specifies the quantum of investment and it states that the investment so made on or after 1.4.2007 in the long-term specified asset by an assessee during any financial year does not exceed fifty lakh rupees. In other words, as per the man....
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....15-16 and subsequent years. Memorandum: Explaining the provisions in the Finance (No.2) Bill, 2014: Capital gains exemption on investment in Specified Bonds. The existing provisions contained in sub-section (1) of section 54EC of the Act provide that where capital gain arises from the transfer of a long-term capital asset and the assessee has, at any time within a period of six months, invested the whole or any part of capital gains in the long-term specified asset, out of the whole of the 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. However, the wordings of the proviso have created an ambiguity. As a result the capital gains arising during the year after the month of September were invested in the specified asset in such a manner so as to split the investment in two years i.e., one within the year and second in the next year but before the expiry of six months. This resulted in the claim for relief of one crore rupees as against the intended limit for relief of fifty lakhs rupees. Accordingly, it is proposed to ....
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....f 2006 F. No. 142/09/ 2006-TPL, dated December 22, 2006, along with the words 'subject to the following conditions, namely,' issued by the Central Board of Direct Taxes are ultra vires Section 54EC of the Income-tax Act, 1961, and arbitrary and violative of Articles 14 and 265 of the Constitution of India and consequently unenforceable", were dismissed as infructuous taking note of the subsequent amendment to Section 54EC of the Act, incorporating the limit on amount of investment in bonds in the section itself. 6. For the reasons aforesaid, we do not find any question of law, much less substantial question of law that arises for our consideration in this appeal. Accordingly, this appeal is dismissed. No costs." .7. We have also gone through the order passed by the Hon'ble Karnataka High Court passed in CIT vs. Smt. Neena Krishna Menon which has also been held thus: "Section 54EC, read with section 263, of the Income-tax Act, 1961 - Capital gains - Not to be charged on investment in certain bonds (2015 Amendment) - Assessment year 2009-10 - Whether amendment to section 54EC brought with effect from 1-4-2015 restricting investment in assets from sa....