2015 (8) TMI 961 - AT - Income Tax

Disallowance of exemption claimed u/s 54EC on investment in REC Bonds - delay in making investment - Held that - Claim of the assessee cannot be denied on the only ground of delay in investing in the REC Bonds due to non-availability of REC Bonds. By respectively following the decision of the Hon ble Bombay High Court in the case of CIT v. Cello Plast (2012 (8) TMI 527 - BOMBAY HIGH COURT ), we reverse the order passed by the CIT(Appeals) and allow the ground raised in the appeal of the assessee. - Decided in favour of assessee.

Summary

Issues:
Claim of exemption under section 54EC of the Income Tax Act for investment in REC Bonds.

Analysis:
The appeal was against the order of the Commissioner of Income Tax (Appeals) regarding the disallowance of exemption claimed under section 54EC of the Income Tax Act for an investment in REC Bonds. The assessee had earned long term capital gains and invested in REC Bonds after the specified time limit of six months from the date of sale of the original asset. The Assessing Officer denied the claim based on this delay. The CIT(Appeals) upheld the denial stating that non-availability of REC Bonds on the last date to invest did not entitle the assessee to extend the time limits. The assessee argued that the bonds were not available in the market during the specified period, relying on a decision of the Bombay High Court. The Tribunal considered the case and reversed the CIT(Appeals) order, allowing the appeal of the assessee based on the precedent set by the Bombay High Court, emphasizing that the delay in investing due to non-availability of REC Bonds was justified within the statutory time limit.

The Tribunal found that the assessee had sold the capital asset and claimed exemption under section 54EC by investing in REC Bonds. Due to the unavailability of REC Bonds in the market between the specified period, the assessee invested in the bonds after the deadline. The Tribunal referred to the Bombay High Court decision, which allowed waiting to invest in bonds until the statutory time limit, and applied the same reasoning to the present case. The Tribunal concluded that the delay in investing in REC Bonds was reasonable considering the circumstances of non-availability during the statutory period, thereby allowing the appeal of the assessee.