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2021 (5) TMI 667 - AT - Income TaxDisallowance u/s 14A - Assessee claimed that it has got huge internal accruals and interest free funds for making the investment and therefore, no disallowance should be made u/s. 14A - HELD THAT:- Authorities below, therefore, was unable to have an opportunity to examine the interest free funds available with the assessee via-a-vis the investment made during the relevant year under consideration. The case laws relied upon by the assessee in its own case by the Co-ordinate Bench of the Tribunal [2021 (2) TMI 1138 - ITAT PUNE] is substantially distinguishable on facts for the reason that in this relevant year, factually it was not established by the assessee and neither therefore, it was examined by the Sub ordinate Authorities that investments were made by the assessee in the year under consideration only from reserves and interest free funds available with the assessee. There is an observation by the Ld. CIT(Appeals) that investments were directly made from OD account where both own funds and interest bearing funds are intermixed. Therefore, it becomes necessary to factually verify whether the entire investments were made only from interest free funds. We are of the considered view, therefore, in the interest of justice, this issue should be remanded back to the file of the Assessing Officer for verification of investments made vis-a-vis interest free funds available with the assessee during the year under consideration Disallowance u/s. 54EC - HELD THAT:- Hon'ble High Court in the case of CIT Vs. C. jaichander [2014 (11) TMI 54 - MADRAS HIGH COURT] has held that as per the mandate of Section 54EC(1) of the Act, the time limit for investment is six months and the benefit that flows from the first proviso is that if the assessee makes the investment of ₹ 50,00,000/- in any financial year, it would have the benefit of Section 54EC(1) of the Act. The Hon'ble High Court further held that however to remove the ambiguity in the above said provision the legislature by Finance (No.2) Act, 2014, with effect from 1.4.2015, has inserted after the existing proviso to sub-section (1) of Section 54EC of the Act, the second proviso which provides as per the investment made by an assessee in the long-term specified asset out of the 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 ₹ 50 lakhs. The said amendment was held to be applicable from assessment year 2015-16 and subsequent assessment years. In assessee's case the investments of the assessee have been made in assessment years 2013-14 and 2014-15. The Finance (No.2) Act, 2014 is effective from assessment year 2015-16 and therefore not applicable to the case of the assessee. Para 21.4 of the said circular (supra.) categorically reads that the amendment is only effective from 01.04.2015 and shall apply in relation to the assessment year 2015-16 and subsequent assessment years. In view thereof, we set aside the order of the Ld. CIT(Appeals) on this issue and direct the Assessing Officer to grant deduction u/s.54EC of the Act to the assessee as per law.
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