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2015 (4) TMI 758 - ITAT BANGALORE

2015 (4) TMI 758 - ITAT BANGALORE - TMI - Revision of assessment order - Denial of exemption under Section 54EC - Prospective amendment in Section 54EC w.e.f. 01-4-2015 - Held that:- Section 54EC has been amended by the Finance Act, 2014 w.e.f. 01-4-2015 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 .....

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crore rupees as against the intended limit for relief of fifty lakh rupees.

It can be seen from the above statutory amendment and the explanatory memorandum to Finance (No.2) Bill, 2014 that the legislature has accepted the ambiguity in the language of the proviso, but has amended the law with prospective effect i.e., from A.Y. 2015-16. It is therefore clear that for AY prior to AY 2015-16, on interpretation of the provisions it is possible for an Assessee claim deduction of ₹ .....

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pondent : Shri Farahat Hussain Qureshi, CIT-II(DR) ORDER Per N.V. Vasudevan, Judicial Member This appeal by the assessee is against the order dated 18.3.2014 of the Commissioner of Income Tax-IV, Bangalore passed u/s. 263 of the Act relating to assessment year 2009-10. 2. The facts and circumstances under which the order u/s. 263 of the Act was passed by the CIT were as follows. The assessee is an individual. She filed return of income declaring a total income of ₹ 1,32,59,530. During the .....

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ix months from the date of transfer. The deduction claimed u/s. 54EC of the Act was allowed by the AO in his order dated 22.11.2011 passed u/s. 143(3) of the Act. 3. The ld. CIT, in exercise of his powers u/s. 263 of the Act, was of the view that the aforesaid order of the AO was erroneous and prejudicial to the interests of the revenue. According to him, the maximum amount of deduction that ought to have been allowed u/s. 54EC was only ₹ 50 lakhs and the AO fell into error in allowing ded .....

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these purchases were within the six months period. ……… The said provision mentions that investment on which an assessee could claim exemption under Section 54EC(1) shall not exceed ₹ 50 lakhs during a financial year. So, the exemption provision has to be construed not transaction-wise but financial year wise. Accordingly, the assessee is entitled to claim exemption of Section 54EC in respect of total investment in REC Bonds of Rs.One crore. 4. The ld. CIT was of the vi .....

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therein more than one financial year simultaneously. The CIT referred to the decision of the ITAT Jaipur Bench in ACIT v. Sri Rajkumar Jain & Sons HUF [2012] 19 taxmann.com 27 (Jaipur Trib). The Tribunal in the aforesaid decision took the view that the maximum allowable deduction u/s. 54EC of the Act is only a sum of ₹ 50 lakhs. The CIT accordingly directed the AO to disallow the claim for deduction u/s. 54EC to the extent of ₹ 50 lakhs. 5. Aggrieved by the order of CIT(A), the .....

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visions of section 54EC(1) read as follows:- Capital gain not to be charged on investment in certain bonds. 54EC. (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 .....

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roportion 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. (emphasis supplied) 9. We have considered the rival submissions. We are of the view that the order of CIT u/s. 263 of the Act cannot be sustained. Identical issue had d .....

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restricted and not the exemption, then in view of the fact that NHAI had allotted the Bonds only on 30.6.2008 in respect of the second investment of ₹ 50 lakhs, which is beyond the period of six months from the date of sale of property, can it be said that the second investment of ₹ 50 lakhs is said to have been made outside the period of six months and no exemption is to be allowed under section 54EC of the Act in respect of the same. 9.5 The learned counsel for the assessee has pl .....

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n two financial years. 9.6 The learned Departmental Representative however placed before us an earlier judgment, contrary to the decision of the Ahmedabad Bench of the ITAT, rendered by the ITAT, Jaipur Bench in the case of ACIT Vs. Raj Kumar Jain & Sons in ITA No.648/JP/2011 dt.30.1.2012 wherein the Tribunal on similar facts, was of the view that a liberal interpretation will lead to discrimination adversely affecting those who sell a property at any time from April to September of a financ .....

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Finance Act, 2007. In the said para 28.2 thereof the reason for it to set a limit on the quantum of investment by a person in a financial year, reads as under : 28.2 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 investors. Therefore, with a view to ensure e .....

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Circular no.3/2008 of CBDT (supra) that the Government only intended to restrict the investment in a particular financial year and thus has fixed a limit of ₹ 50 lakhs as permissible investment in a particular financial year. It also appears clear that the Government did not intend to restrict the maximum amount of exemption permissible under section 54EC of the Act. The fact that the Legislature has consciously used the words in a financial year in the proviso to section 54EC of the Act .....

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ttled principle in law that the courts while construing Revenue Acts have to give a fair and reasonable construction to the language of a statute without leaning to one side or the other, meaning thereby that no tax or levy can be imposed on a subject by an Act of Parliament without the words of the statute clearly showing an intention to lay the burden on the subject. In this process, the courts must adhere to the words of the statute and the so called equitable construction of those words of t .....

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to be applied regardless of results and that only in a situation where two views are reasonably possible, should reference be given to that view which promotes constitutionality and not where the statute can be read only in a particular way. The following decisions of the Hon'ble Apex Court have laid down the proposition that provisions for deduction, exemption or relief are to be construed liberally in order to advance the objective and not to frustrate it. (i) CIT Vs. Gwalior Rayon Silk Ma .....

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(supra) relied on by the assessee and hold that the assessee is entitled to total deduction under section 54EC of the Act spread over a period of two financial years @ ₹ 50 lakhs each on investments made in specified instruments within a period of six months from the date of sale of the property. 10. It may also be mentioned that section 54EC has been amended by the Finance (No.2) Act, 2014 w.e.f. 1.4.2015 as follows:- The following second proviso shall be inserted after the existing provi .....

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tory Memorandum to Finance (No.2) Bill, 2014, which is reproduced below:- 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, 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 a .....

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