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2016 (5) TMI 487 - ITAT CHENNAI

2016 (5) TMI 487 - ITAT CHENNAI - TMI - Exemption u/s.54EC denied - investment in REC capital gains bonds falling in two financial years - Held that:- The legislative intent in the subsequent amendment is to restrict the investment of ₹ 50,00,000/- to one financial year only. There was ambiguity and confusion on interpreting the provisions as the Commissioner of Income Tax (Appeals) examined the issue on the interpreting the word ‘’any’’ referring to dictionary meaning because there was no .....

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the facts and amendment of provisions rely on the jurisdictional High Court decision of CIT vs. C. Jaichander (2014 (11) TMI 54 - MADRAS HIGH COURT ) and CIT vs. Coramandel Industries Ltd (2014 (12) TMI 852 - MADRAS HIGH COURT ) and setaside the order of the Commissioner of Income Tax (Appeals) and direct the Assessing Officer to delete the addition and allow the grounds in favour of the assessee.

Enhancement of income on investments made by the assessee’s two minor children in REC Bo .....

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he minor has to be computed before application of clubbing provisions. In respect of clam of exemption of capital gain, the computation has to be worked out in the hands of the minor and allow the exemption and subsequent income should be added in the hands of the father u/s.64(1A) of the Act - Decided in favour of the assessee. - I.T.A. No. 2254/Mds/2015 - Dated:- 4-5-2016 - Shri Chandra Poojari, Accountant Member And Shri G. Pavan Kumar, Judicial Member For the Appellant : Shri. A. Mahesh, C.A .....

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appeal petition. 3. The first ground raised by the assessee is that Commissioner of Income Tax (Appeals) erred in upholding the order of Assessing Officer on denying the exemption u/s.54EC of the Act investment in REC capital gains bonds falling in two financial years. 4. The Brief facts of the case, the assessee is an individual having income from salary, rental income, capital gains and interest income and filed e-return on 28.09.2011 declaring total income ₹ 4,97,77,530/- and same was .....

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₹ 50,00,000/- on 27.04.2011 and also assessee filed explanation that assessee has complied with the provisions of Sec.54EC as investment was made within the period of six months from the date of transfer and relied on the Tribunal decisions. But the Assessing Officer though accepted Tribunal decision in the cases of Coromandel Industries (P) Ltd vs. ACIT, Company Circle I(3), Chennai 36 taxmann.6 (Chennai) and Smt. Sriram Indubal vs. ITO 32 taxmann.com 118 (Chennai) as under:- "The I .....

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able distribution of benefits among the prospective investors. Last sentence of the Explanatory memorandum clearly states that the exemption for investment cannot exceed 50 lakhs in a financial year. Since the assessee here has placed 50 lakhs in two difference financial years but within six months period from the date of transfer of capital assets, assessee was definitely eligible to claim exemption upto 1 crore . but deferred with the decisions of Tribunal as the Department has filed appeal ag .....

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d 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 the capital gain arising from the transfer of the original asset, the whole of such capital gain shall not be ch .....

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₹ 50,00,000/- and assessed total income of Rs. .6,48,77,528/- and raised demand. Aggrieved by the order of Assessing Officer, the assessee filed an appeal before Commissioner of Income Tax (Appeals). 5. In the appellate proceedings, the ld. Authorised Representative of assessee explained the facts and argued the grounds and supported his arguments with judicial decisions and produced supporting documents in respect of sale of shares and allotment letter of REC bonds u/sed. 54EC of the Act .....

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and dismissed the appeal of the assessee. Aggrieved by the order of Commissioner of Income Tax (Appeals), the assessee filed an appeal before Tribunal. 6. Before us, the ld. Authorised Representative urged the grounds and explained that there is no dispute on calculation of long term capital gains and investments by the assessee except understanding the provisions of Sec.54EC (1) of the Act were assessee has made investments in REC bonds of ₹ 50,00,000/- each on 14.03.2011 and 27.04.2011 .....

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t by the assessee in Sec. 54EC Bonds within the period of six months from date of sale of property is as per law and supported the submissions with the jurisdictional High Court decisions and prayed for allowing the appeal. 7. Contra, the ld. Departmental Representative relied on the orders of the lower authorities, CBDT circular and spirit of amendment of Sec. 54EC of the Act vehemently opposed to the grounds of the assessee. 8. We heard the rival submissions and perused the material on record .....

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bonds is as under:- 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 this provision has been amendment by Finance Act, 2014 w.e.f. 1.04.2015 as under:- Provided further 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 ass .....

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ty was visualized considering the provisions, CBDT circulars and facts of the case. The Assessing Officer tried to make a distinction of provisions for restricting investment of ₹ 50,00,000/- only in one financial year. The assessee has invested in two installments falling in two financial years and availed tax exemption. Amendment of provisions of Sec.54EC in Finance Act, 2014 are prospective and apply from 01.04.2015 effective from assessment year 2015-16 onwards. We considering the fact .....

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see s two minor children in REC Bonds and denial of exemption u/s.54ECof the Act. The Assessing Officer in the assessment order of the assessee u/s.143(3) of the Act dated 26.03.2014 clubbed the income of minor children Luka Pullela and Nethra Pullela u/s.64(1A) of the Act determined in the assessment order dt. 16.12.2013. Aggrieved the assessee raised grounds against action of Assessing Officer before Commissioner of Income Tax (Appeals) alongwith other grounds. 10. The ld. Commissioner of Inco .....

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rised Representative has filed and explained elaborately by petition dated 16.10.2015 on the facts with judicial decisions. At the time of hearing assessee submitted copy of allotment letter of REC bonds of ₹ 50,00,000/- as on 31.03.2011 to Luka and Nethra and another ₹ 50,00,000/- allotted on 30.04.2011 and also produced copy of assessment orders of the minor children were deduction u/s.54EC of the Act was restricted only to ₹ 50,00,000/- instead of ₹ 1,00,00,000/-. The .....

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r of Income Tax (Appeals) considered the submissions and accepted the principles based on jurisdictional High Court and Karnataka High Court decision but deferred on clubbing of total income and relied on Sec. 64(1A) of the Act observed at page 16 of his order and interpreted the computation of total income should include all such income and not total income on which tax is levied and dismissed the ground of the assessee observed at page 16 of his order as under:- I have carefully considered the .....

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ne by him or (b) Activity involving application of his skill, talent or specialized knowledge and experience. Explanation:- For the purposes of this sub- section, the income of the minor child shall be included, a) where the marriage of his parents subsists, in the income of that parent whose total income (excluding the income includible under this subsection) is greater ; or (b) where the marriage of his parents does not subsist, in the income of that parent who maintains the minor child in the .....

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income is the one on which tax is levied. Moreover after clubbing the minor's income with the father i.e. what deduction is eligible are allowed in the hands of father only i.e. the assessee. thus relying on the total income and all such income are not same because the total income is the one on which tax is computed as applicable where as after allowing exemptions/deductions etc the all such income leads to total income. so all such income arising in the minor's case will be clubbed u/ .....

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sed above in the case of father the eligibility of claim of sec 54EC based on the statute proviso to sec 54EC and Departmental circular no 3 j 2008 where in clarification is clearly given that claim of sec 54 EC should not exceed 50lacs in any FY based on this Assessing Officer is directed to add "all such income" of the minor's in the hands of father u/.s 64(1A) and not the TOTAL INCOME of the minors and from the TOTAL INCOME arrived thereafter father alone will be eligible for ex .....

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argued on the denial of exemption u/s.54EC of the Act and substantiated the arguments that Commissioner of Income Tax (Appeals) erred in enhancing income of the assessee by denying exemption u/sec. 54EC of ₹ 50,00,000/- allowed to two minor children and whose income has been aggregated with parents. Further, the observations of Commissioner of Income Tax (Appeals) that clubbing of income should be before allowing any exemption u/s. 54EC of the Act on the interpretation of word All such in .....

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investment u/sec 54EC of the Act has been pindown on two aspects, the Commissioner of Income Tax (Appeals) has denied exemption to the minor child and second issue being whether income to be clubbed with parents total income or such income contested by the Revenue. We highlight the provisions of Sec. 64(1A) of the Act were income of the minor has to be computed before application of clubbing provisions. In respect of clam of exemption of capital gain, the computation has to be worked out in the .....

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Khaleeli vs. DCIT 48 ITD 0191 were it was held that capital gains liable to be clubbed u/sec 64(1)(iv) are also eligible for exemption u/s.54F of the Act. (iii) CIT vs. V.S. Chelliah 147 ITR 590 were it was held that the income of wife out of which insurance premium of her life was paid being includible in the hands of husband, deduction u/s.80C(2)(a)(i) is allowable in husband s hand (iv) CIT vs. S.K. Nayak 145 ITR 0791 were it was held that only the net salary income of spouse after providing .....

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of the minor children of the assessee canoe be included in the income of the assessee for rate purposes. So, considering the definition, interpretation of statutes, judicial provisions of law applicable for minor children. We rely on the decision of Tribunal DCIT vs. Rajeev Goyal, Kolkata in ITA No.951/Kol/2011, dated 1st June, 2012 were held as under:- there is nothing in the notification issued by Rural Electricity Corporation Ltd, dated 29.06.2006, in so far as deduction is to be allowed u/s. .....

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that capital gain not to be charge on investment on certain bonds. Therefore investments made in certain bonds shall be outside scope of capital gain for purpose of computation of total income itself, It is not a deduction under Chap. VIA which comes into picture only after commuting total income and deductions are being allowed from gross total income as per Sec. 80A(1). Notification on which Assessing Officer relied upon have not put on any embargo on investments by an assessee but embargo is .....

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