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2016 (10) TMI 89 - ITAT MUMBAI

2016 (10) TMI 89 - ITAT MUMBAI - TM - Exemption u/s.54EC entitlement - the investment in specified Bonds under section 54EC of the Act was made in two different financial years - Held that:- Respectfully following the decision of the Hon’ble Madras High Court in the case of CIT v. C.Jaichandar (2014 (11) TMI 54 - MADRAS HIGH COURT ) we hold that the language of the provisions of section 54EC(1) of the Act clearly and unambiguously mandate that the assessee can make the investments in two differe .....

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le of two properties on 28/4/2008 and 14/10/2008. We hold and direct accordingly. - Decided in favour of assessee. - ITA No. 134/MUM/2015 - Dated:- 24-8-2016 - SHRI JASON P. BOAZ ACCOUNTANT MEMBER AND SHRI SANDEEP GOSAIN, JUDICIAL MEMBER For The Appellant : Shri D.B. Sanghvi and Rakesh Sakaria For The Respondent : Ms Anu Kirishna Agarwal ORDER PER JASON P. BOAZ, A.M: This appeal by the assessee is directed against the order of the CIT(Appeals)-27, Mumbai dated 4/09/2014 for the assessment year 2 .....

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roceedings under section 147 of the Act. In response to notice under section 148 dated 23/01/2013, the assessee filed a return of income on 11/02/2013 declaring income of ₹ 1,71,24,320/-. In the course of assessment proceedings, the Assessing Officer (A.O.) observed that the assessee had sold two properties for ₹ 3.00 crores on 28/04/2008 and ₹ 1.5 crores on 14/10/2008 and claimed exemption of ₹ 1.00 crores u/s. 54EC of the Act in respect of two separate investments of &# .....

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ngly completed under section143(3) r.w.s. 147 of the Act vide order dated 28/03/2013. 2.2 Aggrieved by the order of assessment dated 28/03/2013 for assessment year 2009-10, the assessee preferred an appeal before the CIT(Appeals)-27, Mumbai challenging on both the technical issue -i.e., re-opening of the assessment for the assessment year 2009-10 under section 147/148 of the Act and also on the issue of restriction of the exemption claimed under section 54EC of the Act to ₹ 50 lakhs as aga .....

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i Rajkumar Jain & Sons (HUF) in ITA No.648/JP/2011 and the Memorandum explaining the provisions contained in the Finance (No.2) Bill 2014, amending the existing provisions of subsection (1) of the section 54EC of the Act w.e.f. 1/04/2015, i.e., effective from assessment year 2015-16. 3. Aggrieved by the order of the CIT(A)-27, Mumbai dated 04/09/2014 for AY 2009-10, the assessee has preferred this appeal, raising the following grounds:- 1.1 The Learned Commissioner of Income-tax (Appeals)-27 .....

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.O in confirming the deduction under section 54EC to ₹ 50 lacs, as against the deduction of ₹ 1 lac claimed by the Appellant under section 54EC of the Act. 2.2 The Ld. CIT(A) failed to appreciate that the investments in the bonds under section 54EC of the Act were made [Rs.50 lacs each] in two different accounting years. 2.3 It is submitted that in the facts and circumstances of the case, and in law, no such rejection of the claim was called for. 3. The Appellant craves leave to add, .....

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called for thereon. 6. Grounds no.2.1 to 2.3-Exemption u/s.54EC : 6.1.1. In these grounds (supra), the assessee assails the impugned order of the ld. CIT(A), in confirming the AO's action in restricting the assessee s claim for exemption u/s.54EC of the Act to ₹ 50 lakhs as against ₹ 1.00 crores claimed by the assessee, without appreciating the fact that the investment in specified Bonds under section 54EC of the Act was made in two different financial years. According to the as .....

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.AR contends that the assessee s claim for exemption of ₹ 1.00 crores, under section 54EC of the Act, in the facts and circumstances of the case on hand, that investment in Specified Bonds was made by the assessee twice; @ ₹ 50 lakhs each in two different financial years, i.e., on 30/09/2008 and 9/04/2009, is to be allowed. In support of this proposition, the ld. AR for the assessee placed reliance, inter-alia, on the following judicial pronouncements which are stated to be directly .....

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4/12/2012). 6.2 Per contra, the ld.DR for the Revenue supported the order of the authorities below on this issue. 6.3.1 We have heard the rival contentions and perused and carefully considered the material on record; including the judicial decisions cited. The undisputed facts of the matter as emanate from the record is that the assessee in the year under consideration sold two properties on 28/04/2008 and 14/04/2008 and in its computation of income from capital gains claimed exemption for ͅ .....

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. 6.3.2 We have had occasion to peruse the judicial pronouncements cited and placed reliance upon by the assessee . In the case of CIT vs. C. Jaichander (supra), Their Lordships were of the view that on a plain reading of section 54EC (1) of the Act, it restricts the time limit for the period of investment after the sale of property to six months. The first proviso to section 54EC(1) of the Act specifies that the question of investment so made after 1/04/2007 in the specified asset by an assesse .....

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nnot be denied . The Hon ble Court observed that it was only after the amendment by Finance (No.2) Act, 2014 w.e.f. 1/04/2015, a second proviso was inserted after the existing proviso to sub-section (i) of the section 54 EC of the Act, that the investment made by an assessee in the specified Bonds, out of Capital Gains arising from the transfer of one or more original assets during the financial year in which the asset/assets are transferred and in the subsequent financial year does not exceed & .....

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which reads as under: Section 54EC. Capital gain not to be charged on investment in certain bonds. (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 dealt with in .....

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e 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 .....

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f 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. 8. The legislature noticing the ambiguity in the above said provision, by Finance (No.2) Act, 2014, with effect from 1.4.2015, inserted after the existing proviso to sub-section (1) of Section 54EC of the Act, a second proviso, which reads as under: Provided further that the investment made by an assessee in the long-term specified asset, from capital gains a .....

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54EC of the Income-tax Act relating to capital gain not to be charged on investment in certain bonds. The existing provisions contained in sub-section (1) of section 54EC 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 longterm specified asset out of total capital gain shall not b .....

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erred and in the subsequent financial year does not exceed fifty lakh rupees. This amendment will take effect from 1st April, 2015 and will, accordingly, apply in relation to assessment year 2015-16 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-te .....

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ring 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 insert a proviso in sub-section (1) so as to provide that the investment made by an assessee in the long-term specif .....

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ing a second proviso with effect from 1.4.2015. The memorandum explaining the provisions in the Finance (No.2) Bill, 2014 also states that the same will be applicable from 1.4.2015 in relation to assessment year 2015-16 and the subsequent years. The intention of the legislature probably appears to be that this amendment should be for the assessment year 2015-2016 to avoid unwanted litigations of the previous years. Even otherwise, we do not wish to read anything more into the first proviso to Se .....

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