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2016 (10) TMI 533 - ITAT MUMBAI

2016 (10) TMI 533 - ITAT MUMBAI - TM - Eligibility to exemption u/s 54EC(1) - 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 different financial years, provided the investment in a financial year does not exceed ₹ 50.00 lakhs. .....

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71/MUM/2015 - Dated:- 24-8-2016 - SHRI JASON P. BOAZ ACCOUNTANT MEMBER AND SHRI SANDEEP GOSAIN, JUDICIAL MEMBER For The Appellant : S/Shri D.B. Sanghvi & Rakesh Sakaria For The Respondent : Shri M. V.Rajguru 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 2009-10. 2. The facts of the case as emanate from the record are, briefly, as under:- 2.1 The assessee, HUF deriving Income from .....

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n 11/02/2013 declaring income of ₹ 2,03,79,260/-.In the course of assessment proceedings, the Assessing Officer (A.O.) observed that the assessee had received additional compensation from CIDCO of ₹ 3.00 crores in 28th April, 2008 and ₹ 1.5 crores in 14th October, 2008 in respect of certain properties and claimed exemption of ₹ 1.00 crores u/s. 54EC of the Act in respect of two separate investments of ₹ 50.00 lakhs each in two different financial years. The AO was o .....

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ated 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 against ₹ 1.00 crores claimed by the assessee . The Ld. CIT(A), vi .....

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ndum 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 AAY 2009-10, the assessee has preferred this appeal, raising the following grounds:- 1.1 The Learned Commissioner of Income-tax (Appeals)-27,Mumbai[ Ld. CIT(A) ] erred in confirming the action of the A.O in f .....

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, 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, alter, delete or modify all or any the above ground at the time of .....

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.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 assessee , the ld. CIT(A) has come to a wrong conclusion of restricti .....

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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 on the issue of exemption under section 54EC of the Act on similar fa .....

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rder 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 received additional compensation from CIDCO in respect of certain properties on 28/04/2008 and 14/10/2008 and in its computation of income from capital gains claimed exemption for ₹ 1.00 cror .....

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he judicial pronouncements cited and placed reliance upon by the assessee . The 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 assessee during any financial year does not ex .....

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d 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 ₹ 50.00 lakhs. At para 5 to 11 of its .....

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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 accordance with the following provisions of .....

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fied 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 sold to six months. There is no cap on the i .....

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7; 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 arising from transfer of one or more original .....

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tal 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 be charged to tax. The proviso to the said su .....

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oes 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-term capital asset and the assessee has, at an .....

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ere 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 specified asset, out of capital gains arising from .....

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15. 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 Section 54EC(1) of the Act, as it stood in rel .....

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