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TMI Blog2018 (2) TMI 713X X X X Extracts X X X X X X X X Extracts X X X X ..... he Ld. Commissioner of Income Tax (Appeal) erred in granting relief to the assessee. On the other hand, Ms. Vaishali Mehta, ld. counsel for the assessee, invited our attention to the amendment made by the Finance Act 2014, which is applicable to and from Assessment Year 20015-16, whereas, the case of the assessee is of Assessment Year 2011-12, wherein, the limit was Rs. 50 Lakhs per Financial Year. Reliance was placed upon the decision of Hon'ble Madras High Court in COMMISSIONER OF INCOME-TAX v. COROMANDEL INDUSTRIES LTD. 370 ITR 586 (Mad.) and in COMMISSIONER OF INCOME TAX vs. C. JAICHANDER 370 ITR 579 (Mad.). 2.1. We have considered the rival submissions and perused the material available on record. We find that the aforesaid issue is covered in favour of the assessee by the decision in the case of Bharatkumar M Jain (HUF) & Manekchand G Jain, (ITA No.169 & 170/Mum/2015) Order dated 07/09/2016 of the Mumbai Bench of the Tribunal, wherein, one of us (Judicial Member) is signatory to the order. The relevant portion from the aforesaid order is reproduced hereunder for ready reference and analysis:- "Both these appeals are by the different assessee, closely related to each ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erial available on record. 2.1. We have considered the submissions of the ld. DR and perused the material available on record. The facts, in brief, are that the assessee is a retired senior citizen, was connected with marketing consultancy in the field of pharmaceutical industry, was having its office at 102B Atlanata, Hirachandani Estate, Thane. The ld. Assessing Officer made the addition of Rs. 51,34,710/- while framing assessment u/s 143(3) of the Act on account of decline of exemption claimed u/s 54E of the Act amounting to Rs. 50 lakhs. On appeal, before the Ld. Commissioner of Income Tax (Appeal), the addition was deleted against which the Revenue is in appeal before this Tribunal. 2.2. If the observation made in the assessment order, leading to addition made to the total income, conclusion drawn in the impugned order, material available on record, assertions made by the ld. departmental counsel, if kept in juxtaposition and analyzed, under the facts discussed hereinabove, we find that the assessee sold shares leading to capital gains of Rs. 1,11,63,450/- and out of this amount rupees One crore was invested in REC Bonds on two dates namely Rs. 50 lakh on 31/03/2009 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncial year does not exceed fifty lakh rupees : [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 asset or assets are transferred and in the subsequent financial year does not exceed fifty lakh rupees.] (2) Where the long-term specified asset is transferred or converted (otherwise than by transfer) into money at any time within a period of three years from the date of its acquisition, the amount of capital gains arising from the transfer of the original asset not charged under section 45 on the basis of the cost of such long-term specified asset as provided in clause (a) or, as the case may be, clause (b) of sub-section (1) shall be deemed to be the income chargeable under the head "Capital gains" relating to long-term capital asset of the previous year in which the long-term specified asset is transferred or converted (otherwise than by transfer) into money. Explanation.-In a case where the original asset is transferred and the assessee invests the whole or any part of the capital gain received or accrued as a re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2007 means any bond, redeemable after three years and issued on or after the 1st day of April, 2007 by the National Highways Authority of India constituted under section 3 of the National Highways Authority of India Act, 1988 (68 of 1988) or by the Rural Electrification Corporation Limited, a company formed and registered under the Companies Act, 1956 (1 of 1956). 2.2. If the aforesaid provision is analyzed, it deals with capital gains not to be charged on investment in certain bonds. Sub-section (1) speaks where the capital gain arises from the transfer of long term capital asset and the assessee has any time within a period of six months, after the date of such transfer, invest, the whole or any part of the capital gains in the long term specified asset, the capital gain shall be dealt with in accordance with the provisions of the section. The position has been clarified with insertion of explanation which speaks about 'cost in relation to any long term specified asst', means the amount invested in such specified asset out of the capital gains received or accruing as a result of the transfer of the original asset, meaning thereby, the date of receipt or accruing are the import ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so to section 54EC, the investment in any Financial Year is restricted to Rs. 50 lakh and since the assessee has made the investment of Rs. 50 lakh each in different two Financial Years but within six month from the date of transfer of the asset,. The decision from Ahmedabad Bench of the Tribunal in Aspi Ginwala vs ACIT (2012) 044 (II) ITCL 0488; ITA No.3226 and 3227/Ahd/2011. Considering the totality of facts, we find no infirmity in the conclusion drawn by the Ld. Commissioner of Income Tax (Appeal). Finally, the appeal of the Revenue is dismissed." 3.2. If the aforesaid decision of the Tribunal, wherein, one of us (Judicial Member), is signatory to the order, deliberated upon the issue in length and place reliance upon various judicial decisions and finally dismissed the appeal of the Revenue. Even otherwise, on a plain reading of section 54EC(1) of the Act, it restrict the time limit, for the period of investment after the property is sold, to six months. There is no cap on the investment to be made in bonds. The first proviso to section 54EC(1) of the Act specifies the quantum of investment and it states that the investment so made on or after 01/04/2007 in the long term ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ain arising from the transfer of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion 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 : [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 asset or assets are transferred and in the subsequent financial year does not exceed fifty lakh rupees.] 3.4. Thus, on plain reading of the abovesaid 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 investment to be made in bonds. The first proviso to section 54EC(1) of the Act, specifies the quantum of investment and it states that the investment so made on or after 01/0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h a manner so as to split the investment in two years i.e., one within the year and second irf 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 (1r so as to provide that the investment made by an assessee in the long-term specified asset, out of capital gains arising from transfer of one or more original asset, during the financial year in which the original asset or assets are transferred 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 assessment years." 3.5. From the above, it can be inferred that the intention of the legislature probably appears to be that this amendment should be for the Assessment year 2015-16 to avoid unwanted litigation of the previous years. In any event, from the reading of section 54EC(1) and the first proviso, it is clear that the time limit for investment in six months from the date of transfer and even if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 54EC of the Act. The Ld. Assessing Officer following first proviso to section 54(1) restricted the deduction to Rs. 50 lakh. 2.3. On appeal before the Ld. Commissioner of Income Tax (Appeal), the decision from the Tribunal and another decision in the case of CIT vs C. Jaichandar (supra) was followed and allowed the full deduction, which is under challenge before this Tribunal. We find that Mumbai Bench of the Tribunal made an elaborate discussion including the amendment made by the Finance Act, 2014 (applicable to and from Assessment Year 2015-16) and analyzed the provision of section 54EC of the Act and thereafter reached to a particular conclusion. Even otherwise, the issue in hand is squarely covered by the decisions (supra) from Hon'ble Madras High Court. In any event, from a reading of section 54EC(1) and the first proviso, it is clear that the time limit for investment is six months from the date of transfer and even if such investment falls under two Financial Year the benefit, claimed by the assessee, cannot be denied. It would have made a difference, if the restriction on the investment in bonds to Rs. 50 lakhs is incorporated in section 54EC(1) of the Act itself. Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... memorandum explaining the provisions in Finance (No.2) Bill 2014, reads as under:- "Clause 23 of the Bill seeks to amend section 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 long-term specified asset out of total capital gain shall not be charged to tax. The proviso to the said sub-section provides that the investment made in the long-term specified asset during any financial year shall not exceed fifty lakh rupees. It is proposed to insert a proviso below first proviso in said subsection (1) so as 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 the subsequent financial year does not exceed fifty l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in CIT vs C. Jaichandar (2015) 370 ITR 579 (Mad.), decision of the Tribunal in ACIT vs M/s JNR Securities Broking Ltd. (ITA No.6987/Mum/2013) order dated 08/07/2015 and various other decisions mentioned in the preceding paras of this order. Thus, it is concluded that, prior to amendment, the time limit of Rs. 50 lakhs as prescribed u/s 54EC of the Act is per year and if the assessee invest Rs. 50 lakh each in two different years, otherwise fulfilling other conditions of section 54EC, thus assessee will be entitle to the benefit of Rs. 1 crore and not merely Rs. 50 lakhs. Thus, the limit of Rs. 50 lakh under the first proviso is not per assessee but per Financial Year. So far as, the amendment made by the Finance Act, 2014 is w.e.f. 01/04/2015 i.e. Assessment Year 2015-16 onwards and cannot be held to be retrospective. Thus, we hold that the assessee is entitle to deduction u/s 54EC of the Act as claimed by him and does not restrict the addition as has been done by the Ld. Assessing Officer. The stand of the Ld. Commissioner of Income Tax (Appeal) is, therefore, affirmed, resulting into dismissal of the appeal of the Revenue. 3. Now, we shall take the appeal of the assessee ( ..... X X X X Extracts X X X X X X X X Extracts X X X X
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