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Bharatkumar M. Jain (HUF) , Manekchand G. Jain Versus ACIT, Circle-16 (2) , Matru Mandir, Tardeo Road, Mumbai

2016 (9) TMI 1421 - ITAT MUMBAI

Deduction u/s 54EC - time limit for investment in six months - Held 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 01/04/2007 in the long term specified asset, by an assessee, during any Financial Year does not exceed .....

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ne vide agreement dated 28/04/2008 and another vide agreement dated 14/10/2008, therefore, there are two separate computation of capital gains, for each assets. The assessee while computing capital gains has sought reinvestment benefit by investing, in the bonds prescribe u/s 54EC on 30/09/2008 against capital gain on 28/04/2008 and on 09/04/2009 against capital gain on 14/10/2008, therefore, the case of the assessee is clear, consequently, in view of the foregoing decision this ground of the as .....

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First Appellate Authority, Mumbai. 2. During hearing, the ld. counsel for the assessee, Shri D.B. Sanghavi, did not press grounds number 1.1 and 1.2 of both appeals with respect to confirming the action of the Assessing Officer, while framing assessment u/s 147 read with section 143(3) of the Act, thus, the impugned grounds number 1.1 and 1.2 of both the appeals are dismissed as not pressed. 3. The only surviving ground in both the appeals is with respect to confirming the deduction u/s 54EC of .....

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CIT (ITA No.7585/Mum/2012) order dated 09/01/2015, M/s JNR Securities Broking Ltd. (ITA No.6987/Mum/2013) order dated 08/07/2015 and Shri Vivek Jairazbhoy vs CIT (ITA No.236/Bang/2012) dated 14/12/2012. This factual matrix was not controverted by the ld. DR, Shri Sunil Kumar Agarwal. 3.1. We have considered the rival submissions and perused the material available on record. We find that the Tribunal vide order dated 09/06/2016 in the case of ACIT vs Prakash Gunaji Sawardekar ITA No.6642/Mum/2014 .....

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Dr. Darsi Suman Patnam, defended the addition made by the Assessing Officer, whereas, none was present for the assessee in spite of issuance of notice, thus, we have no option but to proceed ex-parte, qua the assessee, and tend to dispose of this appeal on the basis of material 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 marketin .....

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on 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 ₹ 1,11,63,450/- and out of this amount rupees One crore was invested in REC Bonds on two dates namely ₹ 50 lakh on 31/03/2009 and remaining ₹ .....

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kh. While doing so, the Assessing Officer referred to notification number 380 of 2006 dated 22/12/2006, issued by CBDT, restricting the investment in bonds to a sum of ₹ 50 lakh per person. Reference was also made to the decision from Hon ble Madras High Court in Areba T & D India Ltd. vs ACIT 177 Taxman 192. The Ld. Commissioner of Income Tax (Appeal) deleted the addition on the plea that the assessee has fulfilled the condition enshrined in section 54EC of the Act as the investment w .....

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er, 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 charged under section 45; (b) if the cost of the long-term specified asset is less than the capital gain arising from the t .....

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e 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 .....

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red and the assessee invests the whole or any part of the capital gain received or accrued as a result of transfer of the original asset in any long-term specified asset and such assessee takes any loan or advance on the security of such specified asset, he shall be deemed to have converted (otherwise than by transfer) such specified asset into money on the date on which such loan or advance is taken. (3) Where the cost of the long-term specified asset has been taken into account for the purpose .....

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specified asset, means the amount invested in such specified asset out of capital gains received or accruing as a result of the transfer of the original asset; (b) "long-term specified asset" for making any investment under this section during the period commencing from the 1st day of April, 2006 and ending with the 31st day of March, 2007, means any bond, redeemable after three years and issued on or after the 1st day of April, 2006, but on or before the 31st day of March, 2007,- (i) .....

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thinks fit: Provided that where any bond has been notified before the 1st day of April, 2007, subject to the conditions specified in the notification, by the Central Government in the Official Gazette under the provisions of clause (b) as they stood immediately before their amendment by the Finance Act, 2007, such bond shall be deemed to be a bond notified under this clause; (ba) "long-term specified asset" for making any investment under this section on or after the 1st day of April, .....

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on (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 amo .....

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find supports from the decision from Hon ble jurisdictional High Court in Cello Plast (2012) 24 taxman.com 111 (Bom.) to the effect that law does not compel a man to do that which he cannot possibly perform. Even otherwise, section 54EC prescribes that exemption shall be available if the investment is made in the specified bonds within a period of six months, thus, the assessee, possibly can make the investment of the amount within the specified period, when it is received by the assessee. The .....

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not available with a particular bank/institution and are issued at a later stage, the date of deposit of the amount in the bank or the institution, as the case may be, are the relevant dates for getting the benefit of exemption u/s 54EC of the Act. For the purpose of section 54EC, the date of investment is to be regarded as the dates of investment/ the payment received by the authorized bank. It is noted that section 54EC of the Act has no restriction if the specified investment of ₹ 50 la .....

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ment is made within six months from the date of transfer of such long term asset. As per the proviso to section 54EC, the investment in any Financial Year is restricted to ₹ 50 lakh and since the assessee has made the investment of ₹ 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 th .....

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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 specified asset by an assessee during any Financial Year does not exceed fifty lakh rupees. In other words, as per the mandate of section 54EC(1) of the Act, the time limit for investment in six month .....

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ified 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 in any subsequent Financial Year does not exceed 50 Lakhs rupees 3.3. 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 .....

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erm 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 this section, that is to say,- (a) if the cost of the long-term specified asset is not less than the capital gain aris .....

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t 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 readin .....

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The notes on clauses, Financial Bill 2014 and the 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 w .....

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he 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. 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 inv .....

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ied asset during any financial year shall not exceed fifty lakh rupees. However, the wordings of the proviso have created an ambiguity. As a result the capital gains arising during 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 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 .....

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elation 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 2005-06 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 such investment falls under two Financi .....

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