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ACIT, Circle-3, Thane Versus Prakash Gunaji Sawardekar

2016 (6) TMI 1279 - ITAT MUMBAI

Exemption claimed u/s 54EC - Capital gain not to be charged on investment in certain bonds - Held that:- 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 lakh is made in two different financial years. - The exemption u/s 54EC is available to an assessee, if the long term capital gains, earned by .....

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6 - Shri Joginder Singh, Judicial Member and Shri Rajendra, Accountant Member Revenue by Dr. Darsi Suman Ratnam-DR O R D E R Per Joginder Singh (Judicial Member) The Revenue is aggrieved by the impugned order dated 07/07/2014 of the ld. First Appellate Authority, Mumbai, on the ground that the Ld. Commissioner of Income Tax (Appeal) did not appreciate the fact that as per amendment by the Finance Act, 2007, as per proviso to section 54EC of the Act, the investment made on or after 01/04/2007, in .....

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rial 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 ₹ 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 ₹ 50 lakhs. On appeal, before the Ld. Commissioner of Inc .....

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this amount rupees One crore was invested in REC Bonds on two dates namely ₹ 50 lakh on 31/03/2009 and remaining ₹ 50 lakh on 31/05/2009. The ld. Assessing Officer disputed the allowability of claimed exemption u/s 54EC of the Act, amounting to rupees One crore when the maximum limit for making investment u/s 54EC of the Act was ₹ 50 lakhs only. The stand of the assessee was that no restriction is specified for investing ₹ 50 lakh each in two different financial years, th .....

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e addition on the plea that the assessee has fulfilled the condition enshrined in section 54EC of the Act as the investment was made on two different financial years. Before coming to any conclusion, we are reproducing hereunder the relevant provision of section 54EC of the Act:- Capital gain not to be charged on investment in certain bonds. 54EC. (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 ref .....

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e charged under section 45; (b) if the cost of the long-term specified asset is less than the capital gain 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 as .....

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y 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 longterm capital asset of the previous year in which the longterm specified asset is tr .....

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h loan or advance is taken. (3) Where the cost of the long-term specified asset has been taken into account for the purposes of clause (a) or clause (b) of sub-section (1),- (a) a deduction from the amount of income-tax with reference to such cost shall not be allowed under section 88 for any assessment year ending before the 1st day of April, 2006; (b) a deduction from the income with reference to such cost shall not be allowed under section 80C for any assessment year beginning on or after the .....

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ble 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) by the National Highways Authority of India constituted under section 3 of the National Highways Authority of India Act, 1988 (68 of 1988); or (ii) by the Rural Electrification Corporation Limited, a company formed and registered under the Companies Act, 1956 (1 of 1956), and notified by the Central Government in the Official Gazette for the purposes of this section with su .....

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; (ba) "long-term specified asset" for making any investment under this section on or after the 1st day of April, 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 t .....

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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 important dates for making investment. The impugned amount was invested in REC bond by the assessee in two different financial years. The provision section 54EC provides for exemption fr .....

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ssee, possibly can make the investment of the amount within the specified period, when it is received by the assessee. The intent and purpose of section 54EC is the date, when the assessee actually collects/receives the sale consideration and thereafter makes investment within six months and that is the date of transfer, thus, the spirit of the legislation is very much clear. The investment can only be made when any amount is actually received by the assessee. In fact, date of receipt by the ass .....

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