TMI Blog2021 (5) TMI 667X X X X Extracts X X X X X X X X Extracts X X X X ..... ecomes necessary to factually verify whether the entire investments were made only from interest free funds. We are of the considered view, therefore, in the interest of justice, this issue should be remanded back to the file of the Assessing Officer for verification of investments made vis-a-vis interest free funds available with the assessee during the year under consideration Disallowance u/s. 54EC - HELD THAT:- Hon'ble High Court in the case of CIT Vs. C. jaichander [ 2014 (11) TMI 54 - MADRAS HIGH COURT ] has held that as per the mandate of Section 54EC(1) of the Act, the time limit for investment is six months and the benefit that flows from the first proviso is that if 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. The Hon'ble High Court further held that however to remove the ambiguity in the above said provision the legislature by Finance (No.2) Act, 2014, with effect from 1.4.2015, has inserted after the existing proviso to sub-section (1) of Section 54EC of the Act, the second proviso which provides as per the investment made by an assessee in the long-term specified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... modify or alter the Grounds of appeal at any time before or during the course of hearing of the case. 2. There are two basic issues for adjudication in this appeal. First, disallowance u/s.14A of the Income Tax Act, 1961 (hereinafter referred to as the 'Act') and second, disallowance u/s. 54EC of the Act. 3. As regards the first issue, disallowance u/s 14A of the Act, it is claimed by the assessee that it has got huge internal accruals and interest free funds for making the investment and therefore, no disallowance should be made u/s. 14A of the Act. 4. The brief facts pertaining to this issue are that the assessee has made huge investment to the tune of ₹ 15.30 Crores as against the share capital and reserves of ₹ 37.11 Crores as shown in the Balance Sheet. That however as evident from the order of the Assessing Officer vide Para 4.2 and order of the Ld. CIT(Appeals) vide para 5.1 of their respective orders, the assessee in this case was unable to establish through evidences and relevant documents that the interest free funds have been only utilized for making investment during the year under consideration. 5. At the time of hearing, the Ld. AR for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the assessee during the year under consideration. In view, thereof, we set aside the order of the Ld. CIT (Appeals) on this issue and remand the same back to the file of the Assessing Officer for adjudication after complying with the principles of natural justice as indicated hereinabove. 8. Thus, Ground Nos. 1, 1.1, 1.2 and 1.3 are allowed for statistical purposes. 9. The next issue in Ground Nos. 2 2.1 of the appeal memo pertains to disallowance u/s. 54EC of the Act. 10. The brief facts pertaining to this issue are that during the year under consideration, the assessee had sold windmill and showed an amount of ₹ 1,78,70,039/- under the head short term capital gain. The assessee claimed exemption for an amount of ₹ 1 Crore u/s.54EC of the Act. The balance amount of ₹ 78,70,039/- had been offered as short term capital gain as the windmill being depreciable asset. The assessee had made claim u/s.54EC of the Act on the ground that windmill was held more than three years and was thus a long term capital asset but for taxation purpose, the transfer of depreciable assets give rise to short term capital gain even if the asset has been held for more than thr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 50,00,000/- each in two different financial years, within a period of six months from the date of transfer of the capital asset, the said deduction should be allowed to the assessee. Further, the Hon'ble High Court in the case of CIT Vs. C. jaichander (Supra.) has held that as per the mandate of Section 54EC(1) of the Act, the time limit for investment is six months and the benefit that flows from the first proviso is that if 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. The Hon'ble High Court further held that however to remove the ambiguity in the above said provision the legislature by Finance (No.2) Act, 2014, with effect from 1.4.2015, has inserted after the existing proviso to sub-section (1) of Section 54EC of the Act, the second proviso which provides as per the investment made by an assessee in the long-term specified asset out of the 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 ₹ 50 lakhs. The said amendmen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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