Income Tax Appellate Tribunal - Ahmedabad
Jyotika Bhupendra Shah, Ahmedabad vs Assessee on 5 September, 2014
आयकर अपील य अ धकरण, अहमदाबाद यायपीठ 'बी' अहमदाबाद।
IN THE INCOME TAX APPELLATE TRIBUNAL
"B" BENCH, AHMEDABAD
ी मुकुल कुमार ावत, या यक सद य एवं ी एन0एस0 सैनी, लेखा सद य के सम
BEFORE SHRI MUKUL Kr. SHRAWAT, JUDICIAL MEMBER AND
SHRI N.S. SAINI, ACCOUNTANT MEMBER
ITA No. 2013/Ahd/2011
(Assessment Year 2008-09)
Smt. Jyotikaben Vs The Asst. Commissioner of
Bhupendrabhai Shah, Income-tax,
9, Preyas Society, Nr. Circle-10, Ahmedabad
Jahanvy Restaurant,
Polytechnic, Ahmedabad
PAN: AMDPS 8521 M
अपीलाथ / Appellant यथ / Respondent
Assessee(s) by : Shri S.N. Soparkar, AR
Revenue by : Shri V.K. Singh, Sr. DR
सुनवाई क तार ख/ Date of Hearing : 28/08/2014
घोषणा क तार ख /Date of P ronounc ement: 05/09/2014
आदे श/O R D E R
PER SHRI N.S. SAINI, ACCOUNTANT MEMBER:
This is an appeal filed by the assessee against the order of the Commissioner of Income-tax (Appeals)-XVI, Ahmedabad dated 09.06.2011.
2. The sole issue involved in this appeal is that the Commissioner of Income-tax (Appeals) erred in dismissing the appeal of the assessee and restricting the exemption u/s 54EC to Rs.50 lakhs instead of Rs.1 crore claimed by the assessee.
3. The brief facts of the case are that the assessee earned Long Term Capital Gain on sale of factory land wherein her share was 1/4th. The Long ITA No. 2013/Ahd/2011 Smt. Jyotika Bhupendra Shah AY 2008-09 -2- Term Capital Gain was worked out at Rs.1,42,35,320/-. The assessee claimed exemption of Rs.1 crore u/s 54EC of the Act. The claim of the assessee was not allowed by the Assessing Officer. The Assessing Officer restricted the exemption to Rs.50 lakhs only in view of the proviso to sub- section (1) of Section 54EC of the Act inserted by the Finance Act, 2007, w.e.f. 01.04.2007. The Assessing Officer further observed that the Explanatory Notes on the provisions of the Finance Act, 2007, issued vide CBDT Circular No.3/2008 dated 12.03.2008, by Finance Minister Speech and the notification No.380/2006 dated 22.12.2006. The Assessing Officer made specific reference to paragraph 28.2 of such Explanatory Notes and stated that this clearly specifies "that the Government decided to impose a ceiling on the quantum of investment that could be made in such bonds. Accordingly, the said section has been amended so as to provide for a ceiling on investment by an assessee in such long-term specified assets." Accordingly, the Assessing Officer viewed that the ceiling was on the investment by an assessee and therefore, the limit has to be Rs.50 lakhs for an assessee; hence, he restricted the exemption to Rs.50 lakhs and the remaining amount of Rs.50 lakhs was disallowed and added to the income of the assessee.
4. Before the Commissioner of Income-tax (Appeals), the assessee submitted as under:-
"1. The appellant has sold off long term capital asset being land and invested the amount of capital gain in the bonds of NHAI and REC to claim exemption under Sec. 54EC worth Rs.1 crores.
2. The appellant has claimed exemption of Rs.1 crores under Sec. 54EC by spreading the investment in two financial years. The ld. Asst. Commissioner was wrongly erred in disallowing the claim of the appellant and restricted the benefit of exemption to Rs.50 lacs.
3. The appellant executed the sale deed on 1st Jan. 2008. The appellant has invested Rs.50 lacs in bonds of REC on 29th February 2008 i.e. in financial year 2007-08 and another Rs.50 lacs in bonds of ITA No. 2013/Ahd/2011 Smt. Jyotika Bhupendra Shah AY 2008-09 -3- NHAI on 30th June, 2008 i.e. in financial year 2008-09. A plain reading of Sec 54EC makes it amply clear that the investment in bonds for the purpose of claiming exemption, in "any financial year" should not exceed Rs.50 lacs.
Even in the Explanatory Notes to the provisions of the Finance Bill 2007, it has been provided that the investment made in the long term specified asset by an assessee during "any financial year" does not exceed fifty lac rupees.
The Asstt. Commissioner has referred to Circular No.3/2008 dated 12.03.2008, wherein paragraph 28.2 provides for ceiling on investment by an assessee in the bonds. It has been provided that "investments" in such specified assets to avail exemption under Sec. 54EC, on or after 1st day of April 2007 will not exceed fifty lacs rupees in a financial year".
This implies that the investment in the bonds during one financial year should not exceed Rs.50 lacs. The appellant has invested Rs.50 lacs in the financial year 2007-08 and another sum of Rs.50 lacs in the financial year 2008-09. Hence, the stipulation provided in Sec 54EC is complied with & the Asst. Commissioner has wrongly disallowed the claim worth Rs.50 lacs.
4. The Asst. Commissioner has taken the base of the Notification No.380/2006, dated 22.12.2006 to disallow the claim. However, it has been expressly provided in the Notification that the said Notification will be applicable for the investments made in the bonds during the period from "26.12.2006 to 31.03.2007". Thus the said notification is not applicable to the appellant and so the claim of Rs.1 crore be allowed in full.
Thus, the appellant's claim for exemption should not be restricted to Rs.50 lacs and benefit of exemption worth Rs.1 crores should be allowed."
5. Thereafter, the Commissioner of Income-tax (Appeals) held as under:-
"2.2 I have carefully considered the submission of the Ld. Counsel as well as the facts of the case and the finding recorded by the Assessing Officer in the assessment order. There is no dispute on the computation of Long Term Capital Gain of Rs. 1,42,35,320/-. However, the appellant had claimed an exemption of Rs. 1,00,00,000/- u/s 54EC(1) of the Act from the said capital gain on account of investment of capital gain in the specified assets. The said claim of the appellant ITA No. 2013/Ahd/2011 Smt. Jyotika Bhupendra Shah AY 2008-09 -4- was not entertained by the Assessing Officer. The Assessing Officer had restricted the exemption to Rs. 50 lakhs only in view of the proviso to sub-section (1) of sec. 54EC of the Act inserted by the Finance Act, 2007, w.e.f. from 01.04.2007. It was the contention of the Ld. Counsel of the appellant that the appellant had invested Rs. 50 lakhs in REC bonds on 29th Feb., 2008 i.e. in financial year 2007-08 and another Rs. 50 lakhs in NHAI bonds on 30th June, 2008 i.e. in financial year 2008-09. In his view, it is amply clear from the plain reading of sec. 54EC(1) that the investment in bonds, for the purpose of claiming exemption, in any financial year should not exceed Rs. 50 lakhs. Reference was made to the Explanatory Notes on the provisions of Finance Bill, 2007. He has disputed the applicability of Notification No. 380/2006 dated 22.12.2006 by stating that the said notification is applicable to the investments in bonds from 26.12.2006 to 31.03.2007.
2.3 I have gone through the provisions of sec. 54EC of the Act which read as under:
"54EC (1) Where the capital gain arises from the transfer of a long-term capital asset (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 in 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) ------- (b) -------
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."
2.4 It is evident from the aforesaid provisions of sec. 54EC(1) that before the insertion of proviso to sec. 54EC(1) by the Finance Act, 2007, w.e.f. from 01.04.2007, there was no restriction on the investment of whole or any part of the capital gains in the long-term specified asset. However, such a restriction was introduced by insertion of the proviso to the sec. 54EC(1) of the Act. By the proviso, the investment in specified assets has been restricted to Rs. 50 lakh in any financial year. This is the settled position of law that provisos are mainly inserted to restrict the scope of the section. The proviso to sec. 147 of the Act, second proviso to sec. 43B before omission w.e.f. 01.04.2004, proviso to sec. 36(1)(iii) inserted w.e.f. from 01.04.2004 and various provisos to sec. 80-IB and sec. 80HHC are some of the ITA No. 2013/Ahd/2011 Smt. Jyotika Bhupendra Shah AY 2008-09 -5- examples where scope of the main sections have been restricted by inserting provisos in the respective sections. There may be cases where the scope of the sections was enlarged by inserting provisos but the same are not relevant here.
2.5 It is also evident from clause 28.2 of the Explanatory Notes on the provisions of the Finance Act, 2007 issued vide CBDT Circular No. 3/2008 dated 12.03.2008 that to ensure the benefit to small investors and equitable distribution, the ceiling on the quantum of investment was imposed. Investments in such specified assets to avail exemption u/s 54EC(1) on or after 1st day of April, 2007 will not exceed fifty lakhs rupees in a financial year. Reference may be made to page-4 and page-5 of the assessment order for the specific wording of clause- 28 of Circular No. 3/2008 dated 12.03.2008. Reference may also be made to page-4 of the assessment order for the Finance Minister's Speech. The Ld. Counsel has misinterpreted the proviso to sec. 54EC(1) and also the clause-28 of Circular No. 3/2008 dated 12.03.2008.
2.6 The intention of the Legislature in inserting the proviso to sec. 54EC(1) was to restrict the exemption to 50 lakhs in a financial year so that the benefit can be given to many small investors. Though, the language of the section 54EC(1) alongwith proviso is very clear but the same was mis-understood by the Counsel of the appellant. It will be worthwhile to discuss the issue of interpretation of statute which is now well settled. The Hon'ble Supreme Court in the case of CIT vs. Tara Agencies 292 ITR 444 (SC) has held that "The intention of the Legislature has to be gathered from the language used in the statute, which means that attention should be paid to what has, been said as also to what has not been said. It is the bounden duty and obligation of the court to interpret the statute as it is. It is contrary to all rules of construction to read words into a statute which the Legislature in its wisdom has deliberately not incorporated." The Hon'ble Supreme Court in the case of Pandian Chemicals Ltd. vs. CIT 262 ITR 278 (SC) has held that "The rules of interpretation would come into play only if there is any doubt with regard to the express language used. Where the words are unequivocal, there is no scope for importing any rule of interpretation as submitted by the appellant." The Appex Court in the case of H.H. Lakshmibai & Anr. vs. CWT 206 ITR 688 (SC) has held that It is settled law that taxation statute in particular has to be strictly construed and that there is no equity in a taxing provision. The Appex Court in the case of Smt. Taulata Syam & Ors. vs. CIT 108 ITR 345 (SC) has held that there is no scope for importing into the statute words which are not there. Such importation would be, not to construe, but to amend the statute. Even if there be a cusus omisus, the defect can be remedied only by legislation and not by judicial ITA No. 2013/Ahd/2011 Smt. Jyotika Bhupendra Shah AY 2008-09 -6- interpretation. The intention of the legislation is primarily to be gathered from the words used in the statute. Once it is shown that the case of the assessee comes within the letters of law, he must be taxed, however, great the hardship may appear to the judicial mind to be. From the aforesaid judicial wisdom, it is clear that the view taken by the Assessing Officer in interpreting the proviso to sec. 54EC(1) of the Act was the correct interpretation and the appellant was not justified to claim the exemption of Rs.1,00,00,000/- for the investment in specified assets. The exemption u/s 54EC (1) was available to him to Rs.50,00,000/- only.
2.8 The Ld. Counsel has challenged the applicability of Notification No. 380/2006 dated 22.12.2006 for the year under consideration as relied upon by the Assessing Officer. The stand taken by the Ld. Counsel is not correct. The Hon'ble Madras High Court has decided this issue in the case of Areva T & D India Ltd. vs. Asstt.CIT 326 ITR 540 (Mad.) by holding that sec. 54EC stood amended by the Finance Act, 2007, retrospectively w.e.f. 1st April, 2006, whereby not only the impugned notification No. 380 of 2006 was validated but limit of investment of Rs. 50 lakhs for investment in long-term specified assets was incorporated in the section itself. It was held vide para-13 of the decision that it is to be noted that another proviso was also inserted after sub-sec. (1) of sec. 54EC of the Act, which reads as follows:
"Provided investment on or after 1st April 2007 in the 'long-term specified asset' by the assessee during the end of the financial year does not exceed Rs. 50 lakhs." By this amendment by Finance Act of 2007, the Central Government limited the investment made on or after 1st April, 2007 in specified long-term asset by the assessee during the end of the financial year to Rs. 50 lakhs and the same has come into effect from 1st April. 2007. From both the amendments (refer opening five lines of para-13 for amendment by Finance Act, 2007) it is clear that the intention of the legislature is to limit the investment in the 'long-term specified asset' to Rs. 50 lakhs. The power to limit on the amount of investment by an assessee in bonds is now incorporated in the section itself. By the proviso to Expln. (b) the bond notified-before 1st April, 2007 with a condition is deemed to be a bond notified under the amended provision. In view of the subsequent amendment, the prayer n the writ petition become infructuous.
2.9 Considering the aforesaid discussion in para-2.2 to para-2.6 above and following the law laid in the decisions relied upon in the aforesaid paras, I am of the opinion that the appellant was entitled for exemption 54EC(1) only for Rs. 50 lakhs after the insertion of the proviso to sec. 54EC (1) w.e.f. 01.04.2007. The Assessing Officer was thus justified in restricting the exemption u/s 54EC(1) only to Rs. 50 ITA No. 2013/Ahd/2011 Smt. Jyotika Bhupendra Shah AY 2008-09 -7- lakhs. The finding so recorded by the Assessing Officer is thereby sustained and the addition of Rs. 50,00,000/- so made is confirmed. All the three grounds of appeal are accordingly dismissed."
6. The Authorized Representative of the assessee reiterated the submissions made before the Commissioner of Income-tax (Appeals) and further relied on the decision of Bangalore Bench of the Tribunal in the case of Vivek Jairazbhoy in ITA No.236/Bang/2012, wherein it was held as under:-
"9.4 The issues now before us for adjudication are the following :
(i) Whether the proviso to section 54EC of the Act restricts the exemption to Rs.50 lakhs or does it merely restrict the investment that can be made in a single financial year to Rs.50 lakhs ?
(ii) If the answer to the above is that it is the investment that is restricted and not the exemption, then in view of the fact that NHAI had allotted the Bonds only on 30.6.2008 in respect of the second investment of Rs.50 lakhs, which is beyond the period of six months from the date of sale of property, can it be said that the second investment of Rs.50 lakhs is said to have been made outside the period of six months and no exemption is to be allowed under section 54EC of the Act in respect of the same.
9.5 The learned counsel for the assessee has placed reliance on the decision of the ITAT, Ahmedabad Bench in the case of Aspi Ginwala & Others Vs. ACIT in ITA Nos.3226 & 3227/Ahd/2011 dt.30.3.2012 wherein on similar facts i.e investment of Rs.50 lakhs each was made in two different financial years but within the period of six months from the date of sale, it was held in para 8 of the said order that the assessee is entitled to exemption of Rs.1 Crore as the six months period for investment in eligible investments involved in two financial years.
9.6 The learned Departmental Representative however placed before us an earlier judgment, contrary to the decision of the Ahmedabad Bench of the ITAT, rendered by the ITAT, Jaipur Bench in the case of ACIT Vs. Raj Kumar Jain & Sons in ITA No.648/JP/2011 dt.30.1.2012 wherein the Tribunal on similar facts, was of the view that a liberal interpretation will lead to discrimination adversely affecting those who sell a property at any time from April to September of a financial year vis-à-vis those who sell property in the period October to March of the ITA No. 2013/Ahd/2011 Smt. Jyotika Bhupendra Shah AY 2008-09 -8- same financial year. In this view of the matter, they came to the conclusion that for the investment to be made within a period of six months, the exemption under section 54EC of the Act is to be restricted to Rs.50 lakhs only.
9.7 The learned counsel for the assessee placed reliance on circular No.3/2008 dt.12.3.2008 issued by CBDT, being an explanatory note on the provisions relating to Direct Taxes in Finance Act, 2007. In the said para 28.2 thereof the reason for it to set a limit on the quantum of investment by a person in a financial year, reads as under :
" 28.2 The quantum of investible bonds issued by NHAI and REC being limited, it was felt necessary to ensure that the benefit was available to all the investors. For this purpose, it was necessary to ensure that the limited number of bonds available for subscription is also available for small investors. Therefore, with a view to ensure equitable distribution of benefits amongst prospective investors, the government decided to impose a ceiling on the quantum of investment that could be made in such bonds. Accordingly, the said section has been amended so as to provide for a ceiling on investment by an assessee in such long- term specified assets. Investments in such specified assets to avail exemption under section 54EC, on or after 1st day of April, 2007 will not exceed fifty lakh rupees in a financial year."
It is clear from the Circular no.3/2008 of CBDT (supra) that the Government only intended to restrict the investment in a particular financial year and thus has fixed a limit of Rs.50 lakhs as permissible investment in a particular financial year. It also appears clear that the Government did not intend to restrict the maximum amount of exemption permissible under section 54EC of the Act. The fact that the Legislature has consciously used the words "in a financial year" in the proviso to section 54EC of the Act also fortifies the same. If the Legislature wanted to restrict the exemption itself to Rs.50 lakhs it could have simply dispensed with using the words "in a financial year"
9.8 The judicial decisions relied upon by the learned counsel for the assessee also support the stand of the assessee. The Hon'ble Apex Court while deciding the case of Vikrant Tyres Ltd Vs. First ITO reported in 247 ITR 821 have already laid down the law on interpreting of statutes by holding thereof that :-
" It is settled principle in law that the courts while construing Revenue Acts have to give a fair and reasonable construction to the language of a statute without leaning to one side or the other, meaning thereby that no tax or levy can be imposed on a ITA No. 2013/Ahd/2011 Smt. Jyotika Bhupendra Shah AY 2008-09 -9- subject by an Act of Parliament without the words of the statute clearly showing an intention to lay the burden on the subject. In this process, the courts must adhere to the words of the statute and the so called equitable construction of those words of the statute is not permissible. The task of the court is to construe the provisions of the taxing enactments according to the ordinary and natural meaning of the language used and then to apply that meaning to the facts of the case and in that process if the tax payer is brought within the net he is caught, otherwise he has to go free."
In the case of CWT Vs. Hashmatunnisa Begum reported in 176 ITR 98 (SC), the Hon'ble Apex Court held that while interpreting statutes, literal construction has to be applied regardless of results and that only in a situation where two views are reasonably possible, should reference be given to that view which promotes constitutionality and not where the statute can be read only in a particular way.
The following decisions of the Hon'ble Apex Court have laid down the proposition that provisions for deduction, exemption or relief are to be construed liberally in order to advance the objective and not to frustrate it.
(i) CIT Vs. Gwalior Rayon Silk Manufacturing Co. Ltd. (196 ITR
149)(SC)
(ii) CIT Vs. Vegetable Products Ltd. ( 88 ITR 192)
(iii) Bajaj Tempo Ltd. Vs. CIT (196 ITR 188)(SC) Taking into consideration the overall facts and circumstances of the case, the CBDT's Circular No.3/2008, and the principles laid down by the Hon'ble Apex Court for interpreting statutes, we are of the considered view that it would be in the fitness of things, to follow the decision of the ITAT, Ahmedabad Bench in the case of Aspi Ginwala & Others (supra) relied on by the assessee and hold that the assessee is entitled to total deduction under section 54EC of the Act spread over a period of two financial years @ Rs.50 lakhs each on investments made in specified instruments within a period of six months from the date of sale of the property.
10.1 We now proceed to address the issue at (ii) as laid out in para 9.4 (supra). As per facts on record, the assessee had issued a cheque for Rs.50 lakhs to NHAI for allotment of Bonds that was encashed by NHAI on 9.6.2008. The sale of the said property took place on 14.12.2007 and the six months period ended on 13.6.2008. NHAI, however, as evident from the record, has allotted the bonds only on 30.6.2008 which is after the six month period. The learned ITA No. 2013/Ahd/2011 Smt. Jyotika Bhupendra Shah AY 2008-09
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CIT(Appeals) held that the date of allotment is what is to be considered for reckoning the six months period and the same (viz. 30.6.2008) being beyond the period of six months, in the instant case, has denied the exemption claimed under section 54EC of the Act for the second investment of Rs.50 lakhs.
10.2 The assessee has placed reliance on a decision of the ITAT, Bombay Bench in the case of Kumarpal Amrutlal Doshi Vs. DCIT in ITA No.1523/Mum/2010 dt.9.2.2011 wherein the Tribunal relying on the decision of the Hon'ble Apex Court in the case of CIT Vs. Ogale Glass Works Ltd (25 ITR 529) has held that payment by cheque subsequently realized on the cheque being honoured and encashed relates back to the date of receipt of the cheque and in law the date of payment is the date of delivery of the cheque. In the cited case the assessee therein had issued a cheque to NABARD on 9.2.2006 which was within the period of six months as specified in sectin 54EC. The cheque got encashed on 15.2.2006 which was after a period of six months. The Tribunal held that the date of payment is the date of tender of the cheque i.e. 9.2.2006. In the instant case of the assessee, the cheque dt.4.6.2008 issued by the assessee for NHAI Bonds was encashed by NHAI on 9.6.2008 which is before the expiry of the period of six months (i.e. 13.6.2008) and therefore the assessee in the present case is on an even better footing than the case relied upon by the learned counsel for the assessee.
10.3 Further, in the case of Aspi Ginwala & Others (supra) cited earlier in this order, the assessee was unable to invest in Bonds within a period of six months as the issue was not open and did so the moment the same was made open to public and thus the allotment was made after the statutory period of six months. The ITAT, Ahmedabad Bench, relying on an earlier decision of the ITAT, Mumbai in the case of Ram Agarwal Vs. JCIT reported in 81 ITD 163 held that the assessee therein was prevented by sufficient cause from investing within the statutorily permitted period of six months and allowed the assessee exemption under section 54EC of the Act in respect of the said investment. In the present case before us, the assessee has made payment for the investment in NHAI which was encashed on 9.6.2008 well within the statutorily permitted period of six months from the date of sale of the property (i.e. upto 13.6.2008). What is to be reckoned here is the date of payment and not the date of allotment as the same is not in the control of the assessee. In this view of the matter, we hold that the date of payment (i.e. date of encashment of cheque) is to be reckoned for calculating the six month period and since in this case the date of payment / encashment being well within the period of six months, the assessee is entitled to exemption under section 54EC ITA No. 2013/Ahd/2011 Smt. Jyotika Bhupendra Shah AY 2008-09
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of the Act even on the second investment of Rs.50 lakhs made in Bonds issued by NHAI. It is ordered accordingly."
7. He further relied on the decision of the Chennai Bench of the Tribunal in the case of Smt. Sriram Indubal, reported in 32 taxmann.com 118, wherein it was held as under:-
"7. We have perused the orders and heard the rival submissions. There is no dispute that assessee had transferred the capital asset on which she had claimed exemption under Section 54EC on 18.2.2008. Assessee had also claimed exemption under Section 54EC on investments made in REC and NHAI Bonds. Section 54EC(1), which is relevant to the case, is reproduced hereunder, for brevity:-
"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 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 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 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"."
8. The first condition mentioned in Section 54EC(1) is that the investment has to be made within a period of six months from the date of transfer of capital asset. Since the date of transfer in the given is 18.2.2008, six months period will elapse on 17.8.2008. Assessee had purchased REC Bonds worth of Rs. 50 lakhs on 27.2.2008 and Bonds of NHAI for Rs. 50 lakhs on 30.6.2008. Both these purchases ITA No. 2013/Ahd/2011 Smt. Jyotika Bhupendra Shah AY 2008-09
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were within the six months' period. Only question that arises is whether proviso to Section 54EC(1) would limit the claim of exemption to Rs. 50 lakhs. Said proviso mentions that investment on which an assessee could claim exemption under Section 54EC(1) shall not exceed Rs. 50 lakhs during a financial year. So, the exemption provision has to be construed not transaction-wise but, financial year- wise. No doubt, Explanatory Memorandum does say that limitation has been placed with a view to ensure equitable distribution of benefits among the prospective investors. Relevant Explanatory Memorandum is reproduced for brevity:-
"The quantum of investible bonds issued by NHAI and REC being limited, it was felt necessary to ensure that the benefit was available to all the investors. For this purpose, it was necessary to ensure that the limited number of bonds available for subscription is also available for small investors. Therefore, with a view to ensure equitable distribution of benefits amongst prospective investors, the government decided to impose a ceiling on the quantum of investment that could be made in such bonds. Accordingly, the said section has been amended so as to provide for a ceiling on investment by an assessee in such long-term specified assets. Investments in such specified assets to avail exemption under section 54EC, on or after the 1st day of April, 2007 will not exceed fifty lakh rupees in a financial year."
Last sentence of the Explanatory Memorandum clearly states that the exemption for investment cannot exceed Rs. 50 lakhs in a financial year. Therefore, if the assessee is able to keep the six months' limit from the date of transfer of capital asset, but, still able to place investment of Rs. 50 lakhs each in two different financial years, we cannot say that the restrictive proviso will limit the claim to Rs. 50 lakhs only. Since assessee here had placed Rs. 50 lakhs in two different financial years but within six months period from the date of transfer of capital asset, assessee was definitely eligible to claim exemption upto Rs. 1 Crore. The same view has been taken by Ahmedabad Bench of this Tribunal in the case of Aspi Ginwala & Others (supra). We are, therefore, of the opinion that the assessee has to succeed in this appeal. Claim of the assessee for exemption upto Rs. 1 Crore has to be allowed in accordance with Section 54EC of the Act."
8. The Authorized Representative of the assessee further relied on the decision of the Panaji Bench of the Tribunal in the case of Ms. Raina Faleiro, reported in 33 taxmann.com 611, wherein it was held as under:-
ITA No. 2013/Ahd/2011Smt. Jyotika Bhupendra Shah AY 2008-09
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"2. The only issue involved in this appeal filed by the Revenue relates to the allowing of relief under Section 54EC. The brief facts of the case are that the Assessee filed its return of income on 29.9.2008 declaring income of Rs.24,00,118/- in which the assessee claimed deduction under Section 54EC amounting to Rs. 50,00,000/-. Assessment was completed on 30.12.2010 at an income of Rs. 7400118/-. The Assessing Officer during the course of assessment noted that the assessee has sold capital asset and computed Capital Gains at Rs.1,16,83,128/-. The Assessee claimed the exemption of the Capital Gains amounting to Rs. 1,00,00,000/- by making the following investments in Capital Gains Bonds under Section 54EC :
(a) REC Bonds of Rs.50,00,000/- on 31.3.2008
(b) REC Bonds of Rs.50,00,000/- on 30.6.2008 The Assessee claims that he has invested the funds within 6 months and therefore is entitled for exemption under Section 54EC. The Assessing Officer noted that a proviso which reads as under, has been inserted w.e.f. 1.4.2007 in Section 54EC(1):
"provided that the investment made on or after the first day of April, 2007 in the long term specified asset by an assessee during any financial year does not exceed fifty lakh rupees"
On the basis of this proviso, the Assessing Officer took the view that the Assessee could have made the investment only upto Rs.50,00,000/- and he could have therefore got exemption under Section 54EC only for a sum of Rs.50,00,000/- and accordingly, he allowed exemption for Rs.50,00,000/- and made the addition of Rs.50,00,000/-. When the matter went before the CIT(A), the CIT(A) deleted the addition by holding as under :
"I have gone through the facts of the case, contents of the assessment order and written submissions of the assessee. The fact is that the assessee has sold the property on 05.02.2008 and Rs.50,00,000/- was invested in the same financial year and Rs. 50,00,000/- was invested during the next F.Y. As per the proviso to Section 54EC of the Act that the long term specified asset by and assessee during any financial year does not exceed Rs.50,00,000/-. As a result, the disallowance made by the AO is dismissed and the assessee's ground of appeal is allowed."
3. We have heard the rival submissions and carefully considered the same. We noted that this issue is duly covered in favour of the Assessee by the decision of the Bangalore Bench in case of Vivek Jairazbhoy v. Dy. CIT [ITA No. 236/Bang/2012, dated 14-12-2012] and Ahmedabad Bench in the case of Aspi Ginwala, Shree Ram Engg.
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& Mfg. Industries v. Asstt CIT [2012] 20 taxmann.com 75/52 SOT 16 (Ahd.). In the case of Aspi Ginwala, the co-ordinate bench has held as under :
"7. We have heard both the parties and perused the records and find that the assessee and his brother Shri Rustom Ginwala sold a property on 22-10-2007 for Rs. 6.21 Crores. The assessee and his brother had 50% share in this property. The assessee made investment of Rs. 50 lakhs on 31 -12-2008 in REC Bonds and Rs. 50 lakhs on 26-05-2008 in NHAI Bonds and claimed exemption of Rs. 1 Crore u/s 54EC of the Act. The investment in REC Bonds was allowed by the AO as it was within the time limit of six months prescribed in section 54EC of the Act, while the investment in NHAI Bonds which was made only on 26-05-2008 was not allowed as according to the lower authorities the assessee is only entitled for exemption u/s 54EC upto Rs. 50 lakhs only. The assessee's case, however, is that as per the proviso to section 54EC, investment made on or after 1st April, 2007 in the Long Term Specified Asset by an assessee during any financial year should not exceed Rs. 50 lakhs. The assessee's case is that since the property was sold on 22-10-2007 he could have invested in eligible investment within six months i.e. on or before 21-04-2008 in order to avail exemption u/s 54EC of the Act. There is no dispute about Rs. 50 lakhs invested on 31-12-2007 in REC Bonds. The dispute is only about further investment of Rs. 50 lakhs in NHAI Bonds made on 26-05-2008. Since six months in this case involves two financial years, the assessee's case is that if he had deposited another Rs. 50 lakhs from 1st April, 2008 to 21-04-2008, he was entitled for exemption u/s 54EC of the Act. As during this period from 01-04- 2008 to 26-05-2008 subscription in eligible investment was closed, the investment made by the assessee on 26-05-2008 i.e. 1st day of the reopening of the subscription of eligible investment in NHAI Bonds should be treated in time. There is also no dispute about the fact that subscription to the eligible investment was closed during the period 01-04-2008 to 26-05-2008. The dispute which remains to be decided by us in this case is whether as per the provisions of section 54EC the assessee is entitled for exemption of Rs. 1 Crore as six months period for investment in eligible investment involves two financial years. If the answer to this question is "yes", whether investment made by the assessee on 26-05-2008 beyond six months period is eligible for exemption in view of the fact that no subscription for eligible investment was available to the assessee from 1st April, 2008 to 26-05-2008.
8. While going through the proviso of section 54EC, we find that the proviso to section reads as under. -ITA No. 2013/Ahd/2011
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"[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 rupee]"
It is clear from this proviso that where assessee transfers his capital asset after 30th September of the financial year he gets an opportunity to make an investment of Rs. 50 lakhs each in two different financial years and is able to claim exemption upto Rs. 1 Crore u/s 54EC of the Act. Since the language of the proviso is clear and unambiguous, we have no hesitation in holding that the assessee is entitled to get exemption upto Rs. 1 Crore in this case. This view of ours gets support from the following finding of the Hon'ble Supreme Court in the case of IPCA Laboratory Ltd. v. Dy. CIT [2004] 266 ITR 521 /135 Taxman 594 (SC), wherein it has been held by the Hon'ble Supreme Court that -
"even though a liberal interpretation has to be given to such a provision the interpretation has to be as per the wording of the section. If the wording of the section is clear, then benefits which are not available cannot be conferred by ignoring or misinterpreting words in the section"
Here the situation is reverse. Since the wording of the proviso to section 54EC is clear, the benefits which are available to the assessee cannot be denied. In view of above, it is hereby held that the assessee is entitled for exemption of Rs. 1 crore as six months' period for investment in eligible investments involved is two financial years.
9. Now, coming to the second aspect of the matter, whether investment of Rs. 50 lakhs made in NHAI Bonds on 26-05-2008 can be considered to be made within six months period as per the proviso to sec. 54EC, we find that the assessee was to make investment in such Bonds between 01-04-2008 to 21-04-2008. There is no dispute about the fact that subscription of eligible Bonds was closed during this period till 26-05-2008 and on the 1st day of the reopening of the subscription, the assessee made this investment. Under the circumstances, we are of the considered opinion that the assessee was prevented by sufficient cause which was beyond his control in making investment in these Bonds within the time prescribed. We further find that various judicial authorities have taken a view that exemption should be granted in such cases where there is a delay in making investment due to non-availability of the bonds and have held that it is a reasonable cause and the exemption should be granted. In the case of Ram Aganval v. Jt. CIT [2002] 81 ITD 163 (Mum), it has been held as under:
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"In regard to claim of exemption under section 54F we may mention that it is found by the learned CIT(A) that the bank was closed on 31 -8-1995 on account of strike as certified by the officials of the concerned bank. From the certification given by the bank officials, the assessee had approached the bank officials with the cheque for the amount of deposit on 30-8-1995. The assessee remained unable to obtain receipt on 31-8-1995 due to bank strike and the cheque was cleared on 1-9-1995. In this view of the situation, it can well be said that the deposit of the assessee was in accordance with the provisions of statute as on the last date i.e. the 31-8-1995, the deposit could not be made due to the reason which was beyond the control of the assessee particularly in view that the efforts were made by the assessee a day prior to last date to deposit the requisite amount in the bank to make him entitle for exemption under sec 54F. As mentioned earlier, this position has also been accepted by the learned CIT(A). Therefore, we direct the Assessing officer to allow the necessary exemption to the assessee.
Before parting we may observe that section 54F is a beneficial provision to encourage assessee to invest in house properties, Keeping in mind the above object behind the insertion of section 54F and considering the fact that the assessee was not at fault in not depositing the amount before 31-8-1995, we hold that the deposit made on 1-9-1995 satisfies the condition laid down in section 54F of the Act." Since no contrary decision was cited on behalf of the Revenue, we are left with no option but to hold that the investments made by the assessee on 26-05-2008 beyond six months is eligible for exemption in view of the fact that no subscription for eligible investment was available to the assessee from 1st April, 2008 to 26-05-2008.
10. In the result, both the appeals are allowed. "
4. We have also noted that subsequently, a contrary view has been taken by Jaipur bench in Asstt. CIT v. Raj Kumar Jain & Sons (HUF) [2012] 19taxmann.com 27/50 SOT 213 (JP.). Subsequent to that decision, the Bangalore bench in the case of Vivek Jairazbhoy (supra) vide order dtd. 14.12.2012 took view in favour of the assessee. From the provisions of Sec. 54EC we noted that the limit of Rs. 50,00,000/- as given under the proviso is per person per financial year. The plain reading of the section as well as the proviso clearly suggests the same interpretation. There is no ambiguity in the interpretation. Had there been an intention of the legislature to restrict the exemption to Rs.50,00,000/-, the legislature would have provided the embargo in this regard. Restriction relates only to the investment made in any financial year by the assessee. Making of the investment is a condition for availing of the exemption. Condition for availing of ITA No. 2013/Ahd/2011 Smt. Jyotika Bhupendra Shah AY 2008-09
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the exemption requires that the investment can be made within a period of 6 months. If 6 months falls within a different financial year, as has happened in this case, in our opinion, this Tribunal cannot add the embargo that the assessee cannot make the investment to avail of the exemption under Section 54EC in the different financial year if he had already made the investment in the financial year in which the capital asset is transferred. In our opinion, the language of Section 54EC is clear and unambiguous and it leads to the interpretation that the assessee can make the investment in two different financial years provided in a financial year the investment made did not exceed Rs.50,00,000/-. We have also gone through the circular no. 3/2008 dtd. 12.3.2008 issued by the CBDT being an explanatory note on the provisions relating to direct taxes in Finance Act, 2007. In para 28.2 thereof the reason for it to set the limit on the quantum of the investment by a person in a financial year are given as under :
"28.2 The quantum of investible bonds issued by NHAI and REC being limited, it was felt necessary to ensure that the benefit was available to all the investors. For this purpose, it was necessary to ensure that the limited number of bonds available for subscription is also available for small investors. Therefore, with a view to ensure equitable distribution of benefits amongst prospective investors, the government decided to impose a ceiling on the quantum of investment that could be made in such bonds. Accordingly, the said section has been amended so as to provide for a ceiling on investment by an assessee in such long-term specified assets. Investments in such specified assets to avail exemption under Section 54EC, on or after 1st day of April, 2007 will not exceed fifty lakh rupees in a financial year."
From this circular also, it is apparent that the Government only intended to restrict the investment in a particular financial year and accordingly has fixed the limit of Rs. 50,00,000/- as permissible limit in a particular financial year. The Government did not intend to restrict the maximum amount of exemption permissible under Section 54EC. Legislature in our opinion has consciously used the words "in a financial year" in the proviso to Sec. 54EC of the Act. If the legislature wanted to restrict the exemption itself to Rs. 50,00,000/-, it could have have simply dispensed with using the words 'in a financial year'. The Hon'ble Supreme Court while deciding the case of Vikrant Tyres Ltd. v. First ITO [2001] 247 ITR 821/115 Taxman 202 laid down law of interpretation of the statute by holding therein as under :
"It is settled principle of law that the courts while construing Revenue Acts have to give a fair and reasonable construction to the language of a statute without leaning to one side or the other, meaning thereby that no tax or levy can be imposed on a subject by an Act of Parliament without the words of the statute clearly ITA No. 2013/Ahd/2011 Smt. Jyotika Bhupendra Shah AY 2008-09
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showing an intention to lay the burden on the subject. In this process, the courts must adhere to the words of the statute and the so called equitable construction of those words of the statute is not permissible. The task of the court is to construe the provisions of the taxing enactments according to the ordinary and natural meaning of the language used and then to apply that meaning to the facts of the case and in that process if the tax payer is brought within the net he is caught, otherwise he has to go free."
5. Even in the case of CIT v. Vegetable Products Ltd. [1973] 88 ITR 192 the Hon'ble Supreme Court has taken view that if there are two views possible, the view favourable to the subject should be taken. In view of the aforesaid discussion, we are of the view that no interference is called for in the order of CIT(A) and CIT(A) has rightly deleted the addition made by the Assessing Officer. We, accordingly, dismiss the appeal filed by the Revenue."
9. He also relied upon the decision of Ahmedabad Bench of the Tribunal in the case of Smt. Pritiben Gautambhai Adani in ITA No.808/Ahd/2012, wherein it was held as under:-
"2. Brief facts of the case are that assessee, during the year under appeal, sold 70,109/- shares of Advantage Retail Pvt. Ltd. on 27.12.2007 for a total consideration of Rs.6,16,95,920/-. For taking benefit of Section 54EC of the Act, the assessee purchased bonds issued by Rural Electrification Corporation of India for a sum of Rs.50/- lakhs in the month of March, 2008 i.e. in the financial year 2007-08. Thereafter the assessee further invested a sum of Rs.50/- lakhs in National Highway Authorities of India bonds in the month of May, 2008 i.e. in the financial year 2008-09. This investment of Rs.1 crore was deducted from the capital gain while computing the income under the head capital gains and return of income was filed. The return income filed by the assessee was accepted by the A.O. vide assessment order dated 7th May, 2010 passed u/s 143(3) of the Act.
3. Subsequently, on 12th April, 2011 the CIT, Ahmedabad-V issued a show cause notice u/s 263 of the Act intimating that as per the proviso to Section 54EC(1), the investment made in long term specified assets during any financial year should not exceed Rs.50 lakhs. The CIT further expressed that the assessee claimed deduction for investment of Rs.1 crore which was allowed by the A.O. and, therefore, the assessment order was erroneous and prejudicial to the interest of the Revenue. Ld. CIT, accordingly, show caused the assessee to make submissions on this issue. Detailed written ITA No. 2013/Ahd/2011 Smt. Jyotika Bhupendra Shah AY 2008-09
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submissions were filed before ld. CIT and assessee's representative also attended before him and the factual and legal positions were explained to him. After taking all these into consideration ld. CIT set aside the order dated 7th May, 2010, passed by the A.O. and directed him to reframe the assessment order after verifying the bond certificate and after giving adequate opportunity to the assessee of being heard. He further directed that the assessment order may be reframed in accordance with law.
4. Aggrieved by this order of ld. CIT, these appeals has been filed before us. At the time of hearing ld. counsel of the assessees' only grievance was that ld. CIT, while directing the A.O. to reframe the assessment order in accordance with law, has also made certain observations in his order on the issue of allowability of deduction u/s 54EC of the Act which are contrary to the decision of Hon'ble ITAT, Ahmedabad Bench in the case of Shri Aspi Ginwala and Shri Rustom Ginwala in ITA No.3226 and 3227/Ahd/2011 for the assessment year 2008-09. He, therefore, submitted that the direction of ld. CIT may kindly be modified to the extent that the A.O. will reframe his assessment order in accordance with law ignoring the observation made by ld. CIT on allowability of deduction u/s 54EC of the Act. Ld. D.R. did not object to this submission of the assessee. Therefore, the direction of ld. CIT is modified and the A.O. is directed to reframe the assessment order in accordance with law ignoring the observation of ld. CIT on allowability of deduction u/s 54EC of the Act.
10. On the other hand, the Departmental Representative appeared for the Revenue vehemently supported the order of the Commissioner of Income- tax (Appeals) and he relied upon the decision of Jaipur "A" Bench of the Tribunal in the case of ACIT v. Shri Raj Kumar Jain & Sons (HUF), reported in [2012] 19 taxmann.com 27 (JP), wherein it was held as under:-
"2.7 We have heard both the parties. Section 54EC was introduced by the Finance Act 2001 w.e.f. 01-04-201. It was provided in Section 54EC that in case the amount of Long term capital gain is invested in the long term specified asset then the assessee is not required to pay the capital gain tax. The long term specified assets were also defined in Explanation b to Section 54EC. There was no limitation imposed for the purpose of investment. Subsequently, Section 54EC was amended by the Finance Act 2006. As per this amended provision, the long term specified asset was defined to mean any bond redeemable after 3 years and issued by the National Highway Authority of India or by the ITA No. 2013/Ahd/2011 Smt. Jyotika Bhupendra Shah AY 2008-09
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Rural Electrification Corporation. Subsequently, the Central Govt. issued a Notification No. 380 of 2006 dated 22nd Dec. 2006 which reads as follows.
''SO. No. 2146(E). (1) In exercise of the powers conferred by sub- cl (ii) of cl.(b) of the Explanation to Section 54EC of the Income Tax Act, 1961, the Central Govt. notifies the bonds for an amount of rupees three thousand five hundred crores to be issued by the Rural Electrification Corporation Ltd., a company formed and registered under the Companies Act, 1956, during the period from 26th Dec. 2006 to 31st March 2007 as 'long term specified asset' for the purpose of the said Section subject to the following conditions namely:-
(i) a person who has made an investment of an amount aggregating more than fifty lakh rupees in the bonds notified as 'long term specified asset by the Central Govt.
for the purpose of Section 54EC of the I.T. Act, 1961 in the Official Gazette vide Notification No. SO No. 963(E) dated 26th June, 2006 or Notification No. SO No. 564(E) dated 29th June, 2006 shall not be allotted any bonds notified as 'long term specified asset' by this notification.
(ii) A person who has not covered by cl. (i) shall not be allotted the bonds notified as 'long term specified asset' by this Notification, for any amount which exceeds the amount of fifty lakhs rupees as reduced by the aggregate of the investment, if any, made by him in the bonds notified as 'long term specified asset' by the Central Govt. for the purposes of Section 54EC of the I.T. Act, 1961, in the Official Gazette vide Notification No. SO. No.963(E) dated 29th June, 2006 or Notification No. SO No.964(E) dated 29th June, 2006.'' The Notification imposed two conditions (1) No more bonds will be issued by any person, if he has already made an investment of an amount aggregating more than Rs. 50 lakhs in the bonds already notified in notification no. 963E dated. 29 June, 206 or 964E dated 29th June, 2006 (2) Persons not covered under the first condition, no person is allotted any bonds, notified as 'long term capital asset' which exceeds Rs. 50 lakhs as reduced by the aggregate investment, if any, made by him in the bonds notified as 'long term specified asset'.
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The Hon'ble Madras High Court in the case of Areva T & D India Ltd. v. Asstt. CIT [2010] 326 ITR 540/[2009] 177 Taxman 192 had an occasion to consider as to whether the conditions imposed in the notification are ultra virus u/s 54EC of the Act. According to the Hon'ble High Court, it was held that conditions mentioned in the Notifications are valid because Section 54EC was amended by the Finance Act 2007 w.r.e.f. 01-04-2006. The proviso has already been introduced in Section 54EC of the Act. The contention of the assessee is that the proviso provides for making investment of Rs. 50.00 lacs in any financial year. The proviso is an exception to the main Section. The investment is to be made within six months from the date of transfer of assets. As per counsel of the assessee, if the period of six months spills over the next financial year in which transfer has taken place then the assessee can make investment of Rs. 50.00 lacs in the financial year in which transfer has taken place and Rs. 50.00 lacs in the subsequent financial year provided the investment is within the period of six months from the date of transfer. Thus the ld. AR of the assessee was of the view that assessee can claim deduction of Rs. 1.00 crore. We had already reproduced Section 54EC while reproducing the submissions of the ld. AR of the assessee. Section 45 says that any profits or gains arising from the transfer of a capital asset effected in the previous year shall be deemed to be an income of the previous year in which the transfer took place save as otherwise provided in Section 54, 54B, 54D, 54E, 54EA, 54EB, 54F, 54G and 54H. Hence, Section 54EC is not mentioned in Section 45 of the Act. As per Section 54EC, the profits or gains arising from the transfer of a capital asset is to be dealt with as per Section 54EC, in case the assessee has invested the whole or any part of the capital gain in the long term capital specified asset. Thus deduction is eligible to the investment. The proviso to Section 54EC provides that an investment made on or after the first date of April, 2007 in the long term specified asset by an assessee during any financial year does not exceed Rs. 50.00 lacs. Hence, the investment should not exceed Rs. 50.00 lacs. The proviso was introduced by the Finance Bill, 2007. In the memo explaining the provision of finance bill, 2007, it has been mentioned as under:-
''This amendment will take effect from 1st April, 2007 It is also proposed to amend the said Section so as to provide for a ceiling on investment by an assessee in such long term specified assets. Investments in such specified assets to avail exemption u/s 54EC on or after 1st day of April, 2007 will not exceed fifty lakh rupees in a financial year'';
It is true that Tribunal under law has no authority to decide the ultra virus provisions. However, whole construing the provision, one can ITA No. 2013/Ahd/2011 Smt. Jyotika Bhupendra Shah AY 2008-09
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definitely look into the facts as to whether the interpretation placed by the Tribunal is fairly applicable. The ld. DR during the course of proceedings before us has fairly contended that the interpretation which the ld. AR wants to place on the proviso to Section 54EC will enable the assessee to claim exemption of around Rs. 1.00 crore. In case, the transfer of assets has taken place from Ist Oct. to 31st March because the assessee will be able to invest Rs. 50.00 lacs in a financial year in which the transfer has taken place and Rs. 50.00 lacs in subsequent financial year. However, the assessee's who have earned the capital gain on transfer of assets from Ist April to 30th Sept. will be able to have deduction only of Rs. 50.00 lacs. We therefore, feel that assessee in the instant case is entitled to exemption of Rs. 50.00 lacs u/s 54EC and it is not the case where two interpretations of Section 54EC are possible. The earlier notification of the Govt. clearly suggested that the assessee's are entitled to the extent of Rs. 50.00 lacs u/s 54EC of the Act. Investment within 06 months is the investment for that financial year in which transfer has taken place. Hence, subsequent investment is to be considered as part of the investment of financial year in which transfer has taken place. We therefore, hold that the ld. CIT(A) was not justified in allowing deduction to the assessee to the extent of Rs. 1.00 crore u/s 54EC of the Act. We therefore, uphold the order of the AO."
11. We have heard the rival submissions and perused the orders of lower authorities and material available on record. The undisputed facts of the case are that the Long Term Capital Gain of Rs.1,42,35,320/- accrued to the assessee on transfer of Long Term Capital Asset on 01.01.2008. The assessee invested Rs.50 lakhs on 29.02.2008 i.e. FY 2007-08 and Rs.50 lakhs on 30.06.2008 i.e. FY 2008-09. Thus, the assessee invested in Rs.1 crore in specified bonds which are eligible for deduction u/s 54EC of the Act within six months from the date of the transfer of capital asset giving rise to Long Term Capital Gain in the hands of the assessee. Accordingly, the assessee claimed exemption of Rs.1 crore u/s 54EC of the Act in the return filed for the Assessment Year 2008-09 which was denied by the Assessing Officer in view of the proviso to sub-section (1) of Section 54EC of the Act, inserted by the Finance Act, 2007, w.e.f. 01.04.2007. He further supported his action by the Explanatory Notes on the provisions of Finance Act, 2007 and CBDT Circular No.3/2008 dated 12.03.2008 as well as by the Finance ITA No. 2013/Ahd/2011 Smt. Jyotika Bhupendra Shah AY 2008-09
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Minister Speech and the notification No.380/2006 dated 22.12.2006, wherein specific reference was made to paragraph 28.2 of such Explanatory Notes which stated that the Government decided to impose a ceiling on the quantum of investment that could be made in such bonds. Accordingly, the said section has been amended so as to provide for a ceiling on investment by an assessee in such long-term specified assets.
12. On appeal, the Commissioner of Income-tax (Appeals) confirmed the action of the Assessing Officer.
13. Before us the Authorized Representative of the assessee submitted that the issue is covered in favour of the assessee by the following decisions of the Tribunal:-
i) ITAT Bangalore in the case of Shri Vivek Jairazbhoy in ITA No.236/Bang/2012
ii) ITAT Chennai in the case of Smt. Sriram Indubal, reported in 32 taxmann.com 118
iii) ITAT Panaji in the case of Ms. Raina Faleiro, 33 taxmann.com 611
iv) ITAT Ahmedabad in the case of Smt. Pritiben Gautambhai Adani, in ITA No.808/Ahd/2012
14. On the other hand, the Departmental Representative supported the order of the lower authorities and relied upon the decision of Jaipur "A" Bench of the Tribunal in the case of ACIT v. Shri Raj Kumar Jain & Sons (HUF) (supra).
15. We find that the first proviso to section 54EC, inserted by the Finance Act, 2007, w.e.f. 01.04.2007, reads as under:-
"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."ITA No. 2013/Ahd/2011
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16. The CBDT vide its Circular No.3/2008 dated 12.03.2008 at paragraph 28.2 thereon opined as under:
"28.2 The quantum of investible bonds issued by NHAI and REC being limited, it was felt necessary to ensure that the benefit was available to all the investors. For this purpose, it was necessary to ensure that the limited number of bonds available for subscription is also available for small investors. Therefore, with a view to ensure equitable distribution of benefits amongst prospective investors, the government decided to impose a ceiling on the quantum of investment that could be made in such bonds. Accordingly, the said section has been amended so as to provide for a ceiling on investment by an assessee in such long- term specified assets. Investments in such specified assets to avail exemption under section 54EC, on or after 1st day of April, 2007 will not exceed fifty lakh rupees in a financial year."
17. Thus, a reading of the aforesaid proviso and Circular shows that the proviso has been inserted to limit the investment in eligible bonds to an amount of Rs.50 lakhs in a financial year and the said proviso does not limit the amount of exemption u/s 54EC in a financial year to an amount of Rs.50 lakhs. The above view stands fortified with the insertion of second proviso to section 54EC by the Finance (No.2) Act, 2014, w.e.f. Assessment Year 2015-16, which reads as under:-
"Provided further that the investment made by an assessee in the long-term specified asst, 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.
18. We find that the decision of Jaipur Bench of the Tribunal in the case of Shri Raj Kumar Jain & Sons (HUF), which was cited by the Departmental Representative, was considered by the Bangalore Bench of the Tribunal in the case of Shri Vivek Jairazbhoy (supra) and thereafter it was held that the proviso to section 54EC does not limit the amount of exemption which is available as per provision of section 54EC. We, therefore, find that the lower ITA No. 2013/Ahd/2011 Smt. Jyotika Bhupendra Shah AY 2008-09
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authorities were not justified in not allowing exemption u/s 54EC to the assessee in respect of investments made in specified capital bonds of Rs.1 crore which were within the limit of proviso to section 54EC i.e. Rs.50 lakhs in a financial year and were within the specified period of six months. We, therefore, set aside the orders of the lower authorities and direct the Assessing Officer to allow exemption to the assessee u/s 54EC in respect of both the investments i.e. Rs.50 lakhs on 02.08.2008 and Rs.50 lakhs on 30.06.2008. Thus, this ground of appeal of the assessee is allowed.
19. In the result, the appeal of the assessee is allowed.
Order pronounced in the Court on Friday, the 05th of September, 2014 at Ahmedabad.
Sd/- Sd/-
(MUKUL Kr. SHRAWAT) ( N.S. SAINI)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Ahmedabad; Dated 05/09/2014
*bt
TRUE COPY
आदे श क त ल प अ े षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent.
3. संबं धत आयकर आयु त / Concerned CIT
4. आयकर आयु त(अपील) / The CIT(A)-III, Ahmedabad
5. वभागीय त न ध, आयकर अपील य अ धकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड फाईल / Guard file.
आदे शानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad