Income Tax Appellate Tribunal - Hyderabad
Jayshree Gowrishankar, Sec'Bad, ... vs Acit, Circle-10(1), Hyderabad, ... on 7 April, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCHES "B" (SMC), HYDERABAD
BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER
I.T.A. No. 144/HYD/2016
Assessment Year: 2010-11
Mrs. Jayshree Gowrishankar, Assistant Commissioner
SECUNDERABAD Vs of Income Tax,
[PAN: ACVPG2223N] Circle-10(1),
HYDERABAD
(Appellant) (Respondent)
For Assessee : Shri R.D. Ahuja, AR
For Revenue : Shri K.J. Rao, DR
Date of Hearing : 08-03-2017
Date of Pronouncement : 12-04-2017
ORDER
This is an appeal by assessee against the order of the Commissioner of Income Tax (Appeals)-6, Hyderabad dated 16-11-2015. The issue in this appeal is with reference to claim of investment made in bonds u/s. 54EC Income Tax Act [Act]. In the appeal filed, assessee has raised grounds of appeal running to three pages which included submissions, case law and sub-clause which should not be part of grounds of appeal. Accordingly, assessee was asked to file concise grounds. In response, assessee filed the following ground(s) of appeal.
"On the facts and in the circumstances of the case and in law, 'Hon'ble Commissioner of Income-tax (Appeals)' erred in allowing appellant's claim of exemption u/s. 54EC on pro-rata basis instead of actual investment in 54EC bonds".
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Mrs. Jayshree Gowrishankar
2. Briefly stated, assessee sold a residential flat for a
consideration amounting to Rs. 94,50,000/-. The capital gains
earned thereon was to the tune of Rs. 63,35,796/-. There is no dispute on the sale consideration or the capital gains earned. Assessee invested an amount of Rs. 50 Lakhs in bonds for claiming deduction u/s. 54EC. Assessee claimed pro-rata deduction in the computation of income. Later Assessee claimed the entire amount of deduction whereas the AO restricted the same invoking the provisions of Section 54EC(1)(b), thereby restricting the same proportionately to Rs. 33,52,273/-, the net capital gains was accordingly worked out to Rs. 38,18,854/- as against Rs. 13,35,796/- offered by assessee. It was the contention before the CIT(A) that assessee has wrongly claimed lesser amount but was entitled for deduction of entire Rs. 50 Lakhs u/s. 54EC. It was further submitted that without prejudice to the above claim, AO has given deduction on the net consideration as against the capital gains, which is to be considered as per the provisions. Ld.CIT(A) however, did not agree with assessee's contention and held as under:
"(iv) Deduction u/s. 54EC: The appellant had invested Rs. 50 lakhs u/s. 54EC which is less than the amount of capital gains arising to her, therefore, clause (b) of Sec 54(1) of the Act is applicable in this case. The proviso to this section limits investment at Rs. 50 lakhs for claiming eligibility for deduction u/s. 54EC. In view of this, the claim made and given on pro-rata basis was correct and calls for no interference. But, since the quantum of exemption u/s. 54EC is proportionate to quantum of capital gain, the Assessing Officer is directed to recompute the exemption with reference to quantum of capital gains determined after giving effect to this appeal order".
Assessee is aggrieved.
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3. Ld. Counsel reiterated the submissions made before the Ld.CIT(A) and relied on the decision of the Hon'ble Bombay High Court in the case of Pruthvi Brokers & Shareholders Pvt. Ltd., [349 ITR 336] and also Delhi High Court decision in the case of CIT Vs. Rose Services Apartment India Pvt. Ltd., [326 ITR 100] for the proposition that assessee can raise new plea on legal submissions and it should be allowed. He further relied on the Circular No. 14 dt. 11-04-1995 that AO should allow the relief to which assessee is entitled. With reference to the deduction u/s. 54EC of entire Rs. 50 Lakhs, it was submitted that due to amendment to the provision the deduction was restricted by the law and entire amount was not allowed to be invested and accordingly, the amount invested in the special bonds was to be allowed as a deduction u/s. 54EC. Thus, assessee is eligible for deduction of entire investment of Rs. 50 Lakhs and not pro-rata.
4. Ld.DR however, relied on the provisions of the Act and supported the order of CIT(A).
5. I have considered the rival contentions and perused the provisions of law. As far as deduction u/s. 54EC is concerned, this provision came on Statute w.e.f. 01-04-2001 substituting the earlier provisions of 54EA and 54EB by Finance Act, 2000. When the provision was originally introduced, the first proviso to Section 54EC introduced by the Finance Act, 2007 w.e.f. 01-04-2007 was not there. Then, assessees were eligible to invest in the long term specified assets to the extent of capital gains to claim deduction. If the cost of the 'long term specified asset invested' is not less than the capital gain arising from the transfer of original asset, the :- 4 -: I.T.A. No. 144/Hyd/2016 Mrs. Jayshree Gowrishankar whole of such capital gain shall not be charged u/s. 45 as per Section 54EC(1)(a). In case the cost of long term specified asset is less than the capital gain arising from transfer of the original asset, then proportionate deduction was eligible as provided under Clause-(b) of sub-section (1) to Section 54EC. At that time, assessees were free to invest any amount in long term specified asset and no restriction was placed by the Statute. However, by the amendment to the provision w.e.f. 01-04-2007, the first proviso was introduced which is as under:
'Provided that the investment made on or after first day of April, 2007 in the long term specified asset by an assessee during any financial year does not exceed Rs. 50 Lakhs'.
5.1. The intention of Legislature can be understood from the notification issued with reference to such amendment. Circular No. 3 dt. 12-03-2008 [299 ITR (St.) 8] explains the amendment as under:
"28...........
28.1..........
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".
:- 5 -: I.T.A. No. 144/Hyd/2016 Mrs. Jayshree Gowrishankar 5.2. Thus, since the legislation has restricted the investment to avail exemption u/s. 54EC made on or after 1st April, 2007, the maximum investment that is permitted is Rs. 50 Lakhs and the entire amount is eligible for deduction. In fact Clause (a) and Clause (b) of sub-section (1) gets qualified by the proviso which allows investment in Long Term Capital Gain only upto Rs. 50 Lakhs and this cannot be further qualified by Clause-a and Clause-b. Since assessee in this case has invested the amount of Rs. 50 Lakhs, the entire amount is eligible for deduction. Since the proviso is inserted after Clause (a) and Clause (b), I am of the opinion that restriction of clause (b) does not apply to the investment that was restricted by the proviso. In this case, capital gain being more than the amount invested of Rs. 50 Lakhs, I am of the opinion that by virtue of proviso to Section 54EC(1), assessee is eligible for deduction of the entire amount, as supported by the Board Circular and also the notifications issued in this regard. Assessee's grounds are accordingly allowed and AO is directed to allow the deduction to the extent of Rs. 50 Lakhs u/s. 54EC.
6. In the result, appeal of assessee is allowed.
Order pronounced in the open court on 12th April, 2017 Sd/-
(B. RAMAKOTAIAH)
ACCOUNTANT MEMBER
Hyderabad, Dated 12th April, 2017
TNMM
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Mrs. Jayshree Gowrishankar
Copy to :
1. Mrs. Jayshree Gowrishankar, Plot No. 8, Radhika Colony, Secunderabad.
2. The Assistant Commissioner of Income Tax, Circle-10(1), Hyderabad.
3. Commissioner of Income Tax(Appeals)-6, Hyderabad.
4. The Pr. Commissioner of Income Tax-6, Hyderabad.
5. D.R. ITAT, Hyderabad.
6. Guard File.