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„The key issue that arises for consideration is whether the first proviso to section 54EC(1) of the Act would restrict the benefit of investment of capital gains in bonds to that financial year during which the property was sold or it applies to any financial year during the six months period. For better understanding of the issue, it would be apposite to refer to section 54EC(1) of the Act, which reads as under:
On a plain reading of the above said provision, we are of the view 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 April 1, 2007, in the long-term specified asset by an assessee during any financial year does not exceed fifty lakhs rupees. In other words, 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 Rs. 50,00,000 in any financial year, it would have the benefit of section 54EC(1) of the Act.
"Notes on Clauses--Finance (No. 2) Bill, 2014:
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 whole or part of capital gains in the long-term specified asset, the proportionate capital gains so invested in the long-term specified asset out of total capital gains shall not be charged to tax. The proviso to the said sub-section provides that the investment made in the long-term specified asset during any financial year shall not exceed fifty lakhs rupees.
This amendment will take effect from 1st April, 2015 and will, accordingly, apply in relation to assessment year 2015-16 and subsequent assessment years."
The Legislature has chosen to remove the ambiguity in the proviso to section 54EC(1) of the Act by inserting a second proviso with effect from April 1, 2015. The Memorandum Explaining the Provisions in the Finance (No. 2) Bill, 2014, also states that the same will be applicable from April 1, 2015, in relation to assessment year 2015-16 and the subsequent years. The intention of the Legislature probably appears to be that this amendment should be for the assessment year 2015-2016 to avoid unwanted litigations of the previous years. Even otherwise, we do not wish to read anything more into the first proviso to section 54EC(1) of the Act, as it stood in relation to the assessees.