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5. The assessee filed Appeal against the order of Assessment, before CIT (Appeals). The Assessee contended that since the entire sale consideration of Rs.25 lakhs was invested in the specified bond, the assessee must get full exemption from capital gain, irrespective of the computation of the deemed sale consideration under section 50C of the Act. CIT Appeals allowed the assessee's Appeal, upon which the revenue filed Appeal before the Tribunal. The Tribunal by the impugned judgment allowed the revenue's Appeal. The tribunal was of the opinion that for the purpose of exemption under section 54EC of the Act, deeming fiction contained in section 50C of the Act cannot be ignored. The assessee could claim exemption only in relation to the investment made in the specified bond and not qua the entire capital gain.

6. Learned Counsel for the Appellant raised following contentions;

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(i) Taking through the provisions contained in Chapter IV of the Act it was contended that the deeming fiction contained in section 50C of the Act, would have no applicability while computing the exemption as provided in section 54EC of the Act. He contended that section 45 which is a charging provision, is made subject to various exemption provisions, including (though not so stated in the section) section 54EC of the Act.

12. We may refer to section 54EC which is an exemption of provision. Sub-Section (1) of section 54EC provides that where the capital gain arising from the transfer of a long-term capital asset being land or plot or both and the assessee has, at any time within a period of six months after the date of such transfer, invested the whole or part of the capital gains in specified asset, the capital gain shall be dealt with in accordance with clause (a) 15 / 17 01-ITXA-981-16.odt and (b) of sub-section (1). As per clause (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. As per clause (b) if the cost of the long-term specified asset is less than the capital gain arising from the transfer of the original asset, the Assessee would receive proportionate exemption from payment of capital gain. Further proviso of sub-section (1) of section 54EC limits the investment that an assessee can make in any specified asset to Rs.50 lakhs. In other words, therefore clauses (a) and (b) of sub-section (1) of section 54EC would always have limit of Rs.50 lakhs specified in the further proviso for investment in the specified asset.

13. We do not find any conflict or any incongruent consequences of applying the provisions of section 50C for the purpose of computation of capital gain tax after claiming exemption under section 54EC of the Act. The deeming fiction under section 50C of the Act, must be given its full effect and 16 / 17 01-ITXA-981-16.odt the Court should not allow to boggle the mind while giving full effect to such fiction. We are not opposing the proposition canvassed by the Counsel of the Assessee that deeming fiction must be applied in relation to the situation for which it is created. However, while giving full effect to the deeming fiction contained under section 50C of the Act for the purpose of computation of the capital gain under section 48, for which section 50C is specifically enacted, the automatic fallout thereof would be that the computation of the assessee's capital gain and consequently the computation of exemption under section 54EC, shall have to be worked out on the basis of substituted deemed sale consideration of transfer of capital asset in terms of section 50C of the Act.