INCOME TAX ACT, 1961

Section 54EC

Capital gains - Exemption under section 54EC - Investment made in REC Bonds - Limit of Rs. 50 lakhs --Applicability

Assessee sold a plot as long-term capital gains and claimed deduction under section 54EC. Assessment was completed under section 143(3) and in the said assessment order, the claim of deduction under section 54EC was restricted to Rs. 50 lakh instead of Rs. 1 crore claimed by assessee. AO held that assessee was required to invest Rs. 50 lakh in REC Bonds in any financial year. AO also relied on the amendments made to section 54EC vide Finance Act, 2014 with effect from 1-4-2015. CIT(A) confirmed the view of AO in restricting claim of deduction under section 54EC to Rs. 50 lakhs. Held: As per provisions of section 54EC(1) and its first proviso, it is clear that time limit for investment is six months from the date of transfer and even if such investment falls under two financial years, benefit claimed by assessee cannot be denied. Amendment in Finance (No. 2) Act, 2014 relates to assessment year 2015-2016 and the same applies prospectively for and from assessment year 2015-2016. Since assessee had invested Rs. 1 crore in two different financial years and within six months from the date of transfer of capital assets, limit of Rs. 50 lakh is per financial year. Hence, assessee was eligible for deduction of Rs. 1 crore under section 54EC.

Relied:ITO v. Umadevi Malavalli [ITA No. 1718/Bang/2016--Order, dated 28-7-2017], CIT v. C. Jaichander (2015) 370 ITR 579 (Mad-HC) : 2014 TaxPub(DT) 4189 (Mad-HC), Vivek Jairazbhoy v. DyIT [ITA No. 236/Bang/2012--Order, dated 14-12-2012] : 2012 TaxPub(DT) 3445 (Bang-Trib) and ITO v. Smt. Bala R. Venkitachalam 71 Taxmann.com 219 (Pune).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2013-2014

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