Kirankumar Popatlal Shah Vs ITO (ITAT Pune)
The Pune Bench of the Income Tax Appellate Tribunal (ITAT) allowed the appeals filed by three co-owners, including Kirankumar Popatlal Shah, concerning the deduction available under Section 54EC of the Income-tax Act for Assessment Year 2009-10. The common issue was whether an assessee could claim a deduction of ₹1 crore by investing ₹50 lakh each in specified bonds during two different financial years, provided both investments were made within six months from the date of transfer of the capital asset.
The assessees, who were co-owners of a property sold for ₹3.51 crore, had each invested ₹50 lakh in REC bonds during Financial Year 2008-09 and another ₹50 lakh during Financial Year 2009-10. They accordingly claimed a deduction of ₹1 crore under Section 54EC. The Assessing Officer restricted the deduction to ₹50 lakh on the ground that the transfer took place in Financial Year 2008-09 and allowing ₹1 crore would defeat the object of the provision. The CIT(A) affirmed the restriction by following the Jaipur Bench decision in ACIT v. Raj Kumar Jain & Sons (HUF).
Before the Tribunal, the assessees relied upon several Tribunal decisions holding that where the six-month investment period extended into the next financial year, investments of ₹50 lakh in each financial year qualified for deduction under Section 54EC. They also relied upon the Supreme Court decision in CIT v. Vegetable Products Ltd. to contend that where two interpretations were possible, the one favourable to the assessee should be adopted.
