S. 54EC investment within 6 months is the investment for that financial year in which transfer has taken place. Hence, subsequent investment is to be considered as part of the investment of financial year in which transfer has taken place.
Assessee sold a property on 13-12-2007 and disclosed capital gain – Assessee invested said capital gain amounting to Rs. 1 crore in specified capital gain bond (i.e., Rs. 50 lakhs on 31-3-2008 + Rs. 50 lakhs on 10-6-2008) and claimed exemption under section 54EC – Assessing Officer by relying upon proviso to section 54EC held that assessee having made a claim of Rs. 1 crore, exceeded investment limit prescribed in proviso and, accordingly, restricted deduction to Rs. 50,00,000 – On appeal, Commissioner (Appeals) held that investment of Rs. 50,00,000 each had been made during two financial years, i.e., financial years 2007-08 and 2008-09, and in either of two cases, investment was made within time-limit of six months from date of transfer and, therefore, assessee was entitled to deduction of Rs. 1,00,00,000 under section 54EC.
As per Section 54EC, the profits or gains arising from the transfer of a capital asset is to be dealt with as per Section 54EC, in case the assessee has invested the whole or any part of the capital gain in the long term capital specified asset. Thus deduction is eligible to the investment. The proviso to Section 54EC provides that an investment made on or after the first date of April, 2007 in the long term specified asset by an assessee during any financial year does not exceed Rs. 50.00 lacs. Hence, the investment should not exceed Rs. 50.00 lacs. The proviso was introduced by the Finance Bill, 2007. In the memo explaining the provision of finance bill, 2007, it has been mentioned as under:-
”This amendment will take effect from 1st April, 2007
It is also proposed to amend the said Section 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 u/s 54EC on or after 1st day of April, 2007 will not exceed fifty lakh rupees in a financial year”;
It is true that Tribunal under law has no authority to decide the ultra virus provisions. However, whole construing the provision, one can definitely look into the facts as to whether the interpretation placed by the Tribunal is fairly applicable. The ld. DR during the course of proceedings before us has fairly contended that the interpretation which the ld. AR wants to place on the proviso to Section 54EC will enable the assessee to claim exemption of around Rs. 1.00 crore. In case, the transfer of assets has taken place from Ist Oct. to 31st March because the assessee will be able to invest Rs. 50.00 lacs in a financial year in which the transfer has taken place and Rs. 50.00 lacs in subsequent financial year. However, the assessee’s who have earned the capital gain on transfer of assets from Ist April to 30th Sept. will be able to have deduction only of Rs. 50.00 lacs. We therefore, feel that assessee in the instant case is entitled to exemption of Rs. 50.00 lacs u/s 54EC and it is not the case where two interpretations of Section 54EC are possible. The earlier notification of the Govt. clearly suggested that the assessee’s are entitled to the extent of Rs. 50.00 lacs u/s 54EC of the Act. Investment within 6 months is the investment for that financial year in which transfer has taken place. Hence, subsequent investment is to be considered as part of the investment of financial year in which transfer has taken place. We therefore, hold that the ld. CIT(A) was not justified in allowing deduction to the assessee to the extent of Rs. 1.00 crore u/s 54EC of the Act. We therefore, uphold the order of the AO.
Whether as per section 54EC investment within 6 months is investment for that particular financial year in which transfer has taken place and said period of six months would not include some part of subsequent financial year – Held, yes
Whether in view of above only investment of 50 Rs. lakhs made on 31-3-2008 fell within time-limit of six months from date of transfer, i.e., 13-12-2007 for financial year 2007-08 – Held, yes
Whether, therefore, Commissioner (Appeals) was not justified in allowing deduction to assessee to extent of Rs. 1 crore under section 54EC – Held, yes [In favour of revenue]