Section 54EC ₹50 Lakh Limit Applied Per Financial Year: ITAT Bangalore

Ramesh V. Shetty Vs ACIT (ITAT Bangalore)

₹50 Lakh Section 54EC Limit Applied Per Financial Year Before AY 2015-16: ITAT Allows ₹71 Lakh Invested Across Two Financial Years

Summary: The Bangalore Bench of the Income Tax Appellate Tribunal has held that, prior to the insertion of the second proviso to Section 54EC(1), the investment limit of ₹50 lakh applied separately to each financial year. Therefore, where investments falling within the statutory period of six months were made in two different financial years, the exemption could exceed ₹50 lakh.

The Tribunal accordingly allowed the assessee’s entire investment of ₹71 lakh in NHAI bonds for Assessment Year 2013-14.

Facts of the case

The assessee was an individual who filed his return of income for Assessment Year 2013-14 declaring total income of ₹1,07,42,030.

During the relevant year, the assessee sold a residential property and disclosed long-term capital gains of ₹70,90,317. To claim exemption under Section 54EC, the assessee invested the capital gains in specified bonds issued by the National Highways Authority of India.

The investments were made in two tranches:

• ₹50 lakh was invested in March 2013; and
• ₹21 lakh was invested in July 2013.

The NHAI allotment letters reflected allotment of the bonds on 31 March 2013 and 31 July 2013, respectively. The corresponding bonds were credited to the assessee’s demat account subsequently.