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| DATE: | March 6, 2012 (Date of publication) |
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| Click here to download the judgement (raj_kumar_jain_54EC_limit.pdf) |
S. 54EC limit of Rs. 50L applies to the transaction & not financial year
In AY 2008-08, the assessee sold property for Rs. 2.47 crores and disclosed capital gain of Rs. 1.14 crores. To overcome the restriction in the Proviso to s. 54EC that the investment made in the specified asset “during any financial year” should not exceed Rs. 50 lakhs, the assessee, within the prescribed period of 6 months, invested Rs. 50 lakhs on 31.03.2008 (FY 2007-08) & 10.06.2008 (FY 2008-09) and claimed a deduction of Rs. 1 crore. The AO rejected the claim though the CIT (A) allowed it. On appeal by the department, HELD reversing the CIT (A):
The object of the proviso to s. 54EC is to provide a ceiling of Rs. 50 lakhs on investment by an assessee in the long term specified assets. If the assessee’s interpretation is accepted then, because the transfer of assets has taken place from 1st Oct to 31st March, the assessee is able to invest Rs. 50 lakhs in the financial year in which the transfer took place and Rs. 50 lakhs in the subsequent financial year. However, assessees who have made a transfer of assets from 1st April to 30th Sept will not be entitled to do so. Accordingly, the investment has to be linked to the financial year in which transfer has taken place and the claim for deduction cannot exceed Rs. 50 lakhs.
Attention is invited to the since reported Order of the Chennai Branch of the ITAT. That has turned out to be in favour of the taxpayer. The taxpayers are now put in an unenviable situation; that is, virtually on the proverbial ‘horns of a dilemma’, in that, unable to decide which view to follow, for, inter alia, paying Advance tax. Of course, until such time the issue gets finally and conclusively settled once for all, either way, It is now up to the govt. /CBDT to bring about clarity, sooner the better; as otherwise the taxpayers would have to meet the fate of “falling between two stools”.
For a glimpse of the contradicting views taken by different Benches of the ITAT, comment posted elsewhere is shared below:
The point of issue in the reported case is centred on the interpretation / construction of the Proviso to sub-section (1) of section 54 EC. The Chennai Bench has, following the Ahmedabad Bench, has taken a view in favour of the assessee. In doing so, the contrary view of the Jaipur Bench, however, as is seen, not been cited by the Revenue, hence not gone into. Be that as it may, it calls for a special noting that, unlike in the other two cases , the Jaipur Bench, in forming its opinion, has called to aid, rightly so, the relevant principles of interpretation of a ‘Proviso’, as enunciated by case law (see paragraphs 3.1 and 3.2 of its order), and accordingly decided the issue. In one’s individual opinion, the Jaipur Bench has to be regarded to have taken the right view; and in any event, the better view.
Recommend for an independent study, the expert commentary in Palkhivala’s text book and case law cited, on the two relevant topics of , -”Principles of Beneficial Interpretation” and “Internal Aids to Construction – Provisos”.
An Error: First line, read: Chennai Bench (not Branch) !