|DATE:||(Date of pronouncement)|
|DATE:||March 6, 2012 (Date of publication)|
|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.