|DATE:||(Date of pronouncement)|
|DATE:||April 4, 2012 (Date of publication)|
|Click here to download the judgement (aspi_ginwala_54EC_50L_limit_6M_time_period.pdf)|
S. 54EC limit of Rs. 50L does not apply to the transaction but financial year. Delay in investing within 6 M owing to non-availability of bonds to be excused
The assessee sold property on 22.10.2007 and computed long-term capital gains. The s. 54EC investment was required to be made within 6 months i.e. on or before 21.04.2008. The assessee invested Rs. 50 lakhs in REC bonds on 31.12.2007 (FY 2007-08, within the 6 M time limit) and Rs. 50 lakhs in NHAI bonds on 26.5.2008 (FY 2008-08, beyond the 6 M time limit) and claimed a deduction of Rs. 1 crore. The assessee claimed that no eligible scheme was available for subscription from 1.4.2008 to 28.5.2008 and that he applied in the NHAI bonds as soon as it opened and that he was prevented by sufficient cause from investing within the time period of 6 months. The AO & CIT (A) rejected the claim for exemption of Rs. 50 lakhs in respect of the NHAI bonds on the ground that (i) it exceeded the monetary limit of Rs. 50 lakhs prescribed in s. 54EC and (ii) it was made beyond the time limit of 6 months. On appeal to the Tribunal, HELD allowing the appeal:
(i) The Proviso to s. 54EC provides that the investment made in a long term specified asset by an assessee “during any financial year” should not exceed Rs. 50 lakhs. It is clear that if the assessee transfers his capital asset after 30th September of the financial year he gets an opportunity to make an investment of Rs.50 lakhs each in two different financial years and is able to claim exemption upto Rs.1 crore u/s 54EC. The language of the proviso is clear and unambiguous and so the assessee is entitled to get exemption upto Rs.1 crore in this case;
(ii) Though the time limit of 6 months for making the investment u/s 54EC expired on 21.4.2008, no bonds were available for subscription between 1.4.2008 to 28.5.2008. The investment was made as soon as the subscription opened on 26.5.2008. The assessee was accordingly prevented by sufficient cause which was beyond his control in making investment in these Bonds within the time prescribed. Exemption should be granted in cases where there is a delay in making investment due to non-availability of the bonds (Ram Agarwal 81 ITD 163 (Mum) followed)
With due respect to the Hon’ble Tribunal, it is felt that the Tribunal has not dealt with the reasons given by the CIT(A) who has aptly quoted the decision of High Court of Kerala in the case of 252 ITR 513 (Ker) C Dhanapalan in his finding that it cannot be the intention of the legislature to favour the assessees transferring asset after the 30th September because it will not only be discriminatory, it will be illogical also is duly echoed in ACIT vs. Raj Kumar Jain & Sons (HUF) (ITAT Jaipur)
@ KEB Rangrajan
When the language of the law is unambiguous, then there is no need to go further and read the meaning. When the words of a statute are clear, plain and unambiguous, ie. when they are reasonably susceptible to only one meaning, the courts are bound to give effect to that meaning irrespective of the consequences.
Further also look at the SET Satellite case where the ITAT has mentioned that “Interpretation is to be made at res magis valeat quam pereat i.e. making it effective rather than making it reduntant. No law can be interpretated in a manner so as to make a clause meaningless.”
Thus I would humbly submit that the ITAT has correctly followed the law at least while answering the first question. I am not so sure of the second question so I shall not comment on that.
CA. Bhavesh Savla