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Started by vsaiyar, June 24, 2014, 11:29:17 AM

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The many of the ITAT benches has held that Limit of Investment in Section 54EC ia applicable for each financial year.  Can any one tell me whether the Department has filed appeals against the decision of the ITAT in following cases:

ShriVivekJairazbhoy vs. Dy Commissioner of Income Tax (International Taxation)(ITAT Bangalore bench ITA no. 236/Bang/2012)
2012] 20 taxmann.com 75 (Ahd.) IN THE ITAT AHMEDABAD BENCH 'C'Aspi Ginwala, Shree Ram Engg. & Mfg. Industries v. Assistant Commissioner of Income tax, Circle-5, Baroda
ITAT CHENNAI BENCH 'D' Smt. Sriram Indubal versus Income-tax Officer, Business Ward IT Appeal NO. 1950 (MDS.) OF 2012
ITAT PANAJI BENCH Income-tax Officer, Ward - 2, Margao, Goa v.Ms. Rania Faleiro IT Appeal No. 9 (PANAJI) of 2013
Vivek Jairazbhoy vs. DCIT (ITAT Bangalore)


It must have filed as tax effect in all these cases is higher than 10 lacs( 50 X 20%). But no contrary judgement of any high court has been noticed except contrary judgement of Jaipur Bench.


. Amendment Proposed
Section 54EC is proposed to be amended by the Finance Bill 2014 by insertion of another proviso in sub-section (1), after the first proviso (now existing) with effect from the 1st day of April, 2015, namely:
"Provided further that the investment made by an assessee in the long-term specified asset, from capital gains arising from transfer of one or more original assets, during the financial year in which the original asset or assets are transferred and in the subsequent financial year does not exceed fifty lakh rupees."
2. Why was this amendment thought of?
This amendment is proposed to be brought in because in the following cases the ITAT benches have held that the assessee can invest up to Rs. 1 Crore in capital gain bonds under section 54EC which is spread over a period of two financial years at Rs. 50 lakhs in each financial year. However, such investment should be made within a period of 6 months from the date of transfer:
  i) Aspi Ginwala, Shree Ram Engg. & Mfg. Industries v. Asst. CIT [2012] 20 taxmann.com 75/52 SOT 16 (Ahd.)
  ii) Vivek Jairazbhoy v. Dy. CIT [ITA No.236/Bang/2012 vide their order dated 14.12.2012]
iii) Smt. Sriram Indubal v. ITO [2013] 32 taxmann.com 118 (Chennai)
iv) ITO v. Ms. Rania Faleiro [2013] 33 taxmann.com 611 (Panaji - Trib.)
CBDT vide its Circular No. 3/2008, dated 12-3-2008 explains the (existing) proviso introduced by the Finance Act, 2007 as under:
"28.2 The quantum of investible bonds issued by NHAI and REC being limited, it was felt necessary to ensure that the benefit was available to all the investors. For this purpose, it was necessary to ensure that the limited number of bonds available for subscription is also available for small investors. Therefore, with a view to ensure equitable distribution of benefits amongst prospective investors, the Government decided to impose a ceiling on the quantum of investment that could be made in such bonds. Accordingly, the said section has been amended 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 of exemption under section 54EC, on or after April 1, 2007 will not exceed fifty lakh rupees in a financial year."
It was sought to be argued from the language used in the aforementioned circular that the cap of Rs. 50 Lakhs in the proviso to section 54EC(1) was only an investment cap and not a deduction cap. In order to get over such argument which appears to be reasonable and the above stated decisions the proposed amendment restricting the claim to Rs. 50 lakhs is brought through necessary amendment to sub-section (1) of section 54EC by adding one more proviso by restricting the total deduction to just Rs. 50 lakhs. The proposed amendment has been carefully worded in such way to cover even cases of transfer of capital asset in the second half of the financial year whereby the assessee gets time till the beginning of the next financial year to make investment under section 54EC of the Act.
3. One Redeeming Feature
However one redeeming feature is that the assessees who resorted to this kind of tax planning by disposing of capital asset in the second half of financial year 2013-14 are still not affected by this proposed amendment as they can invest additional sum in the current financial year (2014-15) provided such investment is made within 6 months from the date of transfer as the proposed amendment would take effect only from the Assessment Year 2015-16 corresponding to the financial year 2014-15. The assessees who would have resorted to tax planning as stated above are liable for capital gains, subject to available exemptions, for the assessment year 2014-15 and as a matter of policy/principle none of the proposed amendments has been given retrospective effect.


Jaitleyji in regard to retrospective law made it clear that no additional tax liability in regard to earlier years will be created by retrospective amendment.  In regard to pending cases in the courts he said let the courts decide the issue.  In regard to future by amending the provisions he has settled the issue saying that only one is entitled to get deduction of Rs.50 lacs only.  In view of this clarification the effective date of amendment cannot be taken as an indication of endorsing the existing court decisions.


2014 (11) TMI 54 - MADRAS HIGH COURT

Commissioner of Income Tax Versus C. Jaichander

Benefit of investment on capital gains u/s 54EC(1) - Whether the first proviso to Section 54EC(1) would restrict the benefit of investment of capital gains in bonds to that financial year during which the property was sold or it applies to any financial year during the six months period – Held that:- Section 54EC(1) of the Act restricts the time limit for the period of investment after the property has been sold to six months - There is no cap on the investment to be made in bonds. The first proviso to Section 54EC(1) of the Act specifies the quantum of investment and it states that the investment so made on or after 1.4.2007 in the long-term specified asset by an assessee during any financial year does not exceed fifty lakh rupees - from a reading of Section 54EC(1) and the first proviso, it is clear that the time limit for investment is six months from the date of transfer and even if such investment falls under two financial years, the benefit claimed by the assessee cannot be denied - It would have made a difference, if the restriction on the investment in bonds to ₹ 50,00,000/- is incorporated in Section 54EC(1) of the Act itself – thus, the order of the Tribunal is upheld – Decided against revenue.


since this provision i.e. 54EC being a provision which intends to give some benefit / relief to the assessee from the imposition of tax, we feel that the same should be interpreted liberally. The various Tribunals have been very positive on this aspect so far.

Hon'ble Madras HC decision is really welcome, but the same has not been reported widely anywhere except TMI

CA Deepak Gadgil