Last week we had discussed the Jaipur Tribunal decision of not allowing the additional Rs. 50 lakh investment in Sec. 54EC bonds. By way of a quick background, exemption from long- term capital gain tax is available if the gain is invested within
a period of six months from sale in Sec. 54EC bonds. Now, in cases where the sale transaction falls between October and March of any year, the six month period, in effect, overlaps two financial years – and this in turn affords the taxpayer the opportunity to double the investible amount from Rs. 50 lakh to Rs. 1 crore! When the issue came up before the Jaipur Tribunal, it ruled in favour of the revenue by disallowing the additional Rs. 50 lakh investment.
Now, right on the back of the above judgment has come an Ahmedabad Tribunal ruling where the taxpayer not only invested Rs. 1 cr in the bonds but also exceeded the six- month time limit. The Bench, in the case of Aspi Ginwala v Assistant Commissioner of income tax, Circle- 5, Baroda has upheld both these actions on the part of the assessee! The brief facts of the case were that the appellant and his brother had sold a house property on 22.10.07 for Rs. 6.21 cr. The appellant had made investment of Rs. 50 lakh on 31.12.07 in REC Bonds and an additional Rs. 50 lakh on 26.5.2008 in NHAI Bonds and claimed exemption of Rs. 1 cr u/ s 54EC of the Act. The first investment ( on 31.12.07) in REC Bonds was within the 6- month time limit. However, the investment in NHAI Bonds done on 26.5.08 was beyond the expiry of the period of 6- months from date of sale. The delay was on account of the fact that bonds u/ s 54 EC werenalt39t available for subscription during 1.4.2008 to 26.5.2008.
The Assessing Officer did not allow the second investment since it was not made within the time limit prescribed by law.
To this, the assessees submission was that in fact there was no delay in making the investment on his part. Since no eligible scheme was available for subscription he was prevented by sufficient cause in not complying with the time limit prescribed in Sec. 54EC. On the one hand, the Act provides for exemption if investment is made within a specified period, however on the other side the specified assets were not available for subscription within that specified period. Hence the investment made immediately on the reopening of the scheme, should be considered within the time limit prescribed and the exemption ought to be granted.
The appellant maintained that the Board in similar circumstances in the past had taken a broad view and has directed that the period of investment needs to be extended.
A case in point was a press note F. NO. 142/ 09/ 2006 dated June 30, 2006 issued by CBDT extending the time limit. The relevant para of the said note is reproduced It has been brought to the notice of the CBDT that some persons could not avail of the benefit under section 54EC of the IT Act on account of non- availability of the capital gain bonds. Further, for some other persons the effective time available for making the investment is less than six months because of non- availability of these bonds.
With a view to removing the hardship caused to the taxpayers, the CBDT, in exercise of powers conferred by Sec 119 ( 2) ( c), hereby orders that the limitation of six months for making the investment under section 54EC of capital gains arising from the transfer of a long- term capital assets, is extended.
Since, the facts and circumstances of the appellants matter were similar, the benefit of benevolent circular/ notification/ press note, needs to be extended to all such cases where assessees are prevented to make investment in the specified assets within specified period for non- availability of bonds for subscription during such period.
The Tribunal agreed and ruled in favour of the assessee. Since the language of the law is clear and unambiguous, there was no hesitation in upholding the assessees claim of the Rs. 1 cr exemption. The Tribunal cited a Supreme Court view in the case of IPCA LAB
