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Sh. Rohit Sawhney, Z-48, Okhala Indl. Area, Phase-II, New Delhi Vs. ACIT, Circle-28(1), New Delhi
November, 29th 2019

Referred Sections:
Section 54EC of the Income-tax Act, 1961
Sub-section (1)
Section 45

Referred Cases / Judgments:
ACIT Vs. Shri Raj Kumar Jain & Sons (HUF),
Taxmann.com 466 (Mad.) vs. C. Jai Cander and reliance has also been placed on the decision of Pune Bench of TAT in the case ITO,
Nasik vs. Bala R Venkitachalam
ACIT, Circle- 2, Ajmer vs. Sh. Rajkumar Jain & Sons(HUF) (2012)
ACIT Vs. Akshay Sobti (2019) 106 taxmann.com 60 (Del-Trib.)
Tulika Devi Dayal Vs. JCIT (2018) 89 taxmann.com 442 (Mum. –trib)
ACIT Vs. Shri Ajay Kaila (ITA No. 6907/Del/2015, Dated September,2017)
ACIT Vs. Akshay Sobti (supra).

 

            IN THE INCOME TAX APPELLATE TRIBUNAL
                  DELHI BENCH: `F', NEW DELHI

           BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER
                              AND
             SHRI O.P. KANT, ACCOUNTANT MEMBER

                          ITA No.724/Del/2017
                        Assessment Year: 2013-14

Sh. Rohit Sawhney,                     Vs. ACIT,
Z-48, Okhala Indl. Area,                   Circle-28(1),
Phase-II, New Delhi                        New Delhi
PAN :AMNPS4870R
          (Appellant)                                 (Respondent)

               Appellant by         Ms. Gargi Sethee, Adv.
                                    Shri Arta Trana Panda, Adv.
               Respondent by        Shri Surender Pal, Sr.DR

                             Date of hearing                  11.09.2019
                             Date of pronouncement            29.11.2019

                                   ORDER

PER O.P. KANT, AM:

         This appeal by the assessee is directed against order dated
29.12.2016 passed by the learned Commissioner of Income Tax
(Appeals)-10, New Delhi, [in short `learned CIT(A)'] for assessment
year 2013-14 raising following grounds:


    1.     That on the facts and circumstances of the case and in law, the
           learned Commissioner of Income Tax (Appeals) has erred in up-
           holding the order of assessing authority wherein she had made the
           addition of Rs.50 lakhs by restricting the exemption u/s 54EC up to
           Rs.50 lakhs out of total claim in respect of Rs.1 Crore on investment
           in Bonds made within six months of sale of property in two different
           financial years amounting to Rs.50 lakhs in each financial year.
                                       2
                                                      ITA No.724/Del/2017



     2.   That the petitioner assessee craves the leave to this Hon'ble Court to
          add, deleted and modify any or all the clauses of Grounds of appeal.


2.    Briefly stated facts of the case are that the assessee filed
return of income on 21.09.2013, declaring total income of
Rs.1,51,77,310/-. The case of the assessee was selected for
scrutiny and statutory notices were issued and complied with.
The Assessing Officer observed that during the year under
consideration, the assessee has sold a property and worked out
long term capital gain to the tune of Rs.1,93,16,309/-. Against
the long term capital gain computed, the assessee claimed
deduction of Rs. 1 crores under section 54EC of the Income-tax
Act, 1961 (in short `the Act'). In support of the claim, the assessee
submitted that he invested in REC Bonds for Rs.50 lakhs each in
the month of January, 2013 and in the month of April, 2013.
According to the Assessing Officer, in terms of provisions of
Section 54EC of the Act, the assessee was entitled for the
investment of Rs.50 lakhs made in the financial year 2012-13
only. According to the Assessing Officer, the assessee has abused
provisions of the law, which in clear terms limit the investments
under Section 54EC up to Rs. 50 lakhs only. The Assessing
Officer held that reply of the assessee was not tenable and the
intention of the legislation was clear that investment made on or
after the 1st Day of April, 2017 in the long term specified assets by
an assessee during the financial year does not exceed Rs. 50
lakhs. It was further observed by the Assessing Officer that the
contention of the assessee cannot be held to be acceptable, since
the provisions does not provide two different treatments to two
                                     3
                                                    ITA No.724/Del/2017



different assessees and one who sells the property between April
to September of the financial year and claims exemption u/s
54EC, is put at a disadvantage since the exemption available to
him would be only Rs.50,00,000/- and secondly, the assessee
who sells the property between October and March and claims
exemption u/s 54EC, the investment can be made of Rs.50 lakhs
in the current financial year and Rs. 50 lakhs in the subsequent
financial year. With the above discussion, the Assessing Officer
held that the grant of exemption under Section 54EC to the
extent of Rs. 1 crore will vitiate the original intention of the
legislature leading to discrimination amongst tax payers on the
same issue. The Assessing Officer also relied on the proviso to
sub-section (1) of Section 54EC and observed that intention of the
legislature in inserting the said proviso to restrict the exemption
to Rs.50 lakhs in the financial year so that the benefit can be
given to many small investors. The Assessing Officer also relied
on the various judicial pronouncements on issue of interpretation
of statute. Further, relying on the decision of the Tribunal, Jaipur
Bench, in the case of ACIT Vs. Shri Raj Kumar Jain & Sons
(HUF), he restricted the deduction to the amount of Rs.50 lakhs
only. On further appeal, the learned CIT(A) also upheld the
finding of the Assessing Officer observing as under:


    "4.1    I have carefully considered the written submissions of Ld. AR
    and assessment order passed by the Assessing Officer, the only
    issue involved is allowance of claim of exemption u/s. 54EC, which
    has been restricted by the Assessing Officer to the extent of Rs.50
    lacs as per proviso to above section, which provides that the
    investment made on or after the first day of April, 2007 in the long
    term specified assets by an assessee during any financial year does
    not exceed Rs.50 lacs On the other hand, appellant is claiming
                                   4
                                                   ITA No.724/Del/2017








deduction u/s, 54EC to the extent of Rs 1 crore relying on the
judicial pronouncement of the Hon'ble Madras High Ccjh in the case
of CIT, Chennai (2015) 53 Taxmann.com 466 (Mad.) vs. C. Jai
Cander and reliance has also been placed on the decision of Pune
Bench of TAT in the case ITO, Ward - 2(4), Nasik vs. Bala R
Venkitachalam and claimed that since investment of Rs.50 lacs each
has been made in two different financial .ears, the quantum of
eligible exemption is Rs.1 crore.

4.1.1 In the above factual matrix of the case, it is pertinent to
reproduce the provisions of section 54EC and proviso appended to
the above section:

    "(1) Where the capital gain arises from the transfer of a long-
    term capital asset (the capital asset so transferred being
    hereafter in this section referred to as the original asset) and
    the assessee has, at any time within a period of six months
    after the date of such transfer, invested the whole or any part
    of capital gains in the long-term specified asset, the capital gain
    shall be dealt with in accordance with the following provisions
    of this section, that is to say,-

    (a) if the cost of the long-term specified asset is not less than the
    capital gain arising from the transfer of the original asset, the
    whole of such capital gain shall not be charged under section
    4A:

    (b) if the cost of the long-term specified asset is less than the
    capital gain arising from the transfer of the original asset, so
    much of the capital gain as bears to the whole of the capital
    gain the same proportion as the cost of acquisition of the long-
    term specified asset bears to the whole of the capital gain, shall
    not be charged under section 45:

    Provided that the investment made on or after the 1st day of
    April, 2007 in the long-term specified asset by an assessee
    during any financial year does not exceed fifty lakh rupees:

    [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.]"

4.1.2 From the proviso to section 54EC(1), it is evident that for
claiming exemption under this section, the investment made in any
financial year cannot exceed Rs.50 lacs. The assessment order on
the issue passed by the AO is crystal clear wherein it has clearly
                                  5
                                                  ITA No.724/Del/2017



been established that the provisions of the Act cannot be interpreted
to suit one's own purpose and it is well settled principle of
interpretation that expression used in a statue should be construed
according to the plain natural meaning of its language unless it is
otherwise defined in the statute. Considering the facts of the case, it
is evident that by interpreting the provisions of above section in a
different way suitable to appellant's purpose, appellant claimed the
deduction by spreading over the investment in the REC Bonds in two
different financial years and exemptions under this section have
been claimed at Rs.1 crore on the ground that two financial years
are involved for the purpose of investment. However the fact cannot
be denied that in the present case, appellant accrued long term
capital gain of Rs.1,93,16,309/- out of which Rs.1 crore has been
claimed exempt u/s 54EC of the Act. The capital gain has been
accrued to the appellant on sale of property named M/s JMD Regent
Square situated in village Sarhaul on Mehrauli-Gurgaon Road, Dist.
Gurgaon, Haryana for an amount of Rs.4,10,00,000/- on
10.01.2013. From this fact, it is clear that the date of transfer of
original asset is 10.01.2013 and as per provisions of Section 54EC
assessee was eligible to invest the capital gain arises on the above
long term capital asset within a period of six months after the date of
such transfer. But misinterpreting the above provisions of the Act,
assessee claimed deduction by spreading the claim in two periods
i.e. in the month of January, 2013 and in the month of April, 2013.

4 1.3 As per plain reading of provisions of Section 54EC, it is evident
that capital gain shall be exempt u/s 54EC only to the extent it is
invested in the long term specified asset within a period of six
months from the date of such transfer. As per the above provisions of
the Act, appellant cannot be allowed the benefit of exemption under
this section in respect of investment made of Rs.50 lakh each on the
ground that such investment falls in two different financial years.
Simple reading of provisions of above section makes it clear that
there is no provision for making investment in two different financial
years. From the provisions of above section, it can easily be held
that the total limit of investment u/s 54EC for exemption of capital
gain in respect of transfer of capital asset cannot exceed Rs.50 lakh.

4.1.4 I am also inclined to agree with the observation of the AO that-
law cannot differently treat two persons for the same cause. It is a
fact that if the appellant's claim is accepted to treat the investment
in two different financial years for the purpose of allowance of
exemption u/s 54EC, it will vitiate the original intent of legislature
Provisions of Section 54EC cannot be interpreted in such a manner
by spreading the claim of capital gain in two different financial years
as this interpretation will put an assessee at disadvantage who sells
his property between April to September to whom deduction u/s
54EC is available at Rs.50,00 000/- and an assessee who sells his
                                       6
                                                       ITA No.724/Del/2017



     property between October to March can claim exemption of Rs.50
     lakh each in the current financial year and in the subsequent
     financial year.

     4.1.5 Further, I am also in agreement with the observation of the AO
     that as per Explanatory Notes on the provisions of the Finance Act
     2007, Government had decided to impose a ceiling on the quantum
     of investment that could be made in such bonds to ensure equitable
     distribution of benefits amongst prospective investors. Hence, AO
     has rightly held that the provision of limiting the exemption u/s
     54EC by the Finance Act 2007 is inconsonance with the intention of
     the law.

     4.1.6 Apart from the above, the intention of the law in restricting
     the claim of exemption u/s 54EC to the extent of Rs.50 lakh also
     established from the fact that second proviso has been appended to
     above section w.e.f. 01.04.2015 wherein it is provided as under:

          " 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".

     4,1.7 Hence, it is clearly established that it was never the intention
     of the law to allow exemption u/s 54EC in excess of Rs.50 lakh.
     Therefore,.! am of the considered view that AO relying on the
     decision in the case ACIT, Circle- 2, Ajmer vs. Sh. Rajkumar Jain &
     Sons(HUF) (2012) 19taxmann.com 27 has rightly held that as per
     Section 54EC investment within six months is investment for that
     particular financial year in which transfer has taken place and said
     period of six months would not include some part of subsequent
     financial year.

     4 1.8 Thus keeping in view, the facts and circumstances of the case
     as narrated by the AO duly supported with various judicial
     pronouncements of the Hon'ble Apex Court on the interpretation of
     law, I am of the considered view that assessee is eligible for claim of
     exemption as per provisions of Section 54EC(1) only to the extent of
     Rs.50 lakh and investment of Rs.50 lakh claimed in subsequent
     financial year does not qualify for the above exemption. Hence, the
     addition of Rs.50 lakh made by the AO is upheld and ground of
     appeal taken by the appellant is dismissed.


3.    Before us, the learned counsel for the assessee filed a paper-
book containing pages 1 to 93 and submitted that identical
                                          7
                                                          ITA No.724/Del/2017



issued of investment in specified bonds of Rs.50 lakhs in the
month of March of the financial year and Rs. 50 lakhs in the
month of April of the next financial year has been allowed as
deduction in following cases by the Tribunal:
     1.     ACIT Vs. Akshay Sobti (2019) 106 taxmann.com 60 (Del-Trib.)
     2.     Tulika Devi Dayal Vs. JCIT (2018) 89 taxmann.com 442 (Mum. rib)
     3.     ACIT Vs Shri Ajay Kaila (ITA No. 6907/Del/2015, Dated September,
            2017)

4.    On the other hand, the learned DR rlied on the order of the
lower authorities.
5.    In the instant case, the issue is whether the assessee is
entitled for deduction of Rs. 1 crore as invested by the assessee in
the month of January, 2013 and Rs. 50 lakhs in the month of
April, 2013 as against the deduction of Rs.50 lakhs restricted by
the Assessing Officer. For ready reference, the relevant provisions
of Section 54EC of the Act is reproduced as under:


     " Capital gain not to be charged on investment in certain bonds.
     54EC. (1) Where the capital gain arises from the transfer of a long-term
     capital asset 61[, being land or building or both,] (the capital asset so
     transferred being hereafter in this section referred to as the original asset)
     and the assessee has, at any time within a period of six months after the
     date of such transfer, invested the whole or any part of capital gains in
     the long-term specified asset, the capital gain shall be dealt with in
     accordance with the following provisions of this section, that is to say,--
       (a) if the cost of the long-term specified asset is not less than the capital
           gain arising from the transfer of the original asset, the whole of such
           capital gain shall not be charged under section 45;
          (b) if the cost of the long-term specified asset is less than the capital
              gain arising from the transfer of the original asset, so much of the
              capital gain as bears to the whole of the capital gain the same
              proportion as the cost of acquisition of the long-term specified asset
              bears to the whole of the capital gain, shall not be charged
              under section 45 :
                                       8
                                                       ITA No.724/Del/2017



     Provided that the investment made on or after the 1st day of April, 2007
     in the long-term specified asset by an assessee during any financial year
     does not exceed fifty lakh rupees :
     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."







6.    Thus, in terms of Section 54EC investment made in
specified assets at any time within six months from the transfer
of the original asset is entitled for deduction but the proviso to
the section has restricted the investment during any financial
year up to Rs. 50 lakhs only. Identical issue in dispute has been
decided by the Tribunal in the case of ACIT Vs. Akshay Sobti
(supra). The relevant portion is reproduced as under:


     "6.1 As regards ground no. 2 which relates to disallowance of
     deduction u/s.54EC to the extent of Rs.50,00,000/- is concerned,
     we find that the AO had restricted the deduction claimed u/s.54EC
     to Rs. 50,00,000/- as against the deduction claimed by the
     appellant amounting to Rs. 1,00,00,000/- following the decision of
     the Honorable Income tax Appellate Tribunal, Jaipur Bench in the
     case of Shri Raj Kumar Jain & Sons IIUF {supra). However, the
     assessee submitted that the Assessing Officer has strangely and
     obliquely stopped short of making observation/mention of the very
     recent Judgment of Honorable High Court of Madras dated
     December 16, 2014 in case of CIT v. Coromandal Industries Ltd.
     [2015] 56 taxmann.com 209/230 Taxman 548/370 ITR 586 (Mag.)
     placed before him for the reason best known to him only. This is to
     be understood that the restriction of Rs. 50,00,000/- in a financial
     year was placed for evenly distributing the invest into the capital
     gains bonds on continued basis throughout the year. Therefore, the
     alternative was put into operation were in the capital gain bonds are
     available on tap throughout the year without stopping but the limit of
     investment has been capped to Rs. 50,00,000/- per assessee per
     financial year. This has resulted in even distribution of benefit to
     public at large. Had the intention of the legislation was cap the total
     investment to Rs. 50,00,000/-, the amendment in statute would
     have prescribed the limit on deduction allowed under the section
     54EC and not on investment allowed under section 54EC. Therefore,
                                        9
                                                        ITA No.724/Del/2017



     the interpretation of ITAT, Jaipur Bench in Shri Raj Kumar Jain &
     Sons IIUF {supra), is misplaced, in total disregard to juagment of the
     higher authority (i.e. Honorable Madras High Court) which has
     elaborately discussed the issue involved, ambiguity of law and the
     provisions of latest amendments made to section 54EC by the
     Finance Act 2014 including the Notes on clauses - Finance Bill 2014
     and Memorandum : Explaining the provisions in the Finance (No. 2)
     Bill, 2014; placing restriction on "lent to Rs. 50 lakhs with effect from
     01.04.2015 by inserting a second proviso, assessing officer has
     totally ignored his reply in as much as reliance placed on the
     judgment of the Honorable Madras High Court. The Honorable High
     of Madras has held as under:-

          'The legislature has chosen to remove the ambiguity in the
          proviso to Section 54EC(1) of Act by inserting a second proviso
          with effect from 1.4.2015. The memorandum explaining the
          provisions in the Finance (No.2) Bill, 2014 also states that the
          same will applicable from 1.4.2015 in relation to assessment
          year 2015-16 and the subsequent years. The intention of the
          legislature probably appears to be that this amendment should
          be for the assessment year 2015-2016 to avoid unwanted
          litigations of the previous years. Even otherwise, we do not
          wish to read anything more into the first proviso to Section
          54EC (1) of the Act, as it stood in relation to the assessees.

          The Honorable High court has further observed and underlined
          as under;

          "In any event, 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
          appellant cannot be denied. It would have made a difference, if
          the restriction on the investment in bonds to Rs.50,00,000/- is
          incorporated in Section 54EC(1) of the Act itself. However, the
          ambiguity has been removed by the legislature with effect from
          1.4.2015 in relation to the assessment year 2015-16 and the
          subsequent years.

     For the foregoing reasons, we find no infirmity in the orders passed
     by the Tribunal warranting interference by this Court. The
     substantial questions of law are answered against the Revenue and
     these appeals are dismissed."


7.    Similarly, in the case of Tulika Devi Dayal (supra) and Shri
Ajay Kaila (supra), the Tribunal has allowed the deduction up to
                                  10
                                               ITA No.724/Del/2017



Rs. 50 Lakhs in two financial years. Respectively following the
finding of the Tribunal, we set aside the finding of the learned
CIT(A) on the issue in dispute and direct the Assessing Officer to
allow the deduction under Section 54EC of the Act for Rs. 1
crores as claimed by the assessee. The grounds of appeal of the
assessee are according allowed.
8.    In the result, the appeal of the assessee is allowed.
Order is pronounced in the open court on 29th November, 2019.



            Sd/-                                   Sd/-
       (H.S. SIDHU)                            (O.P. KANT)
   JUDICIAL MEMBER                         ACCOUNTANT MEMBER
Dated: 29th November, 2019.
RK/-(D.T.D.)
Copy forwarded to:
1.     Appellant
2.     Respondent
3.     CIT
4.     CIT(A)
5.     DR


                                             Asst. Registrar, ITAT, New Delhi

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