Sunday, April 21, 2013

Sec 54 EC - 50L x 2, or 1 ?

An update
June 14

 Section 54/54F – Amount paid towards booking is to be treated towards ‘construction’


of invest proceeds from sale of property strictly within 180 days from date of sale to get exemption under Section 54EC

Nov 10
 Sec. 54EC exemptions allowable despite deeming fiction of sec. 50 treating capital gains as short-term ones

5) Exemption provided under section 54EC couldn’t be denied to the assessee due to deeming fiction created under section 50. Thus, the assessee couldn’t be charged to capital gains when short-term gains of long-term capital assets were invested in the areas specified under the law – CIT V. ADITYA MEDISALES LTD (2013) 38 244 (Gujarat)

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[2013] 38 244 (Gujarat)[02-09-2013]
Commissioner of Income-tax-I vs. Aditya Medisales Ltd.

Bombay High Court in the case of CIT v. ACE Builders (P.) Ltd. [2006] 281 ITR 210/[2005] 144 Taxman 855 (Bom)
Gauhati High Court in the case of CIT v. Assam Petroleum Industries (P.) Ltd. [2003] 262 ITR 587/131 Taxman 699

10th July

Section 54EC benefit to be worked out before setting off long-term capital losses under section 70(3)
For taking benefit under Section 54EC, it is not necessary that one should first apply Section 70(3) and thereafter, the assessee could invest the capital gain arising from the long-term capital asset to any specified bond under Section 54EC
Commissioner of Income-tax, Circle - XIV v. Vijay M. Mahtaney [2013] 35 228 (Madras)
18th June

Investment made by assessee in new residential property was not entitled to deduction under section 54F to extent same was made before the sale of existing property

SMT. NIMMAGADDA SRIDEVI V. DY.CIT [2013] 33 306 (Hyderabad - Trib.)
Xcerpts >

< 17. In view of the above discussion, it is clear that whatever investment made by the assessee in construction of new property within the period stipulated u/s. 54F after the sale of existing property the assessee is entitled for deduction u/s. 54F of the Act. In other words, the investment in new property made by the assessee is not entitled for deduction u/s. 54F of the Act to the extent made before the sale of property. Only that portion of investment made in the new property in accordance with section 54F of the Act is entitled for deduction u/s. 54F of the Act. Accordingly, we direct the assessee to furnish the details of investment made by the assessee in the construction of new residential building after the sale of existing property before the due date of filing of return of income u/s. 139(1) of the Act. The Assessing Officer shall consider that investment made by the assessee in the construction of new property after the sale of existing property in terms of section 54F of the Act. Accordingly, the issue is remitted back to the file of the Assessing Officer for the purpose of quantification of deduction u/s. 54F of the Act. >

Sec. 54EC exemption for investment of Rs. 50 Lach each in 2 Financial Years but within 6 M from transfer date

Ref. previous Blogs for cases in which contrary view has been taken. Also, for a discussion as to why the assessee is virtually on the proverbial 'horns of a dilemma' ; in that, unable to decide which view to follow, for  paying Advance tax. Of course, until such time the issue gts decided once for all either way, or the govt./CBDT chooses to and brings about clarity.


ACIT vs. Raj Kumar Jain & Sons (HUF) (ITAT Jaipur)

S. 54EC limit of Rs. 50L applies to the transaction & not financial year

ITAT , Jaipur has, unlike in the cases decided in asseessee's favour,
The scope of Proviso considered and decided:

3.1 The law is well settled that the role and scope of Proviso is not
to enlarge or to run contrary to what has been provided in the main
provision. The Proviso simply carves out a exception out of the main
provision however, it cannot create a new law which is foreign to main
3.2 A Proviso qualifies the generality of the main enactment by
providing an exception and taking out from the main provision, a portion,
which, but for the Proviso would be part of the main provision. A proviso,
must, therefore, be considered in relation to the principal matter to which
stands as a proviso. A proviso should not be read as if providing by way of
addition to the main provision which is foreign to the main provision
itself. Indeed, in some cases, a proviso may be an exception to the main
provision though it cannot be inconsistent with what is expressed in the
main provision and, if it is, it would be ultra vires the main provision and
liable to be struck down. As a general rule, in construing an enactment
containing a proviso, it is proper to construe the provision together without
making either of them redundant or otiose.


<> April 21, 2013 at 9:50 PM
The point of issue in the reported case is centered on the interpretation / construction of the Proviso to sub-section (1) of section 54 EC. The Chennai Bench has, following the Ahmedabad Bench, taken a view in favour of the assessee. In doing so, the contrary view of the Jaipur Bench, however, as is seen, not been cited by the Revenue, hence not gone into. Be that as it may, it calls for a special noting that, unlike in the other two cases , the Jaipur Bench, in forming its opinion, has called to aid, rightly so, the relevant principles of interpretation of a ‘Proviso’, as enunciated by case law (see paragraphs 3.1 and 3.2 of its order), and accordingly decided the issue. In one’s individual opinion, the Jaipur Bench has to be regarded to have taken the right view; and by  any sound reasoning and logic, the better view.
Recommend for an independent study, the expert commentary in Palkhivala’s text book (latest Edition) and case law cited, on the two relevant topics of , -”Principles of Beneficial Interpretation” and “Internal Aids to Construction – Provisos”.

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