CLAIM BENEFIT OF EXEMPTION U/S 54EC IF THE INVESTING PERIOD FALLS WITH IN TWO FINANCIAL YEARS

Exemption under section 54EC be taken for Rs 1 crore investment of Rs. 50,00,000 each made in two Financial year  as the exemption is Financial year wise  and not to the transaction 

The proviso to Section 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 30^th September of the Financial year he gets an opportunity to make an investment of Rs.50  lakhs each in two financial years and is able to claim exemption up to Rs. 1 crore under section

54EC. The Language of the proviso is clear and unambiguous and so the assessee is entitled to get exemption up to Rs. 1 crore in this case [Aspi Ginwala v ACIT (2012) 20 Taxmann.com 75(Ahd)(Trib)].

However,  as per a contrary Judgement  by the Jaipur Tribunal  it was held that the object of the proviso to section 54EC is to provide a ceiling of Rs. 50 lakhs on Investment by an assessee in the Long term specified assets. If the assessee’s interpretation is accepted then, because the transfer of assets has taken place from 1^st October, to 31^st March, the assessee is able to invest Rs. 50 lakhs in the financial year in which the transfer  took place and Rs. 50 lakhs in the subsequent financial year . However, Assessee  who have made a transfer of assets from 1^st April to 30^thSeptember will not be entitled to do so. Accordingly the investment has to be linked to the Financial year in which transfer has taken place and the claim for deduction cannot exceed Rs 50 lakhs[ACITv Raj Kumar Jain & Sons (HUF) (2012) 19 Taxmann.com27 (Jaipur)(Trib)].

But in a recent judgment by ITAT Bangalore in the case of Shri Vivek Jairajbhoy vs. Dy. Commissioner of Income tax has held in the Judgement pronounced on 14/12/2012 vide ITA no. 236/Bang/2012 that investment of Rs. 50 lakhs  u/s 54EC is applicable to Financial year and not to the transaction that means if the period of investment is spread to two financial years then investment of more than Rs. 50 lakhs can be made in two such financial years in respect of the same transaction. Reliance in this case has been made on the Judgement of Aspi Ginwala v ACIT (2012) 20 Taxmann.com 75(Ahd)(Trib).