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[2012] 52 SOT 16 (AHD.)/[2012] 146 TTJ 385 (AHD.)/[2012] 20 taxmann.com 75 (AHD.)

IT : Where investment in eligible bonds was temporarily closed and by time it was
reopen time limit of six months was expired, investment made on date of reopening
was eligible for exemption under section 54EC

■■■

[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*
D.K. TYAGI, JUDICIAL MEMBER AND A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER
IT APPEAL NO. 3226 (AHD.) OF 2011
[ASSESSMENT YEAR 2008-09]
MARCH 30, 2012

Section 54EC of the Income-tax Act, 1961 - Capital gains - Not to be charged on investment
in certain bonds - Assessment year 2008-09 - Assessee sold a house property on 22-10-
2007 and made investment in NHAI Bonds on 26-5-2008 - Assessing Officer disallowed
exemption on ground that investment was made beyond 6 months time limit - It was found
that eligible investments were closed for subscription from 31-3-2008 and were reopened
only on 26-5-2008 - On said date investment was made - Whether since assessee was
prevented by sufficient cause which was beyond his control in making investment in these
bonds within time prescribed, investment made by assessee would be eligible for
exemption under section 54EC - Held, yes [In favour of assessee]
Circulars and Notifications : Circular No. 142/9/2006-TPL, dated 30-6-2006
FACTS
The assessee and his brother sold a property on 22-10-2007 for Rs. 6.21 crores. The assessee and his brother
had 50 per cent share in this property. The assessee made investment of Rs. 50 lakhs on 31-12-2008 in REC
Bonds and Rs. 50 lakhs on 26-5-2008 in NHAI Bonds and claimed exemption of Rs. 1 crore under section
54EC. The investment in REC Bonds was allowed by the Assessing Officer as it was within the time limit of
six months prescribed in section 54EC, while the investment in NHAI Bonds was not allowed as such
investment was made beyond 6 months time limit prescribed in section 54EC. On appeal, the assessee
contended that the eligible investments were closed for subscription from 31-3-2008 and were reopened only
on 26-5-2008; that as during period from 1-4-2008 to 26-5-2008 subscription in eligible investment was
closed, the investment made by the assessee on 26-5-2008 i.e. 1st day of the reopening of the subscription of
eligible investment should be treated in time. The Commissioner (Appeals) held that assessee, by depositing
Rs. 50 lakhs in the specified assets in the next financial year was trying to claim a deduction of Rs. 1 crore, a
benefit which was not intended by the legislature; that since he had not been able to invest in the specified
assets within six months as provided in section 54EC, he was not entitled to any relaxation in the time period
of six months because he had already deposited Rs. 50 lakhs in the specified assets in the year in which the
capital asset had been transferred.
On appeal:

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HELD
The dispute which is to be decided in this case is whether as per the provisions of section 54EC the assessee
is entitled for exemption of Rs. 1 crore as six months period for investment in eligible investment involves two
financial years. If the answer to this question is 'yes', whether investment made by the assessee in NHAI
Bonds on 26-5-2008 beyond six months period is eligible for exemption in view of the fact that no
subscription for eligible investment was available to the assessee from 1-4-2008 to 26-5-2008. [Para 7]
It is clear from proviso to section 54EC that where assessee transfers his capital asset after 30th September
of the financial year he gets an opportunity to make an investment of Rs. 50 lakhs each in two different
financial years and is able to claim exemption up to Rs. 1 crore under section 54EC.
Since the wording of the proviso to section 54EC is clear, the benefits which are available to the assessee
cannot be denied. In view of above, assessee in instant case, was entitled for exemption of Rs. 1 crore as six
months' period for investment in eligible investments involved was two financial years. [Para 8]
Now, coming to the second aspect of the matter, whether investment of Rs. 50 lakhs made in NHAI Bonds on
26-5-2008 can be considered to be made within six months period as per the proviso to section 54EC, it is
found that the assessee was to make investment in such bonds between 1-4-2008 to 21-4-2008. There is no
dispute about the fact that subscription of eligible bonds was closed during this period till 26-5-2008 and on
the 1st day of the reopening of the subscription, the assessee made this investment. Under the circumstances,
the assessee was prevented by sufficient cause which was beyond his control in making investment in these
bonds within the time prescribed. Further various judicial authorities have taken a view that exemption
should be granted in such cases where there is a delay in making investment due to non-availability of the
bonds and have held that it is a reasonable cause and the exemption should be granted. [Para 9]
Thus, it is held that the investments made by the assessee on 26-5-2008 beyond six months was eligible for
exemption in view of the fact that no subscription for eligible investment was available to the assessee from
1-4-2008 to 26-5-2008. [Para 10]
CASES REFERRED TO
IPCA Laboratory Ltd. v. Dy. CIT [2004] 266 ITR 521 / 135 Taxman 594 (SC) (para 8) and Ram Agarwal v.
Jt. CIT [2002] 81 ITD 163 (Mum.) (para 9).
S.N. Soparkar for the Appellant. S.P. Talati for the Respondent.
ORDER
D.K. Tyagi, Judicial Member - These two appeals have been by two different assessees against two
separate orders 09-11-2011 and 11-11-2011 passed by the learned CIT(A)-V, Baroda for Assessment Year
2008-09.
2. Since issues involved in these two appeals are common, the appeals were heard together and are being
disposed of by this consolidated order. The common grounds which are identical in both the appeals, read as
under:-
[1] The learned C.I.T. (Appeals) has erred in law and on facts in above case in confirming the order of
learned A.O. of assessing the Long Term Capital Gain at Rs. 1,80,32,450/- as against Rs. 1,30,32,450/-
returned by the appellant.
[2] The appellant most humbly submits that on the facts and the circumstances of his case & in law, the
addition/disallowance made by learned A.O. is erroneous and prays that Hon'ble Tribunal be pleased to
hold so now and delete the same.
[3] The learned CIT (Appeals) has erred in law and on the facts of the appellant's case in confirming the
order of the Ld. AO of allowing deduction u/s 54EC of the Act at Rs. 50,00,000/-, instead of Rs.
1,00,00,000/- claimed by the appellant on the erroneous plea that the investment of Rs. 50,00,000/-
made by the appellant is beyond the time limit prescribed u/s 54EC of the Act.
[4] The appellant most humbly submits that on the facts and the circumstances of his case & in law, the
disallowances made by learned A.O. is erroneous and prays that Hon'ble be pleased to hold so now and
grant the deduction as claimed.
[5] The appellant craves leave to add, to alter and/or amend the grounds of appeal herein above taken.

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3. Ground nos.1 and 2 are inter-connected and therefore both are decided together as under. Since the facts
involved in both the grounds are similar, we are considering the facts in the case of Shri Aspi Ginwala in
ITA No.3226Ahd/2011. The facts of the case which are clear from the submissions of the assessee before the
learned CIT(A) which read as under:-
"The appellant has preferred an appeal before your honour against order u/s 143 (3) of the Act passed by
the Asst. Commissioner of Income Tax Circle-5, Baroda (hereinafter referred to as "Ld. A.O.") for the
above-mentioned Assessment Year. In connection with the said appeal the appellant craves liberty to
place the following submissions for your honour's kind consideration, with a request to consider the
same, while finalizing the same.
The facts leading to the grounds of appeals are as under:
1.1 The appellant is an individual having "Income from House Property", Capital Gain, Other Sources
and share of profit from firms".
1.2 The appellant had filed his return of income for the Asst. Year on 11.11.2008 disclosing total
income of 1,06,89,010/-.
1.3 The appellant and his brother namely Rustom Ginwala had sold a house property on 22/10/2007 for
Rs. 6.21 Crore. In the said property the appellant and his brother had 50% share. The appellant had
made investment of Rs. 50 Lacs, on 31/12/2007 in REC Bonds and Rs. 50 Lacs on 26/5/2008 in NHAI
Bonds and claimed exemption of Rs. 100 lacs u/s 54EC of the Act. The investment in REC Bonds was
within time limit of 6 months prescribed in Section 54EC of the Act while investment in NHAI has been
made only on 26/5/2008 (allotment date 31/5/2008) as the subscription of neither of the scheme opened
during 1/4/2008 to 26/5/2008. The appellant had made very same day the subscription of first scheme
got opened.
1.4 The return of income included the "Income from Capital Gain (Long Term)" of Rs. 1,30,32,450/-
earned on sale of house property (after claiming exemption u/s 54 EC of Rs. 100 Lies for investment
made in specified bonds).
1.5 The assessment has been completed u/s. 143 (3) of I.T. Act, 1961 by the Ld. A.O., vide order dated
15/12/2010. In the assessment order the Ld. A.O. has taxed Long Term Gain at Rs. 1,80,32,450/-
instead of 1,30,32,450/- and has disallowed the exemption of x 50.00 Lacs for investment made in
NHAI Bonds on 26/31-5-2008, on the plea that the exemption for such investment is not available as the
investment has been made is beyond 6 months' time limit prescribed in Section 54EC of the Act.
2.1 Both ground of appeals relates taxing Income from Capital Gain at 1,80,32,450/- as against Rs.
1,30,32,450/- returned by the appellant and disallowing exemption of Rs. 50 Lacs claimed u/s 54EC of
the Act.
The appellant objects to the action of the Ld. A.O. on the following grounds:
2.2 The appellant most humbly submits that that the investment has been made by him in the prescribed
securities in due compliance of Section 54EC of the Act and the exemption is rightly claimed and is
available.
2.3 As far as delay in making investment is concern, the appellant most humbly submit that there is no
delay in making investment on his part. Since no eligible scheme notified in the said section was
available for subscription between 1/4/2008 to 28/5/2008 he was prevented by sufficient cause in not
complying with the time limit prescribed in section 54EC. The appellant further submit that the
appellant took all the step to comply with the time limit incl. kept the money ready, instructed the his
broker to subscribe the first available scheme as soon as the scheme starts subscription for new financial
year, requested the issuer etc.
2.4 As stated above as the appellant had sold property on 22/10/2007, he was required to make
investment within 6 months i.e. on or before 21/04/2008, in order to avail exemption u/s 54EC of Act.
However both the eligible investments were closed for subscription from 31st March 2008 and were
reopened only on 26th May 2008 for NHAI Bonds and 28th May 2008 for REC Bonds. The appellant is
attaching herewith proof that no bonds were available during 1/4/ 2008 to 26/28 May 2008 a period
which falls within the period of 6 months in Annexure- 1.
2.5 As far as the observation of the Ld. A.O. made in Para 6.5 of the Asst. Order as under:

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"In this regard response was received from NHAI which provide that the assessee had made the
application on 28th May 2008 and the date of closing of subscription was 31/03/2009 and the period of
issue was 1 year, date on which subscription re-opened was 11th May 2009 and the commencement date
of allotment after re-opening was 3rd May 2009. Therefore, the whole discussion of time period as well
as the time limit of investment should be read in consonance so that the benefits of these provisions
should reach every one and should not be beneficial to one and detrimental to others."
The appellant most humbly submit that this observation is totally out of context as the Ld. A.O. should
have inquired whether the subscription to any of the scheme was opened between 1.4.2008 to 26.5.2008
as claimed by the appellant or not? On the contrary the appellant has furnished evidences (refer
Annexure -1) that subscription to both scheme stopped on 31/3/2008 and reopened only on 26/28th May
2008 and the same is not contradicted by the Ld. A.O as the same is confirmed by REC in reply of the
notice u/s 133(6) of the Act. The copy of the entire correspondence in response to notice u/s 133(6) of
the Act is enclosed herewith for your honour's ready reference in Annexgre-2. The appellant further
submits that every year the subscription stops on 31st March and it reopens in somewhere in May next
year. This is was also case in next year and the subscription reopened only on 11/5/2009 (as observed by
the Ld. A.O. in the assessment order).
2.6 The appellant further submits that since neither of the specified bonds were available for
subscription from 1st April 2008 to 26th/28th May 2008, the investment made immediately on the
reopening of the scheme, should be considered within the time limit prescribed, as there was no delay
on the part of the appellant, rather it was impossible for the appellant to invest after 1/4/2008 till last
date of specified period i.e. 21/4/2008 as both the eligible schemes were closed for the subscription.
The appellant further submits that he had kept the fund ready and as soon as the subscription of one of
the scheme opened, he has subscribed to it. The subscription for NHAI Bonds opened on 26/5/2008 and
the application was made on same day i.e. on 26/05/2008 itself and cheque got cleared on 28/05/08 (the
allotment is made on 31/5/2008). The copy of bank statement along with counterfoil of the investment
made in enclosed in Annexure- 3 for your honour's ready reference. The appellant further submits that
he has made investment on same day the subscription of one of the scheme got opened and didn't wait
till the subscription of other scheme to get open.
2.7 The appellant further submits that this is a case of real hardship to the tax payer. One side the act
provides for exemption if investment is made in the specified assets within a specified period, however
on the other side the specified assets were not available for subscription within that specified period. In
a situation any person is helpless.
In such situation, the appellant most humbly submit that he is eligible for exemption for the investment
made beyond time limit, as he was prevented by sufficient cause which was beyond his control. The
appellant most humbly submit that the Hon'ble C.B.D.T. in past in similar circumstances has taken a
broad view and has directed that the period of investment needs to be extended. The Hon'ble C.B.D.T.
had issued a press note F.NO.142/09/2006 dated 30 June, 2006 extending the time limit. The relevant
Para of the said note is reproduced below for your ready reference:
"5. It has been brought to the notice of the Central Board of Direct Taxes that some persons could not
avail of the benefit under section 54EC of the Income Tax 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.
6. With a view to removing the hardship caused to the taxpayers, the Central Board Of Direct Taxes, in
exercise of powers conferred by clause (c) of sub section (2) of Sec. 119, 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 appellant's matter are same, the benefit of benevolent
circular/notification/press note, needs to be extended to all such cases where the assessee are prevented
to make investment in the specified assets within specified period for non-availability of bonds for
subscription during such period.
2.08 The appellant also submit that various judicial authorities have taken unanimous view that the
exemption should be granted in such cases where there is a delay in making investment due to non-

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availability of the bonds and have held that it is a reasonable cause and the exemption should be
granted. The citations' and the gist of the decisions are as under:
Cello Plast v. DCIT 2010 TIOL 60 ITAT (Mum)
In this case the Tribunal has held that it was an impossible task for the assessee to comply with the time
period laid down u/s 54EC. The delay in purchase due to non-availability of the bonds was held to be a
reasonable cause, and the assessee was held to be entitled to exemption u/s 54EC. The Tribunal has
followed the decision in case of Ram Agarwal v. JCIT 81 ITO 163 (Mum). In that case on similar facts,
it had been held by the Tribunal, that the assessee was entitled to claim deduction u/s 54EC. The
relevant paras from the said decisions are reproduced as under:
Cello Plast v. DCIT 2010 TIOL 60 IT AT (Mum)
"10. The Id. Counsel of the assessee reiterated its contentions raised before the lower authorities here
before us. It was further submitted that no bonds were available at the time of filing of the return. Even
upto 31.12.2006, the bonds were not available. The bonds were available only on 22.1.2007.
Immediately after five days i.e. 27.1.2007 the assessee applied for purchase of bonds and on 31.1.2007
the bonds were allotted to the assessee. Therefore, this was an impossible task to the assessee to buy the
bonds within the specified time as the bonds were not available. Reliance was placed on the decision of
the Tribunal reported in 81 ITD 163 . Attention of the Bench was drawn on paras 15 to 20 of the order
of the Tribunal where in similar circumstances, the claim of deduction u/s 54F was allowed. On the
other hand, the Id. DR placed reliance on the order of the CIT(A).
11. We have heard the rival submissions and consider them carefully. After taking into consideration all
the facts and material on record, we find that the assessee deserves to succeed in this ground also. There
is no dispute that assessee has sold its capital asset i.e. plant and machinery during the year under
consideration. For claiming exemption u/s 54EC, upto Rs. 50 lac has to be invested in the purchase of
specified bonds. The assessee approached the concerned authorities. However, the bonds were not
available. Various entities approached CBDT. Taking into consideration the hardship faced by the
various entities, the CBDT vide circular no. 142/9/2006 TPL dated 30.6.2006 extended the time for
purchasing the specified bonds upto 31.12.2006. The assessee approached the appropriate authorities to
buy the bonds; however they were not available. Therefore, it was an impossible task for the assessee to
comply with the conditions of the sec. 54EC. The assessee ultimately purchased FDs of Rs. 50 lacs with
a view to buy specified bonds whenever they are available. Letter was issued to the SBI while
purchasing FDs of Rs. 50 lacs that the bonds are not available in the market and therefore, FD for an
initial period of 90 days which may be extended further or may be redeemed prior to expiry date for
investing the same in bonds qualified u/s 54E &f the act. Copy of the letter dated 30.10.2006 is placed
at page 6 of the compilation. Copies of the FDs are placed at pages 7 & 8 of the compilation. Copies of
the letters issued by Rural Electricity Corpn. Ltd along with the copy of bond certificate is placed at
pages 9 of the compilation. In this allotment, it is clarified that the assessee applied for the purchase of
the bonds on 27.1.2007 and they are allotted on 31.1.2007. 500 bonds for a consideration of Rs. 50 lacs
were allotted. The bond certificates is also placed at page 10 of the compilation.
11.1 From these facts, it is clearly established that there was reasonable cause in not purchasing these
specified bonds within the specified time allowed as they were not available in the market, as soon as
the bonds were available in the market, the assessee immediately purchased the same. Therefore in our
considered view, under these circumstances, the assessee is entitled for the exemption u/s 54EC. "
Ram Agarwal v. Joint CIT 81 ITD 163 (Mum)
"In regard to claim of exemption under section 54F we may mention that it is found by the learned CIT
(A) that the bank was closed on 31-8-1995 on account of strike as certified by the officials of the
concerned bank. From the certification given by the bank officials, the assessee had approached the
bank officials with the cheque for the amount of deposit on 30-8-1995. The assessee remained unable to
obtain receipt on 31-8-1995 due to bank strike and the cheque was cleared on 1-9-1995. In this view of
the situation, it can well be said that the deposit of the assessee was in accordance with the provisions of
statute as on the last date i.e. the 31-8-1995, the deposit could not be made due to the reason which was
beyond the control of the assessee particularly in view that the efforts were made by the assessee a day
prior to last date to deposit the requisite amount in the bank to make him entitle for exemption under sec

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54F. As mentioned earlier, this position has also been accepted by the learned CIT(A). Therefore, we
direct the Assessing officer to allow the necessary exemption to the assessee.
Before parting we may observe that section 54F is a beneficial provision to encourage assessee to invest
in house properties. Keeping in mind the above object behind the insertion of section 54F and
considering the fact that the assessee was not at fault in not depositing the amount before 31-8-1995, we
hold that the deposit made on 1-9-1995 satisfies the condition laid down in section 54F of the Act."
The appellant also submit that there are no contrary decisions as of now to the best of his knowledge.
2.9 The appellant also submits that the assessee often comes across such type of situations; many a time
banks are closed or govt. office has a holiday on the due date of filing appeal/return/reply, payment of
tax etc. But, in all such cases, Section 10 of the General Clauses/Act, 1897 comes to the rescue. As per
said section if last day happens to be closed, next working day is the last date. The said section is
reproduced herewith for your ready reference.
"Sec. 10. Computation of time.- (1) Where, by any (Central Act) or regulation made after the
commencement of this Act, any act or proceeding is directed to allowed to be done or taken in any
Court or office on a certain day or within a prescribed period, then, if the Court or office is closed on
that day or that day or the last day of the prescribed period, the act or proceeding shall be considered as
done or taken in due time if it is done or taken on the next day afterwards on which the Court or office is
open.
Provided that nothing is this section shall apply to any act or proceeding to which the (Indian Limitation
Act, 1877 (15 of 1877), applies.
This section applies also to all (Central Acts) and Regulations made on or after the fourteenth day of
January, 1887."
This provision is applicable in the case of the appellant as he was prevented to make investment in the
specified assets within specified period due to non-availability of bonds for subscription during such
period.
2.10 In view of the above facts and circumstance and the direct decisions explaining the legal positions,
the appellant most humbly submit that the investment made by him is within the specified time and
hence the exemption is squarely available and have to request your honour to hold so now and quash the
disallowance made.
The appellant shall be grateful if the above submissions are considered favourably while disposing of
the above appeal. For which act of grace, I shall remain grateful."
4. The learned CIT(A) has dealt with the issues as under:-
"5.2 I have considered the facts of the case as well as the observation of the AO and the arguments
advanced by the AR. Before considering the arguments of the appellant, it will be worthwhile to go
through the provisions of section 54 EC of the I.T. Act. Provisions of section 54 EC are reproduced
hereunder: -
"54EC (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) so 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:
[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 rupee]".

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It is clear from the proviso above that it was the intention of the legislature that benefit under section 54
EC be restricted to Rs. 50 lakh for an assessee per (assessment) year. However, due to peculiar drafting
of the proviso a situation has arisen where assessees who transfer their capital asset after 30th
September of the financial year get an opportunity to make an investment of 50 lakh in two different
financial years and are able to claim an exemption up to Rs. 1 crore under section 54 EC. As provisions
of the Act have to be interpreted literally there is no option before the Department but to provide
deduction of Rs. 1 crore to some of the assessees while those transferring capital assets before 30th
September are deprived of this benefit. Clearly, it cannot be the intention of the legislature to favour the
assessees transferring asset after the 30th September because it will not only be discriminatory, it will be
illogical also. The appellant, by depositing Rs. 50 lakh in the specified assets in the next financial year is
trying to claim a deduction of Rs. 1 crore, a benefit which is not intended by the legislature. Since, she
has not been able to invest in the specified assets within six months as provided in section 54 EC, she is
not entitled to any relaxation in the time period of six months because she has already deposited Rs. 50
lakh in the specified assets in the year in which the capital asset has been transferred. The case laws
quoted by the appellant are of no help because facts in those cases were entirely different. In those cases
the appellants were prevented from taking benefit of express provisions of the Act and there was no case
of taking additional and unintended benefit.
It has been held by the honourable High Court of Kerala in the case of 252 ITR 513 (Ker) C Dhanapalan
that A concession cannot be claimed as a matter of right. Any scheme extending concession has to be
understood strictly in terms of the scheme only. It has referred to case of International Cotton
Corporation (P) Ltd 35 STC 1 (SC) which was rendered in context that concession for declared goods
should be extended to some other comparable goods. The SC found that the courts did not have
jurisdiction to direct a similar concessions to others, since that would be tantamount to legislation by the
court, while no court has such legislative power.
SC has consistently held that incentive provisions which confer concession, should be interpreted in a
liberal manner, so as to subserve the purpose for which they are intended e.g.
(i) 196 ITR 188(SC) - Bajaj Tempo Ltd.
(ii) 177 ITR 418(50), 177 ITR 431 (SC)
General rule is that the provisions relating to deductions, allowances and exemptions are expected to be
interpreted rigidly, incentive provisions are to be interpreted differently as they form an exception to the
rule.
It has been held by the honourable Supreme Court in the case of 204 ITR 412 (SC) Budharaja (N.C. )
and Co that "the principle of adopting a liberal interpretation which advances the purpose and object of
beneficent provisions cannot be carried to the extent of doing violence to the plain and simple language
used in the enactment. It would not be reasonable or permissible for the court to rewrite the section or
substitute words of its own for the actual words employed by the Legislature in the name of giving
effect to the supposed underlying object. After all, the underlying object of any provision has to be
gathered on a reasonable interpretation of the language employed by the Legislature".
Similarly, in the case of IPCA LAB 266 ITR 521 (SC) it has been held by Honourable Supreme Court
that "even though a liberal interpretation has to be given to such a provision the interpretation has to' be
as per the wording of the section. If the wording of the section is clear, then benefits which are not
available cannot be conferred by ignoring or misinterpreting words in the section".
Similarly in the case of 108 ITR 439 (SC) Alladi Kuppuswamy it has been held by the Hon'ble SC that
"it is true that a fiscal statute should be construed strictly so as to give every benefit of doubt to the
subject, but when the phraseology of a particular section of the statute takes within its sweep the
transaction which is taxable, it is not for the court to strain and stress the language of the section so as to
enable the taxpayer to escape the tax".
In view of the above position of the law, I'm of the opinion that the appellant is not entitled to any
relaxation in the time limit for making an additional investment of Rs. 50 lakh under section 54 EC of
the income tax act 1961 because it is not only against the provisions of section 54 EC it is also against
the spirit of provision inserted below sub section (1) of section 54 EC reproduced above. Order of the

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AO denying additional exemption of Rs. 50 lakh to the appellant is therefore confirmed."

5. Aggrieved by this order of the learned CIT(A), the assessee is in appeal before us. At the time of hearing,
the learned counsel of the assessee reiterated the submissions made before the learned CIT(A).
6. The learned DR, on the other hand, supported the orders of the AO and the learned CIT(A).
7. We have heard both the parties and perused the records and find that the assessee and his brother Shri
Rustom Ginwala sold a property on 22-10-2007 for Rs. 6.21 Crores. The assessee and his brother had 50%
share in this property. The assessee made investment of Rs. 50 lakhs on 31-12-2008 in REC Bonds and Rs.
50 lakhs on 26-05-2008 in NHAI Bonds and claimed exemption of Rs. 1 Crore u/s 54EC of the Act. The
investment in REC Bonds was allowed by the AO as it was within the time limit of six months prescribed in
section 54EC of the Act, while the investment in NHAI Bonds which was made only on 26-05-2008 was not
allowed as according to the lower authorities the assessee is only entitled for exemption u/s 54EC upto Rs.
50 lakhs only. The assessee's case, however, is that as per the proviso to section 54EC, investment made on
or after 1st April, 2007 in the Long Term Specified Asset by an assessee during any financial year should not
exceed Rs. 50 lakhs. The assessee's case is that since the property was sold on 22-10-2007 he could have
invested in eligible investment within six months i.e. on or before 21-04-2008 in order to avail exemption u/s
54EC of the Act. There is no dispute about Rs. 50 lakhs invested on 31-12-2007 in REC Bonds. The dispute
is only about further investment of Rs. 50 lakhs in NHAI Bonds made on 26-05-2008. Since six months in
this case involves two financial years, the assessee's case is that if he had deposited another Rs. 50 lakhs
from 1st April, 2008 to 21-04-2008, he was entitled for exemption u/s 54EC of the Act. As during this period
from 01-04-2008 to 26-05-2008 subscription in eligible investment was closed, the investment made by the
assessee on 26-05-2008 i.e. 1st day of the reopening of the subscription of eligible investment in NHAI
Bonds should be treated in time. There is also no dispute about the fact that subscription to the eligible
investment was closed during the period 01-04-2008 to 26-05-2008. The dispute which remains to be
decided by us in this case is whether as per the provisions of section 54EC the assessee is entitled for
exemption of Rs. 1 Crore as six months period for investment in eligible investment involves two financial
years. If the answer to this question is "yes", whether investment made by the assessee on 26-05-2008
beyond six months period is eligible for exemption in view of the fact that no subscription for eligible
investment was available to the assessee from 1st April, 2008 to 26-05-2008.
8. While going through the proviso of section 54EC, we find that the proviso to section reads as under:-
"[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 rupee]"
It is clear from this proviso that where assessee transfers his capital asset after 30th September of the
financial year he gets an opportunity to make an investment of Rs. 50 lakhs each in two different financial
years and is able to claim exemption upto Rs. 1 Crore u/s 54EC of the Act. Since the language of the proviso
is clear and unambiguous, we have no hesitation in holding that the assessee is entitled to get exemption upto
Rs. 1 Crore in this case. This view of ours gets support from the following finding of the Hon'ble Supreme
Court in the case of IPCA Laboratory Ltd. v. Dy. CIT [2004] 266 ITR 521 / 135 Taxman 594 (SC), wherein
it has been held by the Hon'ble Supreme Court that -
"even though a liberal interpretation has to be given to such a provision the interpretation has to be as
per the wording of the section. If the wording of the section is clear, then benefits which are not
available cannot be conferred by ignoring or misinterpreting words in the section"
Here the situation is reverse. Since the wording of the proviso to section 54EC is clear, the benefits which
are available to the assessee cannot be denied. In view of above, it is hereby held that the assessee is entitled
for exemption of Rs. 1 crore as six months' period for investment in eligible investments involved is two
financial years.
9. Now, coming to the second aspect of the matter, whether investment of Rs. 50 lakhs made in NHAI Bonds
on 26-05-2008 can be considered to be made within six months period as per the proviso to sec. 54EC, we
find that the assessee was to make investment in such Bonds between 01-04-2008 to 21-04-2008. There is no
dispute about the fact that subscription of eligible Bonds was closed during this period till 26-05-2008 and
on the 1st day of the reopening of the subscription, the assessee made this investment. Under the
circumstances, we are of the considered opinion that the assessee was prevented by sufficient cause which
was beyond his control in making investment in these Bonds within the time prescribed. We further find that

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various judicial authorities have taken a view that exemption should be granted in such cases where there is a
delay in making investment due to non-availability of the bonds and have held that it is a reasonable cause
and the exemption should be granted. In the case of Ram Agarwal v. Jt. CIT [2002] 81 ITD 163 (Mum), it
has been held as under:
"In regard to claim of exemption under section 54F we may mention that it is found by the learned CIT
(A) that the bank was closed on 31-8-1995 on account of strike as certified by the officials of the
concerned bank. From the certification given by the bank officials, the assessee had approached the
bank officials with the cheque for the amount of deposit on 30-8-1995. The assessee remained unable to
obtain receipt on 31-8-1995 due to bank strike and the cheque was cleared on 1-9-1995. In this view of
the situation, it can well be said that the deposit of the assessee was in accordance with the provisions of
statute as on the last date i.e. the 31-8-1995, the deposit could not be made due to the reason which was
beyond the control of the assessee particularly in view that the efforts were made by the assessee a day
prior to last date to deposit the requisite amount in the bank to make him entitle for exemption under sec
54F. As mentioned earlier, this position has also been accepted by the learned CIT(A). Therefore, we
direct the Assessing officer to allow the necessary exemption to the assessee.
Before parting we may observe that section 54F is a beneficial provision to encourage assessee to invest
in house properties. Keeping in mind the above object behind the insertion of section 54F and
considering the fact that the assessee was not at fault in not depositing the amount before 31-8-1995, we
hold that the deposit made on 1-9-1995 satisfies the condition laid down in section 54F of the Act."
Since no contrary decision was cited on behalf of the Revenue, we are left with no option but to hold that the
investments made by the assessee on 26-05-2008 beyond six months is eligible for exemption in view of the
fact that no subscription for eligible investment was available to the assessee from 1st April, 2008 to 26-05-
2008.
10. In the result, both the appeals are allowed.

■■

______________
*In favour of assessee.

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