Section 54EC benefit to be worked out before setting off Long-term capital losses U/S 70(3)

Section 54EC benefit to be worked out before setting off Long-term capital losses U/S 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

1) If for working out the relief under Section 54, the Revenue does not insist upon the applicability of Section 70(3), then there is no acceptable reason as to how provisions of Section 70(3) would stand attracted in the case of Section 54EC?;

2) Revenue’s argument that for the purpose of working out the relief under Section 54 EC, one has to take recourse first to Section 70(3) and then only look at Section 54 EC deserved to be rejected;

3) A reading of Section 70(3) shows that the loss that has to be looked at first isn’t with reference to the loss arising in respect of any new capital asset, but in the totality of the loss suffered on the sale of capital asset chargeable to tax under Section 45;

4) On the other hand, Section 54EC is specific with reference to investment in specified bonds as regards the capital gain arising from and out of a long-term capital asset;

5) Thus, going by the scheme of the Act, 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. Therefore, revenue’s appeal stood dismissed - Commissioner of Income-tax, Circle - XIV v. Vijay M. Mahtaney [2013] 35 taxmann.com 228 (Madras)

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