CA Sandeep Kanoi
Issue -Whether for the purpose of Section 54EC of IT Act, 1961, the period of investment of six months should be reckoned after the date of transfer or from the end of the month in which transfer of capital asset took place?
Brief Facts :- Assessee in individual capacity has sold a flat situated at Lotus Co-operative Society, Usmanpura Ahmedabad for a consideration of Rs.64 lacs. The appellant had computed the Capital Gain at Rs.Nil and declared the same as per the Return of Income. A working of the Capital Gain was admittedly furnished along with the return of income. The basis for “Nil” capital gain was that the gain was stated to be at Rs.56,65,767/- however the assessee had made the investment in NHAI bond of Rs.45 lacs and claimed the deduction u/s.54 EC of IT Act. The assessee has also made an investment in “capital gain account scheme” of Rs. 12 lacs, not in controversy.
Contention of the Revenue
The AO has referred the provisions of Section 54EC of IT Act and thereafter discussed that a sale document was registered on 10th of June, 2008; hence, the assessee was required to purchase the NHAI bond within six months from the said date of registration, i.e., 10th June, 2008. However, the assessee had purchased the NHAI bond on 17th of December, 2008, alleged by the AO. A show cause was issued as to why the claim of exemption be not disallowed in respect of the investment made in NHAI bond in the light of the provisions of Section 54EC of IT Act being not invested within six months.
Contention of the Assessee
The assessee has informed that the sale consideration was deposited in a capital gain account out of which the investment was made in the specified asset, i.e., NHAI bond to claim the benefit of the provisions u/s.54EC of IT Act. The assessee has also explained to the AO that the last date of expiry of six months from the date of transfer of the Long Term Capital Asset was 10th of December, 2008 however the assessee had allegedly tendered a cheque on 8th December, 2008 vide an application no.157602 to the bank. According to assessee since the application for the purchase of those bonds was tendered in the bank on 8th December, 2008, which was within the period of six months from the date of the transfer of the Long Term Capital Asset, therefore, the assessee was eligible for the deduction u/s.54EC. According to the assessee the cheque was cleared on 17th of December, 2008.
Alternatively the assessee’s contention was that up to the end of the month of December 2008 the said investment was eligible for the deduction. The AO was not convinced and held that the assessee was required to invest the capital gain in the specified asset within a period of six months from the date of the transfer and that requirement was not complied with by the assessee; hence, not eligible for the deduction u/s. 54EC of IT Act. Accordingly an addition of Rs.45 lacs was made in the hands of the assessee.
ITAT Judgment and discussion
The subtle question is that whether the word “month” refers in this section a period of 30 days or it refers to the months only. Section 54EC, if we read again prescribes that an investment is required to be made within a period of six months. Whether the intention of the legislator was to compute six calendar months or to compute 180 days. To resolve this controversy, we are guided by a decision of Hon’ble Allahabad High Court pronounced in the case of Munnalal Shri Kishan Mainpuri, 167 ITR 415 where answering the dispute in respect of law of limitation the Hon’ble Court has clearly held that there is nothing in the context of section 256(2) to warrant the conclusion that the word ‘month’ in it refers to a period of 30 days, therefore, refers to six months in Section 256(2) is to six calendar months and not 180 days. Rather, in this cited decision an interesting observation of the court was that while comparing the precedents the contextual setting is to be examined and if entirely distinct and different then do not warrant to apply universally. Even in the case of Tamal Lahiri Vs. Kumar P. N. Tagore, 1978 AIR 18 11/1979 SCC (1) 75, it was opined while interpreting Section 533 of Bangalore Municipal Act, 1932 that the expression six months in the said section means six calendar months and not 180 days. A copy of the judgment is placed before us. The purpose of mentioning this plank of argument is that after scrutinizing few more Sections of The Act it is evident that on some occasion the Legislature had not used the terms “ Month” but used the number of days to prescribe a specific period. For example in Section 254(2A) First Proviso it is prescribed that the Tribunal may pass an order granting stay but for a period not exceeding one hundred and eighty days. This is an important distinction made in this statute while subscribing the limitation/ period. This distinction thus resolves the present controversy by itself.
So the logical conclusion is that in the absence of any definition of the word ‘ month’ in The Act, the definition of General Clauses Act 1897 shall be applicable and by doing so there is no attempt on our part to interpret the language of Sec. 54EC , what to say a liberal or literal interpretation. We hereby hold that the Legislature has in its wisdom has chosen to use the word ‘ month’. This was done by keeping in mind the definition as prescribed in General Clauses Act 1857. Therefore we have also read the word ‘month’ within the recognized ways of interpretation. Rather we have also seen both; the conventional as well as lexicon meaning. Here there in no attempt to supply casusomissus but replicated as per the language used.
Investment had been made in the month of December, 2008. However the present case there is no dispute about the investment which had actually been made by the assessee. The said investment, alleged to be few days late from the date of transfer in the month of June, 2008. It is not the case of the Revenue that the appellant had altogether fudged the dates. Once the purpose of the introduction of the section was served by making the investment in the specified assets then that purpose has to be kept in mind while granting incentive.
We hereby hold that the investment in question qualifies for the deduction U/s 54EC. Resultantly assessee’ s grounds are hereby allowed. The question referred is answered in favor of the assessee.
Some of the Judgment Discussed while deciding the above case :-
1. S. 54EC– 6 months period to be reckoned from the end of the month in which transfer takes place– Yahya E. Dhariwala, 49 SOT 458 (Mum)
2. Legal profession is not business or trade – SC – Dhanraj Singh Choudhary v. Nathulal Vishwakarma 16 taxmann.com249 (SC)
3. S. 54EC investment time limit begins from date of receipt of consideration – Chanchal Kumar Sircar vs. ITO  50 SOT 289 (Kolkata) [16 ITR (Trib) 91
4. S. 54EC – 6 Month Means 6 British calendar Months – Aquatech Engineers, 36 CCH 167 (Mum Trib.)