Sec. 54EC- Six months means six calendar months and not 180 days

By CA Sandeep Kanoi Income Tax Judiciary March 28, 2014 2 comments

TaxGuru Citation: 2014 taxguru.in 110
Case Name: Alkaben B. Patel Vs ITO (ITAT Ahmedabad)
Appeal Number: Only available for paid members
Date of Judgement/Order: Only available for paid members
Courts: All ITAT, ITAT Ahmedabad

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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 10^th of June, 2008; hence, the assessee was required to purchase the NHAI bond within six months from the said date of registration, i.e., 10^th June, 2008. However, the assessee had purchased the NHAI bond on 17^th 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 10^th 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 8^thDecember, 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 17^th 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