Section 54EC — Exemption from capital gains tax —
Whether assessee entitled to claim exemption under the provision when
the investment in the eligible bonds is made within six months of the
date of receipt of consideration as against the prescribed condition of
the date of transfer — Held, Yes.
Facts: During the year under appeal
the assessee sold three flats and the entire floor of a building
constructed by him by sales agreements dated 2-7-2004 and 1-7-2004,
respectively. The entire consideration aggregating to Rs.131.77 lacs was
received in instalments between 1-7-2004 and 27-6-2005. Each of the
instalment received by the assessee was deposited by him in full with
NABARD almost immediately and in any case within six months’ period from
the dates of the respective receipts. The assessee claimed exemption
u/s.54EC of the Act on Capital Gains. The AO completed the assessment
u/s.143(3) of the Act accepting the returned income. The CIT, in
exercise of his powers u/s.263 of the Act, held that the investments of
sale consideration amounts should be within six months’ from the date of
the sale and not from the date of receipt of consideration as claimed
by the assessee. In that view, he not only set aside the assessment, but
also gave directions for not considering the deposits made beyond the
period of six months from 2-7-2004 for the purpose of section 54EC.
In
consequence to revision order passed u/s.263 of the Act by the CIT,
assessment was framed u/s. 254/263/143(3) of the Act by the AO on
24-12-2010, and disallowed exemption u/s.54EC of the Act. Aggrieved, the
assessee preferred appeal before the CIT(A) and the CIT(A) also
confirmed the action of the AO.
Held:
According to the Tribunal, if the
period is reckoned from the date of agreement and receipt of part
payment at the first instance, then it would lead to an impossible
situation by asking the assessee to invest money in specified asset
before actual receipt of the same. In taking this view the Tribunal was
supported by the decision of the Andhra Pradesh High Court in the case
of S. Gopal Reddy v. CIT, (181 ITR 378), where in a similar situation of
delayed receipt of compensation amount on acquisition of property, the
Court observed that if the investment in specified asset was made within
a period of six months from the date of receipt of compensation, as
against the date of acquisition of the property denoting transfer
thereof, the same should be considered to be sufficient compliance for
the purpose of claiming exemption u/s.54E of the Act. The Tribunal noted
that similar view was also taken by the Allahabad High Court in the
case of CIT v. Janardhan Dass, (late through legal heir Shyam Sunder)
(299 ITR 210) and by the Andhra Pradesh High Court in the case of
Darapaneni Chenna Krishnayya (HUF) v. CIT, (291 ITR 98). In view of the
above consistent principle adopted by the High Courts in respect to
interpretation of a beneficial provision and the fact that the assessee
invested in specified bonds i.e., NABARD bonds, within one month of the
receipt of sale consideration, the Tribunal held that the assessee is
eligible for exemption u/s.54EC of the Act.
