Section 54EC — Six months period, referred to in section 54EC, should be reckoned from the end of the month in which the transfer takes place.
Facts:
During the previous year relevant to the assessment year under consideration the assessee sold shares of two private limited companies. The assessee chose to invest the entire sale consideration in the bonds specified u/s.54EC of the Act. Of Rs.1,97,50,000 invested by the assessee in REC bonds, a sum of Rs.45,00,000 was invested on 30th August, 2005. The AO in an order passed u/s.147 r.w.s. 143(3) of the Act denied the claim for deduction of Rs.45,00,000 on the ground that the shares have been transferred on 24th February, 2005, whereas the investment was made on 30th August, 2005 which is beyond the period of six months from the date of sale. The assessee submitted that the sale of shares took place on 28th February, 2005, based on documents filed with the Registrar of Companies.
Aggrieved, the assessee preferred an appeal to the CIT(A) who upheld the action of the AO.
Aggrieved, the assessee preferred an appeal to ITAT.
Held:
The Tribunal noted that the subject-matter of transfer is shares of a private limited company. In case of shares of private limited company, the process of transfer of shares can be said to be completed only when the board of directors approves the transfer. The Annual Return filed before the ROC disclosed that the date of registration of transfer was 28th February, 2005. Board resolution approving the transfer of shares was passed on 25th February, 2005. Just because the stamping was done on 24th February, 2005 of blank forms, it cannot be concluded that there is transfer on 24th February, 2005. The Tribunal concluded that the date of transfer is 28th February, 2005. Hence, the investment made on 30th August, 2005 was within a period of six months as contemplated under the Act.
The Tribunal then held that even if the date of transfer is to be taken as 24th February, 2005, the wording used in the section is ‘at any time within a period of six months after the date of such transfer’. The Tribunal noted that the Madras High Court in the case of Kadri Mills Ltd. and the Calcutta High Court in the case of Brijlal Lohia and Mahabir Prasad Khema have held that since the term ‘month’ is not defined in the Income-tax Act, 1961, the expression used under the General Clauses Act, 1897 should be applied. Having noted the definition of the term ‘month’ as defined under The General Clauses Act, 1897 and also that the Act in certain sections has stated the period in number of days the Tribunal held that from the language in section 54EC the period of six months should be reckoned from the end of the month in which the transfer takes place. As the investment was made on 30th August, 2005, the Tribunal held that the assessee has invested a part of the capital gain within a period of six months after the date of transfer of the long-term capital asset in question in specified assets.
The Tribunal allowed the appeal filed by the assessee.
