2015 (12) TMI 618 - AT - Income Tax

Eligibility for exemption u/s 54EC - whether the investment was made by the assessee within the six months from the transfer of the original asset as prescribed u/s 54EC - Held that - The assessee had filed an application with National Housing Bank on 23.12.2004 and submitted along with this application Cheque No.669766 drawn on bank of India, Mulund Branch Mumbai, dated 23.12.2004. This fact has not been disputed by the Ld. DR appearing on behalf of the revenue. Thus, assessee has clearly made the investment within the period of 180 days also. Thus, viewed from any angle it can be safely said that the assessee has made investment within the period of six months. The assessee should be granted the benefit of deduction and the same has been wrongly denied to the assessee. - Decided in favour of assessee.

Summary

Issues:
1. Eligibility for exemption u/s 54EC.
2. Whether investment was made within six months from the transfer of the original asset.

Analysis:

Issue 1: Eligibility for exemption u/s 54EC
The appeal was filed against the order passed by the Ld. Commissioner of Income Tax (Appeals) regarding the eligibility of the Assessee for exemption u/s 54EC for the assessment year 2005-06. The Assessee sold a row house in April 2004 and invested the capital gain in NHB Capital Gain Bonds in December 2004. The AO and Ld. CIT(A) held that the investment was made beyond the stipulated six-month period from the date of transfer, thereby denying the exemption. The Tribunal considered the facts and arguments presented, including dates of agreement, transfer, possession, application, cheque clearance, and bond issuance. The Tribunal noted the importance of the date of transfer and relied on legal interpretations of "month" as per British calendar. The Tribunal also referenced a Supreme Court judgment regarding cheque payments. Ultimately, the Tribunal concluded that the Assessee had complied with the requirement of section 54EC by making the investment within the prescribed period, overturning the previous decisions and granting the exemption.

Issue 2: Investment timeline and legal interpretations
The key issue revolved around whether the Assessee made the investment within six months from the transfer of the original asset, as required by section 54EC. The AO and Ld. CIT(A) had determined that the investment fell outside this period, leading to the denial of the exemption. The Tribunal meticulously analyzed the timeline of events, including the dates of agreement, transfer, possession, application, cheque clearance, and bond issuance. Legal interpretations of "month" as per British calendar were crucial in determining the timeline compliance. The Tribunal referenced previous judgments and legal principles to support its decision. Ultimately, the Tribunal found that the Assessee had indeed made the investment within the stipulated period, based on the date of transfer and the interpretations of relevant legal terms. This analysis formed the basis for granting the Assessee the benefit of deduction u/s 54EC.

In conclusion, the Tribunal allowed the appeal, emphasizing the importance of the timeline of investment in relation to the transfer of the original asset and providing a detailed legal analysis to support its decision.