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2016 (12) TMI 1081 - AT - Income TaxEligible for exemption of the capital gains u/s 54EC - AO held that since the investment in the specified securities as stipulated u/s 54EC of the Act were not paid on or before 12th April, 2009, the assessee is not entitled to claim deduction - Held that - The word month as stipulated in Section 54EC of the Act clearly postulate that the investment in long term specified assets is to be made within six months from the date of transfer of original asset , as the word month has not been defined under the Act , the reference to Section 3(35) of General Clauses Act,1897 has to be adopted which provides Month shall mean a month reckoned according to the British calendar. The REC bonds were subscribed by the assessee on 24-04- 2009 and were allotted to the assessee by REC on 30th April, 2009 which is within six months after the date of transfer of asset as per British Calendar month, hence, the assessee fulfilled the conditions laid down under section 54EC of the Act and as such assessee is eligible for deduction u/s 54EC of the Act of ₹ 17,50,000/- invested in long term specified assets being REC Bonds on 24-04-2009 which is within six months from the end of the month in which transfer took place i.e. October 2008 , the original asset having being sold on 13-10-2008 . - Decided in favour of assessee.
Issues Involved:
1. Addition under Section 50C of the Income Tax Act, 1961. 2. Disallowance of exemption claimed under Section 54EC of the Income Tax Act, 1961. Issue-wise Detailed Analysis: 1. Addition under Section 50C: The first issue pertains to the addition of ?19,104/- under Section 50C of the Income Tax Act, 1961. The assessee sold an ancestral property for ?1,05,00,000/- and declared long-term capital gains as Nil after claiming deductions under Section 54EC. The Assessing Officer (AO) adopted the stamp valuation authority's value of ?1,06,12,500/- as the full value of consideration for Section 48 purposes, resulting in an addition of ?19,104/- as long-term capital gains. The assessee did not challenge the stamp valuation nor sought a reference to the Departmental Valuation Officer (DVO). Section 50C is a deeming provision where the value adopted by the stamp valuation authority is deemed to be the full value of consideration if it exceeds the actual sale consideration. The Tribunal upheld the AO's addition, emphasizing that the assessee did not challenge the stamp duty valuation or seek a DVO reference. Thus, the assessee's contentions were dismissed, and the addition under Section 50C was sustained. 2. Disallowance of Exemption under Section 54EC: The second issue concerns the disallowance of ?17,50,000/- claimed as an exemption under Section 54EC. The assessee invested in REC Bonds on 30th April 2009, whereas the property was sold on 13th October 2008. The AO noted that the investment should have been made within six months of the sale, i.e., by 12th April 2009. The assessee argued that the investment was attempted on 31st March 2009 but was delayed due to the closure of the companies' books. The CIT(A) upheld the AO's decision, stating that the investment was made beyond the six-month period. The Tribunal, however, referred to Section 3(35) of the General Clauses Act, 1897, defining "month" as per the British calendar. It concluded that the investment made on 24th April 2009 was within six months from the end of October 2008, thus fulfilling the conditions of Section 54EC. The Tribunal allowed the exemption, overturning the CIT(A)'s decision. Conclusion: The appeal was partly allowed. The addition under Section 50C was upheld, but the disallowance of the exemption under Section 54EC was overturned, granting the assessee the claimed exemption.
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