2018 (9) TMI 1613 - AT - Income Tax

Disallowance of Investment in REC Bonds claimed as deduction u/s 54EC from LT Gain - delay between actual (Registered) transfer and effective deemed transfer was only 46 days - Held that - As per section 54EC of the Act, any Long Term Capital Gain (LTCG), arising to any assessee, from the transfer of any capital asset on or after 01.04.2000 shall be exempt to the extent such capital gain is invested within a period of six months after the date of such transfer in the long-term specified asset provided such specified asset is not transferred or converted into money within a period of three years from the date of its acquisition. The investment is restricted only upto ₹ 50,00,000/-. In the instant case, the purchase agreement was registered on 05.08.2011. Again an additional stamp duty of ₹ 1,41,070/- was paid on 22.03.2012 and thus the registration was completed. The appellant purchased the REC Bond on 31.03.2012. As per it the assessee has paid ₹ 1,41,070/- towards additional stamp duty on 22.03.2012 to complete the process of registration of the Purchase Agreement . The assessee filed its return of income for the impugned assessment year on 20.03.2014. The AO completed the assessment u/s 143(3) on 04.03.2015. Thus no one can say that the payment of additional stamp duty by the assessee is an afterthought. To sum up by paying the additional stamp duty of ₹ 1,41,070/- the appellant completed the process of registration of the Purchase Agreement on 22.03.2012. The appellant purchased the REC Bond on 31.03.2012. We set aside the order of the Ld. CIT(A). - Decided in favour of assessee

Summary

Issues:
1. Disallowance of Investment of ?50 Lacs in REC Bonds claimed as deduction u/s 54EC from LT Gain.
2. Interpretation of the term "transfer" for the purpose of claiming deduction u/s 54EC.
3. Application of section 2(47)(v) and section 53A of the Transfer of Property Act, 1882 in determining the transfer date.
4. Consideration of the date of registration of purchase deed vs. actual transfer date for investment purposes.
5. Applicability of section 54EC in case of deemed transfer and actual transfer.

Analysis:
1. The appeal involved the disallowance of a deduction claimed u/s 54EC for investing ?50 Lacs in REC Bonds from Long Term Gain. The AO disallowed the claim as the investment was made beyond six months from the transfer of the capital asset. The CIT(A) upheld the disallowance based on the inclusive definition of transfer under section 2(47)(v) and the actual transfer date being 05.08.2011.

2. The main contention was the interpretation of the term "transfer" for claiming the deduction u/s 54EC. The assessee argued that the actual transfer occurred on 22.03.2012, not on 05.08.2011, as per the registered agreement. The appellant relied on legal precedents to support the argument that the investment in REC Bonds was made within a reasonable time from the actual transfer date.

3. The debate centered around the application of section 2(47)(v) and section 53A of the Transfer of Property Act, 1882 in determining the transfer date. The appellant emphasized that the registration of the purchase agreement on 22.03.2012 constituted the true transfer, allowing for the investment in REC Bonds within the stipulated period.

4. The Ld. counsel highlighted the importance of the actual transfer date over the registration date of the purchase deed for claiming benefits under section 54EC. The argument focused on the legal significance of the registered transfer and the timing of the investment in REC Bonds in relation to this transfer date.

5. Ultimately, the Appellate Tribunal set aside the order of the CIT(A) and allowed the appeal, emphasizing that the appellant completed the registration process by paying additional stamp duty on 22.03.2012, and the investment in REC Bonds was made on 31.03.2012, within a reasonable timeframe from the actual transfer date. The Tribunal's decision favored the appellant's interpretation of the transfer date for the purpose of claiming the deduction u/s 54EC.