2012 (2) TMI 363 - AT - Income Tax

Revisionary order passed u/s 263 - Long-term capital gains - Deemed transfer of property u/s 2(47)(v) - dis-allowance of exemption u/s 54EC reckoning period of six months for the deposit in bonds from the date of agreement and receipt of part payment at the first instance Held that - Admittedly, assessee received part payments after execution of agreement to sale and handing over of possession thereby completing the transaction in terms of section 53A of Transfer of Property Act and invested in specified bonds i.e. NABARD bonds within one month of the receipt of sale consideration being part payment. In our view, in such case, the period of six months for making deposit u/s. 54EC should be reckoned from the dates of actual receipt of the consideration. Therefore, assessee is eligible for exemption u/s 54EC on part payment received Decided in favor of assessee.

Issues Involved:
1. Disallowance of exemption under Section 54EC of the Income Tax Act.
2. Interpretation of the date of transfer for capital gains purposes.
3. Validity of investments made in specified assets within the stipulated period.

Issue-wise Detailed Analysis:

1. Disallowance of Exemption under Section 54EC of the Income Tax Act:
The common issue in these appeals is the disallowance of exemption under Section 54EC of the Income Tax Act by the Assessing Officer (AO), which was confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)]. The appellants argued that they could not invest the sale consideration in 'long term specified asset' before actually receiving it. The AO and CIT(A) held that the deposits were made beyond six months from the date of the deemed transfer of property, thus disallowing the exemption. However, the Tribunal found that the appellants had deposited the amounts within one month of receipt, which was within the six-month period from the actual receipt of the sale consideration, thus entitling them to the exemption under Section 54EC.

2. Interpretation of the Date of Transfer for Capital Gains Purposes:
The appellants contended that the date of transfer for allowing time to invest the consideration amount in specified assets should be the actual date of receipt of each installment of the payment. The Tribunal agreed, stating that the six-month period for making deposits under Section 54EC should be reckoned from the dates of actual receipt of the consideration. This interpretation avoids an impossible situation where the assessee would be required to invest money in specified assets before actually receiving it. The Tribunal supported this view by citing the Andhra Pradesh High Court's decision in S. Gopal Reddy v. CIT and the Allahabad High Court's decision in CIT v. Janardhan Dass, which emphasized that the period for investment should be considered from the date of receipt of compensation.

3. Validity of Investments Made in Specified Assets within the Stipulated Period:
The Tribunal noted that the appellants had received part payments and handed over possession of the property on 02.07.2004, with subsequent payments received later. The appellants invested the sale consideration in NABARD bonds within one month of receipt, which was within the six-month period from the actual receipt of the consideration. The Tribunal held that the appellants were eligible for exemption under Section 54EC, as they had complied with the requirement of investing in specified assets within six months of receiving the sale consideration. This decision was consistent with the principles adopted by various High Courts in interpreting beneficial provisions under capital gains tax.

Conclusion:
The Tribunal allowed the appeals of the assessees, directing the AO to grant the exemption under Section 54EC for the investments made within six months from the actual receipt of the sale consideration. The Tribunal's decision emphasized a reasonable interpretation of the statute to avoid absurd results and ensure that the assessees could benefit from the exemption provisions as intended by the legislature.

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