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2022 (6) TMI 1059 - AT - Income TaxBenefit of Section 54EC - Amount invested in bonds issued by NHAI - AO denied the benefit of Section 54EC holding that the investment in the bonds issued by NHAI was made after a period of 11 months taking the date of execution of unregistered Cancellation Deed - HELD THAT - PA, a registered document whereby the developer has agreed to sale the flat to the Appellant which created rights/interest in the Flat being immovable property, was a registered document and therefore, the extinguishment such rights/interest could only be achieved only by way of a registered document. Thus, we find merit in the contention of the Appellant that date of registered Cancellation Deed (i.e. 11.09.2012) should be taken as the date of transfer of capital asset. In order to claim benefit of Section 54EC, investment must be made within six month from the transfer of the capital asset. In the case of Kartick Chandra Mondal 2020 (2) TMI 773 - ITAT KOLKATA it has been held that term month means calendar months (and not a period of 30 days), which should be applied for the purpose of Section 54EC of the Act. Same view has been taken by Mumbai Bench of the Tribunal in the case of Mr. Yahya E. Dhariwala 2011 (11) TMI 381 - ITAT MUMBAI . Respectfully, following the aforesaid decisions of the Tribunal we hold that the investment made by the Appellant in bonds issued by NHAI on 06.03.2013 falls with the period of six calendar months and thus, meets the requirement of Section 54EC of the Act. Accordingly, we are of the view that the Appellant is entitled to benefit of section 54EC of the Act in respect of amount invested in bonds issued by NHAI. - Decided in favour of assessee.
Issues Involved:
1. Classification of the sum of INR 44,16,000/- as revenue receipt and its taxation. 2. Eligibility for exemption under Section 54EC of the Income Tax Act, 1961. Detailed Analysis: Issue 1: Classification of the Sum of INR 44,16,000/- The Appellant, a partnership firm, contested the classification of INR 44,16,000/- as "Income from Other Sources" by the Assessing Officer (AO) and confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)], arguing it should be treated as Long Term Capital Gains (LTCG). Facts and Arguments: - The Appellant had entered into an Agreement for Purchase of a flat with a developer in 2002, which was registered. Due to the developer's failure to deliver possession, the Appellant filed a suit for specific performance. - A settlement was reached, and the Appellant received INR 60,00,000/- for relinquishing rights in the flat, leading to a registered Cancellation Deed in 2012. - The AO concluded that since the Appellant never received possession, no rights in the property existed, thus the compensation was treated as "Income from Other Sources." - The CIT(A) upheld this view but allowed an additional deduction under Section 57(iii) of the Act. Judgment: - The Tribunal held that the Appellant had statutory rights under the Maharashtra Ownership Flat Act, 1963, which provided certain protections and obligations despite not having possession. - The Tribunal cited the case of CIT vs. Tata Services Ltd., asserting that the right to obtain conveyance of immovable property is "property" within the meaning of Section 2(14) of the Act. - Therefore, the compensation received was for the transfer of a capital asset, leading to LTCG and not "Income from Other Sources." Issue 2: Eligibility for Exemption under Section 54EC The AO denied the exemption under Section 54EC, stating the investment in bonds was made beyond the six-month period from the date of the unregistered Cancellation Deed. Facts and Arguments: - The Appellant argued that the registered Cancellation Deed dated 11.09.2012 should be considered the date of transfer, making the investment in bonds on 06.03.2013 within the permissible period. - The AO had taken the date of the unregistered Cancellation Deed (24.03.2012) and concluded that the investment was made after 11 months. Judgment: - The Tribunal held that the date of the registered Cancellation Deed should be considered for determining the transfer date. - Citing precedents, the Tribunal concluded that the term "month" means calendar months, thus the investment made within six calendar months from the date of the registered Cancellation Deed was valid. - Consequently, the Appellant was entitled to the exemption under Section 54EC for the amount invested in NHAI bonds. Conclusion: - The Tribunal allowed the appeal, holding that the sum of INR 44,16,000/- should be treated as LTCG and not "Income from Other Sources." - The Appellant was also entitled to the exemption under Section 54EC for the investment in bonds, as it was made within the required period. Result: - The appeal was allowed in favor of the Appellant.
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