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TMI Blog2012 (9) TMI 796X X X X Extracts X X X X X X X X Extracts X X X X ..... ardship in a similar situation, the CBDT vide circular No.791 dated 26.2.2000 has clarified that such an investment can be made within the period of six months from the date of receiving of money from transfer of capital asset. Assessee’s claim for exemption u/s 54EC from capital gains, is allowed - Decided in favor of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... 00,000 Investments made under sec. 54EC as under:- Date Investments Amount 20.3.2003 1790 Bonds of N.H.B. ₹ 179,00,000 21 .4.2003 220 Bonds of NHB ₹ 22,00,000 26.4.2003 C.G. Scheme ₹ 25,10,000 ₹ 226,00,000 Since the Development Agreement was executed on 21.09.2002, the period of 6 months for investment in Specified Assets under sec. 54 EC expires on 21 .3.2003. As per the above details, the investments made on 21.4.2003 & 26.4.2003 amounting to ₹ 47,10,000!- is not eligible for exemption under sec. 54EC of the Act The assessee has deferred the tax liability to A.Yr. 2004-05 on the pretext of possession letter dated 21.08.2003. Since the Development agreement has been entered into by the assessee during the Financial Year 2002- 03 relevant to A.Yr. 2003-04 and all the payments were received during the same period, the capital gain is to be taxed in the A.Yr. 2003-04. Hence, the case is reopened under sec. 147 of the l.T.Act 1961". 4. Against the said reopening the assessee made his detailed objections before the Assessing Officer and submitted that possession of the property was given on 21-8-2003 and, therefore, on that basis, the date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowance." Accordingly, the income was assessed at an income of Rs..56,58,130/-. 5. Before the CIT(A) also, the detail objections and submissions were made on the validity of reopening under Section 147 on various other grounds, however, the same has been rejected by the CIT(A) vide para 6 of the appellate order. Regarding the issue of taxability of capital gain for the assessment year 2003-2004 and disallowance of deduction under Section 54EC, the assessee made detail submissions before the CIT(A), inter alia, on the ground that firstly, the transfer has not taken place in the assessment year 2003-2004 even though 'builders' agreement' was signed in this year as all the conditions prescribed in the agreement were not fulfilled and the same was therefore, offered for capital gains in the assessment year 2004-2005. Secondly, various post dated cheques issued by the developers to the assessee, the last cheque for a sum of Rs..47,08,000/- dated 28.3.2003 was returned unpaid by the bank which was redeposited and cleared on 16-4-2004 and was invested in the bond immediately thereafter and, therefore, in such a situation it cannot be held that the transfer had taken place in the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2004-2005 on protected basis. This order for A.Y. 2004-2005 now stands deleted by the CIT(A) and no appeal has been filed before the ITAT by the department. He thus submitted that if the capital gain in terms of the conditions given in the agreement and as per the assessment order, falls in the assessment year 2004-2005, therefore, there is no question of disallowance under Section 54EC. In support of his contentions, he relied upon the decision of ITAT Mumbai Bench in the case of ACIT Vs. Geeta Devi Pasari, reported in (2007) SOT 63 (Mum) (URO), which has been confirmed by the Hon'ble High Court in ITA No.867/2007 vide order dated 10-7-2008. In this decision, the judgment of the Hon'ble Bombay High Court in the case of Chaturbhuj Dwarkadas Kapadia (supra), has been considered. 7.1 The other main plank of his argument was that the period of six months for making the investment under Section 54EC has to be reckoned with, from the date of the payment received by the assessee and not from the date of transfer. He drew our attention to the fact that the last installment of payment was received on 28.3.2003, which was bounced and the same was redeposited on 16.4.2003 and bonds were p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .47,08,000/- invested after six months from the date of agreement can be allowed or not. 9.1 It is not in dispute that the assessee has received the last amount of instalment for sum of Rs..47,08,000/-, beyond the period of six months from the date of the development agreement and the same has been deposited immediately thereafter by the assessee i.e. before 26.4.2003. Section 54EC prescribes that capital gain will not be charged if the investment has been made in specified bonds within a period of six months after the date of transfer of the capital asset. However, such an exemption will not be available if such a condition is not fulfilled. This Section thus provides an exemption to an assessee from taxing of long term capital gain, if the capital gain is invested whole or any part there of in the long term specified assets. The benefit of exemption intended in this section can only be given, unless and until the assessee receives the payment from transfer of a capital asset, otherwise it cannot be expected from an assessee to invest the same within the period prescribed. It will frustrate the entire purpose and spirit of the section itself. Looking to this hardship in a simila ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the Ministry of Law and has decided that the period of 6 months for making investments in specified assets for the purpose of sections 54EA, 54EB and 54EC should be taken from the date such stock-in-trade is sold or otherwise transferred, in terms of section 45(2) of the Act. 5. This may be brought to the knowledge of all the officers of your region. [F.No.225/98/2000/ITA-From Central Board of Direct Taxes]" 9.2 Thus, the aforesaid circular was issued having regard to the impossibility of making the investment of the amount in specified bonds/assets within six months from the date of the transfer. To remove such rigour of law, Board has clarified that such an investment can be made only on the realization of sales consideration. It is needless to say that CBDT circular is in the nature of contemporanea expositio i.e. contemporaneous exposition or construction of a statute by the administrative authorities entrusted with the task of executing the statute is a very useful guide and aid for giving an interpretation in case of any ambiguity. It is now quite settled law that such circulars issued by the Apex authority like CBDT has a binding effect on the Income Tax authorities ..... X X X X Extracts X X X X X X X X Extracts X X X X
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