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TMI Blog2006 (7) TMI 166X X X X Extracts X X X X X X X X Extracts X X X X ..... 44 lakhs in the Syndicate Bank as fixed deposit and availed of a loan of Rs. 4 lakhs on the security of the fixed deposit. After adjusting the loan amount, the balance amount of Rs. 40 lakhs received by the appellant was deposited in capital bonds issued by the IDBI on May 26, 1992, as investment in a specified asset in terms of section 54E of the Income-tax Act. The deposit in IDBI bonds yielded an advance interest of Rs. 9.4 lakhs which along with another amount of Rs. 60,000 taken by the appellant from the bank was also deposited in IDBI Bonds on May 28, 1992. Since both the amounts were deposited within six months in terms of section 54E, the appellant/assessee claimed exemption from capital gains on the entire deposit of Rs. 50 lakhs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be invested in the specified assets provided under section 54E of the Act or whether it is enough that the assessee raises funds from any source and deposits the equivalent sum of net consideration within six months from the date of transfer in specified assets. Even though learned counsel for the appellant/assessee has explained various situations whereunder the assessee may be entitled to exemption from capital gains by investment in specified assets from sources which are not received on sale or exchange or transfer of the capital asset, we do not think any such hypothetical issue need be considered for deciding this case, the facts of which are stated above. There may be situations where the assessee has not in fact received considerati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the transfer of a capital asset, means the full value of the consideration received or accruing as a result of the transfer of the capital asset as reduced by any expenditure incurred wholly and exclusively in connection with such transfer." It is obvious from the above that net consideration does not include any accruals on the investment from out of the net consideration of the asset transferred. "Net consideration" is only the net sale value obtained on transfer of a capital asset, which is the full value received as reduced by the expenditure incurred for and in connection with the transfer. The assessee's counsel submitted that the time-frame for investment under section 54E is sufficient opportunity to the assessee to use the net c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or another specified asset for claiming exemption on such amount also. This is because once part of the net consideration is spent by the assessee, the same is not available for reinvestment. Consequently, if the assessee's argument is accepted, then shortage of net consideration invested in specified assets immediately after transfer can be made up from accruals in the form of interest on such investment up to six months, to make up for balance net consideration for claiming exemption on the total investment which is not contemplated under section 54E of the Act. We, therefore, answer the question referred that in the appeal in the affirmative, i.e., against the appellant/assessee and in favour of the Department and dismiss the appeal. We ..... X X X X Extracts X X X X X X X X Extracts X X X X
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