54ec

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Ca Siddharth Mehta (Querist)
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07 February 2012 Mr. Cheti Chand has invested his capital gains in capital gain tax savings bonds
under section 54EC on 30.09.2010 when the bonds were available; and there was a
strong rumor that these bonds may not be available for next one year (though it turned
out to be a real rumor, and the bonds were available freely even after three months). He
sold his capital asset on 22.11.2010 and earned capital gain. Mr. Cheti Chand has
claimed exemption of capital gain against investment in bonds made on 30.09.2010 u/s.
54EC.
The Assessing Officer denies the benefit of exemption contending that investment is
made prior to date of sale which is not allowed as per language of the section.
Discuss above issue with a view that
- Mr. Cheti Chand has invested his own fund in Capital tax savings bonds u/s. 54EC.
- Mr. Cheti Chand has received advance from buyer before 30.09.2010 and has invested same fund in capital gain tax savings bonds u/s. 54EC.
- possibility of claiming exemption from capital gain tax in above case,assuming that the rumor of bonds being not available for a considerable period turns
out to be true.

CA. Hari Kishan

CA. Hari Kishan (Expert)
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07 February 2012 The rumor arguments may not hold strong. The language of the section is abundently clear that the amount is to be invested at anytime within a period of six months AFTER the date of sale. so the investment is to be made within such time and not prior.

You could try on the argument stating that the transfer of the property i.e possession, risk reward and all other titles were transferred to the buyer prior to the registration date and substantial amount was received from the buyer also. that only pending was registration which is a mere formallty. There are several cases also should these facts can be established. You must give a try...