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Sec 54EC

21 January 2018

if asset in depreciable block is used for 3 years(long term use) and sold it with short term capital gain of 50000. Can this amount is utilised to purchase NHAI bonds for getting exemption u/s 54 EC

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9 Replies

MAYUR (ARTICLE ASSISTANT) (22 Points)
Replied 21 January 2018

No, because CG arising in this case is STCG and 54EC is exemption only for LTCG.

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Dheeraj Reddy (5 Points)
Replied 21 January 2018

Sec 54EC does not make any distinction between long term and short term capital asset.if capital gain arise on transfer of long term capital asset and it is invested within 6 months in REC bonds then it is exempted to the extent of capital gains or amount invested which ever is lower.

Rajat Juneja (8 Points)
Replied 21 January 2018

Good question, the assessee should get the section 54EC benefit. The rationale is that section 54EC uses the expression 'long term capital asset', now in your case the asset is held for more than 3 years therefore it shall qualify as as a 'long term asset'.

Further, the fact that for the computational purposes even if such asset falls within the mandate of section 50, the deeming fiction there to treat such assets as 'short term capital asset', shall not be extended to section 54EC of the Act.

RAMAKRISHNAN R (INCOME TAX OFFICER) (1736 Points)
Replied 22 January 2018

in my opinion, 54ec deduction is not allowed

shalini (CA) (525 Points)
Replied 22 January 2018

As per my understanding, 54EC will not be allowed in this case.

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Rajat Juneja (8 Points)
Replied 22 January 2018

For the information of all my learned friends, refer V. S. Dempo (Supreme Court) in Civil Appeal No. 4797 of 2008.

And also try not to misguide the querist.

Vedangi Deshmukh (112 Points)
Replied 22 January 2018

As per given case ,can person claim exemption u/s 54EC ??
I read the case but didnt understand, will u plz explain...

Rajat Juneja (8 Points)
Replied 22 January 2018

Yes, you can claim the benefit under section 54EC! Read my earlier post, the rationale is that section 50 is a deeming provision which converts long term capital asset to short term capital asset on for the purpose of computing taxes. It doesn't change the otherwise long term character of the capital asset.

Hope it clarifies.