2011 (2) TMI 26 - AT - Income Tax

Assessee granted exemption for NABARD bond investment under section 54EC.

Kumarpal Amrutlal Doshi Versus DCIT (Appeals)

The tribunal found that the assessee's investment in NABARD bonds met the requirements for exemption under section 54EC of the Income-tax Act. The ... Capital gain - Exemption under section 54EC - period of 6 months for making investment in long term specified asset was 9-2-2006 - As on that date the cheque had been delivered to NABARD - date of payment of the cheque would be the date of delivery of the cheque - date on which subsequently the cheque was encashed in the ordinary course by NABARD on 15-2-2006 cannot be said to be the date of investment - assessee has substantially complied with the provisions of section 54EC of the Act and was, therefore, entitled to exemption under section 54EC of the Act – Appeal allowed Issues Involved:1. Eligibility for exemption under section 54EC of the Income-tax Act.2. Consideration of NABARD bonds as long-term specified assets.3. Compliance with the six-month investment period requirement.Detailed Analysis:1. Eligibility for exemption under section 54EC of the Income-tax Act:The assessee appealed against the CIT(A) order disallowing the exemption under section 54EC of the Income-tax Act. The assessee argued that the investment in NABARD bonds was made as per the provisions of the Act. The revenue authorities contended that the investment was not made within the stipulated six-month period, and the bonds were not considered long-term specified assets as per the amendments applicable from the assessment year 2006-07.2. Consideration of NABARD bonds as long-term specified assets:The tribunal examined whether NABARD bonds could be considered long-term specified assets under section 54EC. The section was introduced by the Finance Act, 2000, and amended by subsequent Finance Acts. Initially, NABARD bonds were included as long-term specified assets, but the Finance Act, 2006, excluded them effective from 1-4-2006. The tribunal noted that the investment was made on 9-2-2006, before the exclusion took effect. Therefore, the investment in NABARD bonds was valid under the law as it existed at the time of the transfer of the capital asset, supporting the assessee's claim.3. Compliance with the six-month investment period requirement:The tribunal addressed whether the investment was made within six months from the date of transfer of the long-term capital asset. The date of transfer was 9-8-2005, making the deadline 9-2-2006. The assessee sent the application and cheque to NABARD by courier on 7-2-2006, which was received on 9-2-2006. The cheque was encashed on 13-2-2006, and the bonds were allotted on 15-2-2006. The tribunal referenced the Supreme Court decision in CIT v. Ogale Glass Works Ltd., which held that payment by cheque relates back to the date of delivery. Thus, the investment date was considered 7-2-2006, within the six-month period, fulfilling the requirement for exemption under section 54EC.Conclusion:The tribunal concluded that the assessee's investment in NABARD bonds was made within the stipulated period and qualified as long-term specified assets under the law applicable at the time of the transfer. The assessee was entitled to the exemption under section 54EC. The appeal was partly allowed, granting the exemption, while other grounds not pressed by the assessee were dismissed.Order:The appeal of the assessee is partly allowed. Order pronounced in the open court on the 9th day of February 2011.