Holding period from earlier allotment supported long-term capital gain treatment and allowed section 54EC deduction.

The holding period for land was computed from the earlier allotment and payment, because the later 2007 sale deed was treated as a formal ratification of an earlier acquisition rather than the sole date of ownership. On that basis, the property was held beyond the statutory period for a long-term capital asset, so the gain on transfer was assessable as long-term capital gain. Once the transfer was characterised as long-term, deduction under section 54EC was also allowable.

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Issues: Whether the gain on sale of the land was assessable as long-term capital gain or short-term capital gain, and whether the assessee was entitled to deduction under section 54EC.

Analysis: The dispute turned on the true date from which the assessee held the property. The purchase deed executed in 2007 was treated as a formal ratification of an earlier transaction, while the allotment letter and the payment details supported the assessee's case that the acquisition had in substance taken place much earlier. The relevant holding period was therefore to be computed from the earlier allotment and payment, not merely from the date of registration of the later deed. On that basis, the asset had been held for more than the statutory period required for a long-term capital asset. Once the transfer was accepted as giving rise to long-term capital gain, the deduction under section 54EC also followed.

Conclusion: The gain was correctly assessable as long-term capital gain, and the deduction under section 54EC was allowable.

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