Section 54EC deduction depends on the effective transfer date, and completed registration can bring bond investment within time.

Section 54EC relief was available where the capital gain was invested within six months of the effective date of transfer, and the completion of registration determined that date on the facts. The sale agreement had been executed earlier, but additional stamp duty was paid and registration was completed on 22.03.2012; REC Bonds were purchased on 31.03.2012. The payment of additional stamp duty formed part of completing registration and was not treated as an afterthought, so the transfer was taken to have occurred on 22.03.2012. The bond investment was therefore within the statutory period and the deduction was admissible.

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Issues: Whether the assessee was entitled to deduction under section 54EC of the Income-tax Act, 1961 in respect of investment in REC Bonds made within six months from the date of completed registration of the transfer agreement, or whether the period had to be counted from the earlier date treated as a deemed transfer.

Analysis: The investment under section 54EC is available where the capital gain is invested within six months after the date of transfer of the capital asset. On the facts, the agreement for sale was initially executed earlier, but additional stamp duty was paid and the registration process was completed on 22.03.2012. The REC Bonds were purchased on 31.03.2012. The payment of additional stamp duty was treated as part of the completion of registration and was not regarded as an afterthought. In these circumstances, the effective completed transfer was taken as having occurred on 22.03.2012, bringing the bond investment within the statutory period.

Conclusion: The disallowance of deduction under section 54EC was not sustainable and the assessee was held entitled to the claimed relief.

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