Section 54EC eligibility turns on possession date under a development agreement, with bonds invested within six months treated as valid.

For section 54EC, the relevant transfer date under a joint development arrangement is the date possession is handed over in part performance; investments in specified bonds made within six months from that date remain eligible, even if split across two financial years, and the deduction was allowed. The assessee's additional claim for construction cost under section 54 was supported by fresh material admitted at appeal, but earlier verification was incomplete and duplication needed examination, so the matter was remanded to the Assessing Officer for fresh factual enquiry.

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Issues: (i) Whether deduction under section 54EC was available where the investment in specified bonds was made within six months from the date of handing over possession under a joint development agreement. (ii) Whether the assessee's claim for additional cost of construction under section 54 required fresh consideration.

Issue (i): Whether deduction under section 54EC was available where the investment in specified bonds was made within six months from the date of handing over possession under a joint development agreement.

Analysis: The transfer for capital gains purposes was held to arise when possession was given in part performance of the agreement. The agreement itself contemplated handing over possession only after approval of the building plan, and the plan was approved only later. On that footing, the investments in the specified bonds were within the statutory six-month period. The fact that the investments were made in two different financial years did not defeat the claim, as long as both investments fell within the six-month window.

Conclusion: The deduction under section 54EC was allowable and the disallowance was set aside.

Issue (ii): Whether the assessee's claim for additional cost of construction under section 54 required fresh consideration.

Analysis: The additional claim was supported by fresh material that had been admitted at the appellate stage. The earlier verification was found to be incomplete, and the quantum of the claim required proper examination to determine whether there was duplication and to what extent any further relief was justified. The matter therefore needed a fresh factual enquiry by the Assessing Officer.

Conclusion: The issue was remanded to the Assessing Officer for fresh consideration.

Final Conclusion: The appeal succeeded on the section 54EC issue, while the additional construction claim was sent back for reconsideration, resulting in a partial relief to the assessee.

Ratio Decidendi: For section 54EC, the relevant date is the date on which possession is handed over in part performance of the development arrangement, and investments made within six months from that date remain eligible even if they fall in different financial years.

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