2016 (12) TMI 1481

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....e AO for the reasons that the investment made in the bonds was made beyond six months from the date of sale of shares and therefore the conditions laid down u/s 54EC of the Act for allowing exemption were not complied with. 3. Facts of the case are that the assessee filed return of income on 14.1.2011 declaring total income at Rs. 5,82,21,197/-. The case of the assessee was selected for scrutiny and statutory notices under section 143(2) and 142(1) of the Income Tax Act, 1961 were issued and served upon the assessee. During the course of assessment proceedings, the AO noticed that the assessee has earned a long term capital gains of Rs. 4,20,39,770/- on sale of shares and securities and also claimed exemption of Rs. 50 lakhs under section ....

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....agreement. Similarly, the transferee was also required to deposit the sale consideration with the escrow agent M/s Nolakha and Associates. Accordingly, after fulfilling all the respective obligations and commitments under the agreement both the parties would approach the escrow agent to finally transfer the equity shares in favour of the transferee and also passed on the consideration to the transferor. The assessee submitted before the AO that vide shares subscription of share, sales and purchase agreement dated 31.12.2009, the assessee and the transferee approached escrow agent to effect transfer of shares who was accordingly effected transfer of shares, and therefore the period of six months should be reckoned from the agreement dated 31....

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....t of the diluted shares of the company. As a part of business purchase agreement, it was also understood that the transferee may carry out due diligence within 60 days of the aforesaid effective date and in view of such understanding, it was decided that the transfer or shall put his equity holding in an escrow account as part of the business purchase agreement. Similarly, transferees were also required to deposit their part of consideration with an escrow agent namely M/s Nolakha Associates. It was also understood that on completion of due diligence and obligation attached to each party commitment, they would approach the escrow agent to give effect to the transfer of shares. It is also observed that vide share subscription, share purchase....

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.... hand, the ld. AR opposed the arguments of the ld.DR and submitted that the actual date of transfer was 31.12.2009 which has been accepted by the ld.CIT(A) after examining the various documents and agreement produced during the appellate proceedings and recorded the findings of facts that the shares were deposited with escrow account by the transferor and so was the sale consideration by the transferee pending due diligence. The ld. AR submitted that it is customary in such type of deal that due diligence is carried out by the customer intending to purchase shares to examine whether the shares which are intended to be purchased are free from any encumbrances and charges, litigation etc and during the period of due diligence the share transf....