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| DATE: | March 3, 2011 (Date of publication) |
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| Click here to download the judgement (kumarpal_54EC_time_limit.pdf) |
S. 54EC relief available if cheque issued within 6 months of transfer even if cheque cleared, and bonds issued, after 6 months
On 9.8.2005 (AY 2006-07) the assessee earned LTCG on sale of land. U/s 54EC, NABARD bonds were a “specified asset” till 31.3.2006 and the assessee had time till 9.2.06 (6 months) to make the investment. The assessee issued a cheque on 7.2.06 and sent it by courier to NABARD. The cheque was encashed on 13.2.2006 and the bonds were allotted on 15.2.06. The AO & CIT(A) rejected the claim on the ground that (i) NABARD bonds were not a “specified asset” as of 1.4.06 & (ii) the investment was not within 6 months of the transfer. On appeal to the Tribunal, HELD allowing the appeal:
(i) The department’s argument that for AY 2006-07 only the “specified assets” as of 1.4.06 should be considered is not acceptable. Instead, the law as it stood on the date of transfer of the capital asset has to be applied;
(ii) When a payment is made by cheque, then the ‘date of payment‘ is the ‘date of the cheque‘ even though the cheque may be encashed subsequently. As the cheque was issued within 6 months of the transfer, s. 54EC relief was available even though the cheque was encashed, and bonds were allotted, later.
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