How to avail LTCG Exemption of more than 50 Lacs u/s 54EC in a FY?

Viewed 2246

I sold a land in March 2012 and as a result had LTCG of Rs. 65.5 lacs. To save CG tax, I purchased NHAI-bonds of Rs. 50 lacs in March, 2012, and of Rs. 15.5 lacs in April, 2012. In the income-tax return of FY 2011-12 (AY 2012-13), I claimed 65.5 lacs exemption u/s 54EC. Now my case is under scrutiny u/s 143(2) and 142(1).

Please let me know whether exemption u/s 54EC of bonds purchased in April, 2012, is permitted for the FY 2011-12. Sincere thanks in anticipation.

3 Answers

Dear Anil

The Law states that the max limit to claim exemption is 50 Lakhs and this sum should be invested within 6 months from the date of sale. However, you have claimed Rs. 65.5 Lakhs.

The main issue here is understanding the point that whether Rs. 50 Lakh limit is per year or per property.

Referring to previous case laws, you wld be happy to note that it has been decided that if the assessee is able to keep the six months’ limit from the date of transfer of capital asset, but, still able to place investment of Rs. 50 lakhs each in two different financial years, we cannot say that the restrictive proviso will limit the claim to Rs. 50 lakhs only and therefore you would be claim to claim exemption of Rs. 65.6 Lakhs

Case Law:

  1. ITAT CHENNAI BENCH ‘D’ : Smt. SriramIndubal versus Income-tax Officer
  2. Ahmedabad Bench of this Tribunal in the case of Aspi Ginwala

Thank you so much for the (favorable) reply.

Purchase of NHAI bonds within six months of sale is permitted for deduction u/s 54EC.

However in some cases, the decision has come in favor of the income tax officer and not the assessee

Refer: Assistant Commissioner of Income-tax, Circle-2, Ajmer v. Shri Raj Kumar Jain & Sons (HUF).

Its advisable that you study the cases which have been in favor of the assessee and try to convince your income tax officer on the same...

I am also very thankful to you for this reply which will help many others in understanding the complex situation with respect to section 54EC.

Related