TMI Blog2011 (2) TMI 26X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee has made the said investment as per the provisions of the Income-tax Act. 2. The learned Commissioner of Income-tax has erred in considering the NABARD bond as not eligible for exemption u/s 54EC." 3. The assessee is an individual. He filed his return of income declaring long term capital gain on sale of a land at Patlipada in Thane District. There is no dispute that the capital gain on sale of the property by the assessee was Rs. 19,15,972 and the said capital gain was long term capital gain. The date of transfer of the capital asset was 9-8-2005. The assessee made investment of Rs. 20.00 lakhs in NABARD Bonds and claimed exemption from tax on capital gain. The dispute in this appeal is with regard to the eligibility of the assessee for the claim of exemption as aforesaid. The assessee had originally made a claim under section 54EA of the Income-tax Act, 1961 (the Act). Those provisions were admittedly not applicable. The correct provision under which the assessee could claim exemption was section 54EC of the Act. For claiming exemption under section 54EC the assessee had to make investment of the capital gain in long term specified asset within a period of 6 mont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said to be of the Internet Courier Services through whom he had forwarded the application for the NABARD Bond. However, the original of it has not been produced to verify the genuineness of the same. Neither has acknowledged that the application send by courier was deposited with NABARD before 9-2-2006 has been given. It is also seen that the cheque has been encashed after the due date of 9-2-2006 i.e. on 13-2-2006. All the issues clearly point to the fact that the assessee has delayed the required investment and thus not fulfilled the mandatory time limit. It is not understood as to why the assessee delayed the reinvestment by a few days specially when the money was available with the assessee well before the due date. In view of the above, it is clear that the benefits of section 54EC would not be applicable to the assessee because the time limit for the purpose of exemption has not been complied with as was mandatory to have been done." 5. On the question whether NABARD were long term specified securities, the revenue authorities held that section 54EC of the Act was introduced by Finance Act, 2000 w.e.f. 1-4-2001 and has undergone various amendments by the Finance Act, 2001, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is section, ( a ) ** ** ** (b) "long-term specified asset" means any bond redeemable after three years issued, on or after the 1st day of April, 2000, by the National Bank for Agriculture and Rural Development established under section 3 of the National Bank for Agriculture and Rural Development Act, 1981 (61 of 1981) or by the National Highways Authority of India constituted under section 3 of the National Highways Authority of India Act, 1988 (68 of 1988). 8. By Finance Act, 2001 w.e.f. 1-4-2002, clause (b) was substituted as follows: '(b) "long-term specified asset" means any bond redeemable after three years, issued, (i) on or after the 1st day of April, 2000, by the National Bank for Agriculture and Rural Development established under section 3 of the National Bank for Agriculture and Rural Development Act, 1981 (61 of 1981) or by the National Highways Authority of India constituted under section 3 of the National Highways Authority of India Act, 1988 (68 of 1988); (ii) on or after the 1st day of April, 2001, by the Rural Electrification Corporation Limited, a company formed and registered under the Companies Act, 1956 (1 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the law as on the 1st day of the Assessment year has to be applied, cannot be accepted. The law as it stood on the date of transfer of the capital asset which results in the capital gain has to be applied. 13. In this regard, we derive support from the decision of the Hon'ble Gujarat High Court in the case of CIT v. Nirmal Textiles 224 ITR 378. The facts of the case were that the Assessee in the above case had opted for Samvat Year as his accounting period ending on Diwali every year. The controversy relates to asst. yr. 1975-76, the previous year relevant to which ended on Diwali of 1974, i.e., the accounting period commencing on next day of Diwali 1973 and ending on Diwali 1974 is the previous year relevant to the assessment year in question for which income-tax payable by the assessee was to be assessed. He sold certain plots of land between 26th Dec, 1973 and 25th March, 1974. As on the date of such transfers, the assessee had held the said immovable property for the period of more than 24 months, but less than sixty months. The assessee claimed that as on the date of transfer of the capital assets concerned, the definition of short-term capital asset under section 2(42 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lity that is the part of the statute which determines what persons in respect of what property are liable. Next, there is the assessment. Liability does not depend on assessment, that ex-hypothesi has already been fixed. But the assessment particularizes the exact sum which a person liable has to pay. Lastly, come the methods of recovery if the person taxed does not voluntarily pay. (iii) Insofar as the first part of imposition of tax is concerned, namely what persons in respect of what property are liable to pay tax is to be determined with reference to law as on the date on the occurrence of event which creates or attracts the liability to tax, unless the statute by express or by necessary implication provides otherwise. In computing such liability what is to be excluded, or included or conditions or allowances of deductions or exemptions and like matters of law as it exists on 1st of April of the relevant assessment year govern the assessment. (iv) Applying the aforesaid principles, if we view the facts of the present case the taxable event which attracted liability to tax was the transfer of immovable property as a result of which the income in the nature of capital gai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s existing in the previous year, all the machinery provisions for crystallising that liability and recovering the sum to make the levy effective will be governed by the law as at the commencement of the assessment year for which the assessment has to be made. 14. In a case of this nature, the Assessee can never claim deduction u/s.54EC if the contention of the learned D.R. is to be accepted, because the period of 6 months from the date of transfer would expire well before the 1st day of the Assessment Year. We therefore reject the argument of the learned D.R. in this regard. We hold that investment in NABARD Bonds by the Assessee at the relevant point of time has to be regarded as investment in long term specified asset within the meaning of section 54EC of the Act. 15. The next issue whether the assessee had made investment within a period of 6 months from the date of transfer of the long term capital asset has to be examined. In this regard there is no dispute that the date of transfer of the long term capital asset is 9-8-2005. There is also not dispute that the period of 6 months from the date of transfer is on or before 9-2-2006. The assessee sent the application to NABARD ..... X X X X Extracts X X X X X X X X Extracts X X X X
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