I have incurred capital gains with an agreement for sale dated 9-Aug-2019 and received the funds on the same date. I wish to take NHAI bonds on or before 5-Feb-2020. When I read Information Memorandum dated 01-Apr-2019 of NHAI, Page 5, what I saw is even if I make RTGS/NEFT today to their account, they will consider deemed date as last day of the month and all benefits in terms on interest and capital gain tax exemption will be available to me as on deemed date (which will be 29-Feb-2020). For me 8-Feb-2020 is the last date of 6 month window. So I am bit worried as to what to do? Will Income Tax department consider 5-Feb-2020 as date of payment in Capital Gain Bonds and give me exemption or will they go by deemed date 29-Feb-2020. If IT department goes by 29-Feb-2020, I will be in trouble as my investment in NHAI bonds at 5.75% will become dead investment plus I will end paying hefty Capital Gain Taxes. I have 3 options now 1. Take a chance and invest in bonds hoping for the best 2. Pay hefty taxes and invest in PO NSC for 7.9% return 3. Put the money in Capital Gain Saver account and buy a house to save tax ( even though I don't want to buy one!) Do you have any other suggestion please?
Hello,
"Month" is not defined under the income tax law. There are various case laws, specifically in case of Sec. 54EC Bonds, where it was held that six months period should be reckoned from the end of the month in which the transfer(Sale) takes place. So you have time upto the end of February for investment in Sec. 54EC Bonds.
Advisable to invest before 8th Feb. 2020 to avoid any issue.
I hope that this answer satisfies your requirements.
Regards,
CA Hunny Badlani
There are case laws in your favour where payment was made in time and hence one would get exemption and the section says 6 months not 180 days so you also get full month of february to invest.
Hope you find the information helpful if you do please rate it 5 and provide your valuable feedback for my improvement.
Thank you.
Dear Sir,
You will get the exemption even if the investment made on or before 29-feb-2020 as decided in many case laws.
Sir, if you are planning to buy the Bond within 5-Feb-2020, then you are well within the time limit of 6 months. So, no need to worry.
NHAI is right. There are a few Case Laws where in it was held that the period be considered from the end of the month. So, go ahead and buy the Bonds
Hi
As per the Information Memorandum, it is clearly specified that deemed date i.e. last day of month shall be considered for the benefit under section 54 EC.
However, at the same time, there are several case laws to clarify the intent of law and meaning of 6 months to be 6 calendar months for making the investment. According to this, you may make investment till Feb 2020.
The exemption shall be available.
Hi. Thanks a lot for the answer. What exactly is a case law which allows investment until end of Feb 2020? Can you please let me know where can I find these details on internet?
There are many judicial pronouncents in favor like Aquatech Engineers vs ACIT.
This is one of those cases you can easily find more:
http://itatonline.org/archives/neela-s-karyakarte-vs-ito-itat-mumbai-s-54ec-the-period-of-6-months-available-for-making-investment-means-6-calendar-months-not-180-days-payment-by-cheque-dates-back-to-date-of-presentation/
Sir, there are a few Case Laws (Income Tax Appellate Tribunal Decisions) which have held that the time limit of 6 months is actually 6 calendar months and not 180 days. So, the time limit of 6 months is reckoned to be the end of the month in which the period of 6 months expires. In your case it will end of Feb 2020 i.e 29-Feb-2020.
I have given summary of one such case law for your Reference. In this case, Shares were sold as per Assesse on 28-Feb-2005 but department contended that the shares were sold as on date of Board Resolution 24-Feb-2005. In either case, the date of investment being 30-Aug-2005, was allowed to be within the period of 6 months.
[2012] 17 taxmann.com 159 (Mum.)
IN THE ITAT MUMBAI BENCH 'G'
Yahya E. Dhariwala v. Deputy Commissioner of Income-tax, Circle-15(2)
IT: For purpose of section 54EC, period of six months has to be reckoned from end of month in which transfer took place
Below is the extract of Para 14 of the Order:
14. In view of the above discussion and from the language in section 54EC, we are of the opinion that six months period should be reckoned from the end of the month in which the transfer takes place. As the investment has been made on 30th August 2005, we hold that the assessee has invested a part of the capital gain within a period of six months after the date of transfer of the long term asset in question in specified assets. We order accordingly. The grounds raised by the assessee are allowed.
Mr. Yahya E. Dhariwala V/s Dy. Commissioner of Income Tax (ITAT Mumbai)
Alkaben B. Patel Vs ITO (ITAT Ahmedabad)
Hi,
There are many judicial pronouncents in favor of said situation:
Please refer below link:
Hello Sir,
Yes, you can invest until end of Feb 2020.
The exemption shall be available on the same.
Ok Sir.