Calculation of time limit for 54EC Bonds liberally construed- 6 months to be calculated from date of receipt of consideration

Held in Chanchal Kumar Sircar [2012] 18 taxmann.com 304 (Kolkata - Trib.):
Where property is sold by assessee under a transaction ('deemed transfer') covered by section 53A of Transfer of Property Act, possession handed over to buyer on execution of agreement against part payment and balance payment received after 6 months on registration of property, period of six months for making deposit under section 54EC of the Act should be reckoned from dates of actual receipt of consideration; if period is reckoned from date of agreement and receipt of part payment at first instance, then it would lead to an impossible situation by asking assessee to invest money in specified asset before actual receipt of same; this is based on High Court decisions in the context of sections 54E, 54B, 54EA and 54EB which are similarly worded as section 54EC

 Also, s. 54EC requires the “consideration” to be invested. If the consideration is not received, there is no question of investing it (S. Gopal Reddy 181 ITR 378 (AP), Janardhan Dass 299 ITR 210 (All) Darapaneni Chenna Krishnayya 291 ITR 98 (AP) (compulsory acquisition cases) followed).

Same view taken in Mahesh Nemichand Ganeshwade ITAT Pune
Cases Followed:

(i) ITO v. H.P. Vishweswaraiah (2001) 250 ITR 863 (Kar)

(ii) S. Gopal Reddy v. CIT (1990) 181 ITR 378 (AP)

(iii) CIT v. Smt. Roda Mistry (1998) 231 ITR 12 (AP)

Further Held by Bombay High Court in Cello Plast ITA 3731/2010 27-7-2012
Fact that s. 54EC bonds were available during the 6 months & that there were alternative bonds available irrelevant if the bonds not available on the last date

The assessee sold factory building on 22.3.2006 and earned LTCG of Rs.49.36 lakhs. The LTCG was invested in s. 54EC bonds of Rural Electrification Corporation (“REC Bonds”) on 31.1.2007, beyond the period of 6 months (21.9.2006) specified in s. 54EC. The assessee claimed that the delay was due to the fact that for the period from 4.8.2006 to 22.1.2007, the bonds were not available and the investment was made when available. The Tribunal allowed the assessee’s claim (included in file). Before the High Court, the department argued that (a) even if the bonds were not available for a part of the period, they were available for some time in the period after the transfer (1.7.2006 to 3.8.2006) and the assessee ought to have invested then & (b) the s. 54EC bonds issued by National Highway Authority(NHAI) were available and the assessee could have invested in them. HELD by the High Court dismissing the appeal:

(i) The department’s contention that the assessee ought to have invested in the period that the s. 54EC bonds were available (1.7.2006 to 3.8.2006) after the transfer is not well founded. The assessee was entitled to wait till the last date (21.9.2006) to invest in the bonds. As of that date, the bonds were not available. The fact that they wereavailable in an earlier period after the transfer makes no difference because the assessee right to buy the bonds upto the last date cannot be prejudiced. Lex not cogit impossibila (law does not compel a man to do that which he cannot possibly perform) and impossibilum nulla oblignto est (law does not expect a party to do the impossible) are well known maxims in law and would squarely apply to the present case;

(ii) The department’s contention that the assessee ought to have purchased the alternative s. 54EC NHAI bonds is also not well founded because if s. 54EC confers a choice investing either in the REC bonds or the NHAI bonds, the revenue cannot insist that the assessee ought to have invested in the NHAI bonds.