Date of Investment in 54 EC Capital gains bonds

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This discussion explores a common query regarding the 54 EC Capital Gains Bonds: whether an investment made within the six-month window qualifies for capital gains exemption if the bond allotment date falls after the deadline. While online investment can be made by the 17th of April, allotment often occurs later, on the 30th of April. Participants discuss the potential grey area, the importance of bank statements as proof, and reference tax rulings that suggest such claims might be challenged by tax officers, potentially requiring litigation.

Narayanan Nagarajan

Narayanan Nagarajan (Querist)
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05 April 2024 To avail capital gains exemption, investment in 54 EC Capital gain bonds are to be made within 6 months. The six month period ends on 17th April 2024. Though the investment can be made online before 17th April, allotment of bonds will be made only on the last day of the month, viz 30th April.

In such a case, will the nvestment qualify for capital gains exemption as allotment date is beyond the due date for investment?

Nikhil Kaushik

Nikhil Kaushik (Expert)
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05 April 2024 as far as I know, the date of allotment is considered as the date of investment. Could not find any case law on this. But in case any disallowance is made, you can use your bank statement as a proof of investment plus the fact that the interest on the bond is paid right from the date on which them money is credited to the issuing agency's bank account.

Having said that, its a grey area. good chance that you may get a disallowance.

Refer to this article : https://economictimes.indiatimes.com/et-personal/gaining-ground/articleshow/747371.cms?from=mdr

Narayanan Nagarajan

Narayanan Nagarajan (Querist)
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05 April 2024 Thank you very much Sir.
In the meantime, I could come across this message. Will it be of help?
https://taxguru.in/income-tax/period-deduction-section-54ec-income-tax-act-regarded-british-calendar-months.html

Nikhil Kaushik

Nikhil Kaushik (Expert)
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05 April 2024 just ran this example in the tax return ITR -2. It may go through. But just be clear that ITO often still disallow and let you litigate at CIT(A) and ITAT level. Thats the reason you have this judgment. Because the ITO and CIT(A) rejected this claim.

Narayanan Nagarajan

Narayanan Nagarajan (Querist)
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05 April 2024 Thank you very much.
I presume in case of rejection, we may rely upon this judgement in support.

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