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Query regarding section 54ec

Ankur (na) (252 Points)

06 October 2011

Hello friends, please help me to clear the following doubt, i am putting it in the form of an example.

suppose an individual makes a long term capital gain of Rs. 50000 on March 20,2011 and he plans to invest it in the bonds of NHAI on August 18,2011 and the due date for him for filing the return is 31st july 2011. Now please tell me whether he will show Rs. 50000 as LTCG in his return of AY 2011-12 or can he get exemption under sec 54EC before actually investing the money.????

and if he shows Rs. 50000 as LTCG as aforesaid in AY 2011-12; then what will be his tax consequences in the next AY 2012-13 since he invests Rs. 50000 in PY 2011-12???????

Thanking in anticipation.

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12 Replies

Prosanta Chaki (CA Final So many books 📚 has little time.!) (264 Points)
Replied 06 October 2011

Return should be submit without examption on or before due date. After due date he should revise return with examption also be passable.

Sanat kumar (Chartered Accountant) (265 Points)
Replied 06 October 2011

Hi Ankur,

In this case, the assesee have to file his ROI u/s 139(1)on or before 31st July 2011 without claiming the exemption u/s 54EC because investment is necessary for claiming the exemption.

After making investment in NHAI Bond, the assessee have to file a revised return within the prescribed time for claiming the amount of exemption.

* Krishna * (CA Student) (6149 Points)
Replied 06 October 2011

@ Sanat

In my view, an assessee can file a Revised Return u/s 139(5) only in case if he discovers any ommission or wrong statement of a particular item in the Original Return. But in above example, he has not neither ommitted nor wrongly mentioned, so in my view he cannot revise the return. However, here assessee is investing his LTCG within a period of 6 months. But to revise the return above conditions are fulfilled in my view. Please clarify me on this aspect.

* Krishna * (CA Student) (6149 Points)
Replied 06 October 2011

@ Ankur

An assessee may invest his capital gains in bonds of NHAI/RECL to avail benefit of Section 54EC. However, if one invests in such a manner, then the interest accruing from the bonds of NHAI/RECL will be fully taxable on accrual basis every year. Still investing in bonds is the best option.

Aparna Raja K.C (Student) (520 Points)
Replied 06 October 2011

Since the due date of filing return of income is 31st july,2011, the deposit made on Aug,8th is not to be considered.

CA PRAVEEN SINGH (MANAGER ACCOUNTS) (2277 Points)
Replied 06 October 2011

In this case, the assesee have to file his ROI u/s 139(1)on or before 31st July 2011 without claiming the exemption u/s 54EC because investment is necessary for claiming the exemption.

After making investment in NHAI Bond, the assessee have to file a revised return within the prescribed time for claiming the amount of exemption.

agree....

Sanat kumar (Chartered Accountant) (265 Points)
Replied 06 October 2011

Hi Krishna,

I do agree with your point that a ROI can be revised only in case of Omission or wrong statement.

But in this case, Income tax law is silent regarding the filing of ROI. There are only two options available for an assessee:

1. File ROI u/s 139(1) without considering the investment or,

2. File a belated ROI: In this case Interest u/s 234A will be attracted.

So in both case, assessee will suffer. Like in 1st case he will not get the exemption and in 2nd case he has to pay interest. But the objective of section 54EC is to provide benefit of exemption.

So I think, revision will be allowed in this case.

Lets consider a case: Due to nonavailability of NHAI Bond, CBDT issued a circular extending the time limit for making investment u/s 54EC by 6 months.

So in this case, an assessee will not wait for 6 months to file his ROI. He will file his ROI u/s 139(1) so as to avoid interst u/s 234. And after investing in NHAI bond he will revise his ROI.

What you are telling is absolutely right, but the problem is then what we will do in such cases.

There are many practical difficulties in the law, where law is silent. So the opinion of one may be different from another.

3 Like

Swapnil Jain (Finance - FP&A) (564 Points)
Replied 06 October 2011

Originally posted by : Sanat kumar
	Hi Ankur, In this case, the assesee have to file his ROI u/s 139(1)on or before 31st July 2011 without claiming the exemption u/s 54EC because investment is necessary for claiming the exemption. After making investment in NHAI Bond, the assessee have to file a revised return within the prescribed time for claiming the amount of exemption.

CA Sumiit B Nagpal (Business) (1077 Points)
Replied 06 October 2011

Originally posted by : CA PRAVEEN SINGH
	In this case, the assesee have to file his ROI u/s 139(1)on or before 31st July 2011 without claiming the exemption u/s 54EC because investment is necessary for claiming the exemption. After making investment in NHAI Bond, the assessee have to file a revised return within the prescribed time for claiming the amount of exemption. agree....

Ashutosh Biswal (Asst.Manager Finance) (283 Points)
Replied 06 October 2011

In this case, the assesee have to file his ROI u/s 139(1)on or before 31st July 2011 without claiming the exemption u/s 54EC because investment is necessary for claiming the exemption. After making investment in NHAI Bond, the assessee have to file a revised return within the prescribed time for claiming the amount of exemption.....

I do agree ..

RAHUL DUGAR (Searching a Job) (28 Points)
Replied 07 October 2011

A person is going to construct a house of 3 floors and after constructing 2 floors, he let them out to tenants at rs 5500 pm.The construction work is still going on and 3rd floor and roof is still to be constructed.

Now , I want to know that whether the income of Rs132000 will be included in his income or not

I raised this question because I have heard that No income shall be computed for incomplete house.

I will be very thankful if the answer is supported by legal evidence.

RAKESH JAIN (RETIRED COMPUTER PROFESSIONAL) (369 Points)
Replied 23 August 2012

Is the maturity amount (same as investment amount) in 54EC bonds on maturity taxable or only interest paid during 3 years (investment period) taxable?