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SECTION 54EC

PRADEEP VASANTRAO THOMBRE (General Manager - Taxation) (60 Points)

15 February 2010

HI,

In 20th January 2010, the AGricultural land has been transferred under Development agreement followed by irrevocable GPA. To save the Capital Gain tax whether investment can be made Rs.50 Lacs in the F.Y 2009-2010 and also Rs.50 Lacs in the F.Y 2010-2011. Please confirm.

P.V.THOMBRE

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3 Replies

Amir (Learner) (4016 Points)
Replied 15 February 2010

Dear Pradeep Sir,

We had discussed a case similar to the present & I think the investment you will made in FY 2010-11 will not be eligible for exemption u/s 54EC...

Max Payne (employed) (2574 Points)
Replied 15 February 2010

If the section is interpreted literally, yes....

But the intention of the law is to reduce the LTCG by 50 lakhs only for that previous year.... though the literal contruction can mean upto Rs.1 crore....

(In such a situation, there is a violation of equity before the law in my opinion, cos mere timing of the transfer will allow some assesee to claim twce the benefit as others... the concept of income tax is to tax CG arising during the previous year, not at a point of time during the Previous year..... Where the literal interpretation gives absurd meaning, the interpretation should not be literal, also agreed by Mumbai AT in Manjula Shah's case reg indexation of gifted assets....)

Thus in my opinion, u shud not invest 1 crore, there could be demand and would be litigation... If assessee is individual, then go for section 54B and relax....