Section 54EC

Section 54EC — the law in short

What the courts have decided on section 54EC, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• ITO v Parikh Transport Co. High CourtHelps taxpayerNo later treatment found
  I sold a building on which depreciation had been claimed in earlier years. The Assessing Officer applies s.50, calls the gain short-term and refuses the bond exemption. Can he?
  Not on this Gujarat decision, for two independent reasons. Section 50 applies only where the asset both is depreciable and forms part of a block of assets, so an asset withdrawn from business use before the block-of-assets scheme began never entered a block and s.50 does not reach it. And in any event the legal fiction in s.50 is confined to the computation of capital gains and cannot cut down s.54EC, which exempts the gain where the assessee invests in the specified asset.
• CIT v C. Jaichander High CourtHelps taxpayerSuperseded by amendment
  I sold property in February and put Rs.50 lakh into bonds in March and another Rs.50 lakh in June, both within six months. Can I claim section 54EC on the whole Rs.1 crore?
  Yes, for transfers before the 2014 amendment. The Madras High Court held that section 54EC(1) fixes a six month window for investment, while the first proviso caps investment at Rs.50 lakh in any financial year. Read together, an assessee who invests Rs.50 lakh in each of two financial years, both within six months of the transfer, gets the exemption on the full Rs.1 crore. The Court declined to read the ceiling into the sub-section itself. Parliament closed the gap by a second proviso inserted by the Finance (No. 2) Act, 2014 with effect from 1 April 2015, so the answer is different from assessment year 2015-16 onwards.
• Sunil Kumar Agarwal v CIT High CourtHelps taxpayer
  The AO adopted the stamp duty value and I never asked for a DVO reference. Can he do that?
  No. Where the stamp duty valuation exceeds the stated consideration, the Assessing Officer must refer the valuation to the DVO under s.50C(2), and must do so even where the assessee never asked. Recording the Sub-Registrar's value in the deed does not show that the seller accepted it, because the stamp duty burden falls on the purchaser.
• CIT v Cello Plast High CourtCuts both ways
  The 54EC bonds weren't on sale before my six months ran out. Have I lost the exemption?
  No. Where the specified bonds were genuinely unavailable on the last date of the six-month window, the time limit stands effectively extended and an investment made as soon as the bonds became available qualifies under section 54EC.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.