Advance Received on Investment in Specified Bonds are Eligible for Income Tax Exemption: Bombay HC [Read Order]

Business Income - Bombay High Court 2 - Tax Scan

The division bench of the Bombay High Court in the case CIT v. Subhash Vinayak Supnekar held that the assessee, who had received advance amount on investment in specified bonds are eligible for the benefit of  capital gain exemption under section 54EC of the Income Tax Act, 1961.

The bench was hearing an appeal filed by the Department against the order of the ITAT amount received on sale of a capital asset as an advance on the basis of Agreement to Sale and the same being invested in specified bonds before the final sale, would entitle the respondent assessee to the benefit of section 54EC of the Income Tax Act.

The bench comprisingof Justice M.S Sanklecha and Justice A.K. Menon analyzed the provisions of the agreement produced by the assessee, and found that the Agreement to Sale had been entered into on 21st February, 2006 in respect of the subject property and the amounts being received by the vendor (assessee) under that Agreement to Sale.

“Thus, these amounts when received as advance under an Agreement to Sale of a capital asset are invested in specified bonds, the benefit of Section 54EC of the Act is available. In the above view, the Tribunal holds that the facts of the present case are similar to the facts before the Tribunal in Bhikulal Chandak HUF (supra). The Revenue does not dispute the same before us. Moreover, on almost identical facts, this Court in Ms. Parveen P. Bharucha Vs. DCIT, 348 ITR 325, held that the earnest money received on sale of asset, when invested in specified bonds under Section 54EC of the Income Tax Act, is entitled to the benefit of Section 54EC of the Act. This was in the context of reopening of an assessment and reliance was placed upon CBDT Circular No. 359 dated 10th May, 1983 in the context of Section 54E of the Income Tax Act.”

Read the full text of the order below.