Short Overview: The claim of deduction under section 54EC could not be disallowed since assessee has demonstrated that non–investment in REC Bonds within the stipulated period was due to non–availability of bonds in the market.

Against the gain derived from transfer of lease holds rights the assessee had claimed deduction under section 54EC towards investment made in REC Bonds. AO disallowed assessee’s claim of deduction under section 54EC, as investments in bonds were made after expiry of the prescribed period for making the investment.

It is held that the assessee had invested the amount in REC Bond, as soon as it became available. In the meanwhile, the six month period from the date of transfer of the capital asset had expired. Assessee could not have invested in the REC Bonds within the stipulated period of six months as provided under section 54EC as it was not possible on the part of the assessee to do so due to non–availability of the bonds. Thus, the claim of deduction could not be disallowed since assessee has demonstrated that non–investment in REC Bonds within the stipulated period was due to non–availability of bonds in the market.

Decision: In assessee’s favour