494B. REC and NHAI Bonds
Section 54EC of the Income-tax
Act,1961 provides that capital gain arising from the transfer of a long-term
capital asset shall not be charged to tax to the extent such gains are invested
in ‘long-term specified asset’ within a period of six months after the date of
such transfer.
2. Prior to the amendment to section 54EC by the
Finance Act, 2006, ‘long- term specified asset’ for the purposes of said
section means any bond redeemable after three years and issued by the National
Bank for Agriculture and Rural Development (NABARD), National Highways
Authority of India (NHAI), Rural Electrification Corporation Ltd. (REC),
National Housing Bank (NHB), or Small Industries Development Bank of India (sidbi).
3. However, after the amendment to said section
by the Finance Act, 2006, ‘long-term specified asset’ means any bond,
redeemable after three years and issued on or after 1-4-2006 by NHAI and REC
and notified by the Central Government in the Official Gazette for the purposes
of said section. It has been reported by NHAI and REC that, consequent upon
this amendment proposed by the Finance Bill, 2006, issue of old bonds was
closed on 29-3-2006.
4. Bonds of NHAI and REC under the amended
provision of section 54EC have been notified by the Central Government vide
Notification Nos. S.O. 963(E) and S.O. 964(E), dated 29-6-2006 for Rs. 1,500
crores and Rs. 4,500 crores, respectively to be issued during financial year
2006-07. It has been informed by REC and NHAI that these bonds will be issued
from 1st July, 2006 and 20th July, 2006, respectively.
5. It has been brought to the notice of the
Central Board of Direct Taxes that some persons could not avail of the benefit
under section 54EC of the Income-tax Act on account of the non-availability of
the capital gain bonds. Further, for some other persons the effective time
available for making the investment is less than six months because of
non-availability of these bonds.
6. With a view to removing the hardship caused
to taxpayers, the Central Board of Direct Taxes, in exercise of powers
conferred by clause (c) of sub-section (2) of section 119 of the
Income-tax Act, 1961, hereby orders that the limitation of six months for
making the investment under section 54EC of capital gains arising from the
transfer of a long-term capital asset, is extended—
(i) up
to 30th September, 2006, in case of persons where the long-term capital asset
was transferred between 29-9-2005 and 31-12-2005 (both dates inclusive);
(ii) up
to 31st December, 2006, in case of persons where the long-term capital asset
was transferred between 1-1-2006 and 30-6-2006 (both dates inclusive).
Order F.No. 142/09/2006-TPL, dated
30-6-2006