The assessee sold a plot of land for a sale consideration of Rs.25 lakhs and invested the entire amount in bond as specified under section 54EC. In return for income, the assessee had declared long-term capital gain on transfer of land at Rs. 21.19 lakhs and claimed full exemption of such capital gain under section 54EC.

Assessing Officer determined long-term capital gain of the assessee at Rs.49.47 lakhs for purpose of levying stamp duty and, accordingly, passed an order of assessment and charged Rs. 24.47 lakhs (Rs. 49.47 lakhs – Rs. 25 lakhs) to tax as a capital gain.

The assessee contended that since the entire sale consideration of Rs.25 lakhs was invested in a specified bond, the assessee must get full exemption from capital gain, irrespective of computation of deemed sale consideration under section 50C. Court held that capital gain and consequently computation of exemption under section 54EC shall have to be worked out on basis of substituted deemed sale consideration of transfer of a capital asset in terms of section 50C. Therefore, the assessee would be chargeable to capital gains to extent of enhanced and notional sale consideration under section 50C 104 taxmann.com 208 (Bombay)