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Income Tax Appellate Tribunal, SURAT BENCH, SURAT
Before: SHRI PAWAN SINGH, JM & DR. A. L. SAINI, AM
O R D E R
PER DR. A. L. SAINI, ACCOUNTANT MEMBER:
Captioned appeal filed by the assessee pertaining to assessment year (AY) 2013-14, is directed against the order passed by the Learned Commissioner of Income Tax (Appeals)-3, Surat [in short “the ld. CIT(A)”] in Appeal No. CAS/3/503/2015-16 dated 30.07.2018, which in turn arises out of an assessment order passed by the Assessing Officer under section 143(3) of the Act, 1961 (hereinafter referred to as “the Act”) dated 22.01.2016.
When this appeal was called out for hearing, learned counsel for the assessee invited our attention to the order dated 08.07.2021, passed by the Division Bench of this Tribunal in assessee’s group case in for the AY. 2013-14 on identical and similar facts, whereby the issue relating to exemption under section 54B, when the property was not registered in the name of HUF but registered in the name of one of the members of HUF, has been discussed and adjudicated in favour of assessee. Learned counsel for the assessee submitted that the present appeal is squarely covered by Assessment Year.2013-14 Dhansukhbhai A. Kanani (HUF) the aforesaid order of the Tribunal, a copy of which was also placed before the Bench.
Learned Departmental Representative (ld. DR) for the Revenue did not have much to say but he nevertheless relied upon the orders of the authorities below.
We see no reasons to take any other view of the matter than the view so taken by the Division Bench of this Tribunal in assessee’s group case vide order dated 08.07.2021. In this order, the Tribunal has inter alia observed as follows: “9. We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld.CIT(A) and other materials brought on record. We find that a key issue arises for our apt adjudication in the instant lis, is that whether property which was purchased out of the funds of the HUF and has been shown in the books of accounts of HUF and HUF is doing agricultural activities, and just merely because the property was registered in the name of co-parcerner of the HUF, makes the HUF ineligible to claim deduction under section 54B of the Act? We note that Assessing Officer was of the view that individual is a different taxable entity as compared to HUF entity and therefore denied the deduction under section 54B of the Act. We note that in the instant case the purchase of property was out of the funds of the HUF and has been shown in the books of accounts of HUF. The HUF had shown agricultural income in the year when property was purchased and in the subsequent years. The agricultural income was not shown in the hands of individual, however, it is shown in the hands of HUF. The co-parcerner of the HUF may hold property on behalf of the HUF. We note that assessee purchased agricultural land out of the sale proceeds of the agricultural land sold and after that the assessee has claimed exemption under section 54B of the Income Tax Act to the tune of Rs.27,22,020/- in respect of purchase of land situated at Vidhan, Block No.281. We further note that funds had been utilised which pertains to HUF and the same was transferred from bank account of HUF to bank account of Individual. We note that as per Hindu Succession Act, property purchased out of HUF funds or earning of HUF always remained under ownership of HUF and all members of HUF has right in that property. Thus, in the instant assessee`s case, the fruit of the property is enjoyed by the HUF. 10. We note that section 54B of the Act provides exemption in respect of capital gain on transfer of land used for agricultural purposes. Sub-section 1 of section 54B states that subject to the provisions of sub-section (2), where the capital gain arises, from the transfer of a capital asset being land which, in the two years immediately preceding the date on which the transfer took place, was being used by the assessee being an individual or his parent, or a Hindu undivided family, for agricultural purposes [(hereinafter referred to as the Page | 2
Assessment Year.2013-14 Dhansukhbhai A. Kanani (HUF) original asset)], and the assessee has, within a period of two years after that date, purchased any other land for being used for agricultural purposes, then, if the amount of the capital gain is equal to or less than the cost of the new asset, the capital gain shall not be charged under section 45 of the Act. Therefore, it is abundantly clear that Hindu undivided family (HUF) may also sale agricultural land and purchase another agricultural land and claim exemption under section 54B of the Act. Thus, HUF is also an assessee under the Income Tax Act. However, HUF is an artificial person, like limited company. All the activities of a limited company are performed by its directors, likewise, all the activities of HUF are performed by its member of HUF. Therefore, the purchase of agricultural land or sale of agricultural land are to be done by members of HUF , on behalf of HUF. In the instant case the entire purchase consideration for agricultural land was paid by utilizing fund of HUF, therefore, agricultural land so purchased belongs to HUF. Just because the agricultural land was registered in the name of individual member of HUF, does not mean that it is not a property of HUF and the HUF can not claim exemption under section 54B of the Act. We note that Hon`ble High Court of Punjab and Haryana in the case of Gurnam Singh [2008] 170 Taxman 160 (Punjab & Haryana), held that the purchased land was being used by the assessee only for agricultural purpose and merely because in the sale deed his only son was also shown as co-owner, it did not make any difference because the purchased land was still being used by the assessee for agricultural purposes. It was not the case of the revenue that the said land was being used exclusively by his son. The findings of the Hon`ble Court is reproduced below: “3. Feeling aggrieved against the aforesaid order, the respondent filed an appeal before the Commissioner of Income-tax (Appeals), who vide his order dated 17-12-2002 allowed the same and set aside the action of the Assessing Officer in denying the deduction under section 54F of the act to the respondent. Against the said order, the revenue filed an appeal before the ITAT, who vide its order dated 24-4-2006 has dismissed the appeal, while observing as under:— "The issue before us revolves around allowability of deduction under sections 54B and 54F of the Act. The land in question was purchased by the assessee in the name of his son. The learned Assessing Officer disallowed the deduction on the ground that the land is in the name of the son of the assessee, so the deduction cannot be allowed, specially when the land was purchased by Sh. Gurnam Singh out of the sale proceeds of agricultural land and since Palwinder Singh was bachelor and was not having any independent source of income was dependent upon his father even for livelihood. The conclusion of the learned Assessing Officer is available on page 4 of the assessment order. Before coming to a conclusion, we are supposed to analyze section 54B which is applicable where the capital gains arise from the transfer of capital asset and was being used for agriculture purposes which was invested in the purchase of any other land and again being used for agricultural purposes. There is no dispute to the fact that the assessee sold his agricultural land and then purchased other agricultural land out of the sale proceeds and got registered some portion of the land in the name of his only son who was a Assessment Year.2013-14 Dhansukhbhai A. Kanani (HUF) bachelor at the relevant time. If the 'ikrarnama'/agreement is analyzed which is available at page 9 of the paper book, it clearly speaks that "The purchaser is at liberty to execute the sale deed in the name of any member of his family. He is also at liberty to execute as many as sale deeds as he desires...." If the contents of the 'ikrarnama'/agreement to sale is analyzed one undisputed fact is oozing out that the sale proceeds of the agricultural land were in fact used to purchase another agricultural land. Section 54B speaks about transfer of capital asset being land within a specified period and another land is purchased for agricultural purposes, then it shall be dealt with in accordance with the provision of this section. It is not the case of the revenue that the capital gain was not utilized by the assessee for the purchase of new asset before the date of furnishing the return of income under section 139. In fact, if the facts as detailed in the 'ikrarnama' are analyzed, the capital gains was utilized by the assessee for purchasing the new asset. Section 54B is applicable as per the provision of clause 2 of the section. The only dispute raised by the revenue is that the land was got registered in the name of his son. This fact is not disputed that the assessee was an old and illiterate person and never filed any return. At the same time, he was not having any other source of income also. It is not the case that the sale proceeds were used for any other purposes or beyond the stipulated period. This fact was also not disputed that the son of the assessee was bachelor and was not having any other source of income and was totally dependent upon his father. Undisputedly, the earlier land which was sold, also belonged to the assessee and the sale proceeds were also used for purchasing agricultural land. The possession of the said land was also taken by the assessee. The only objection raised by the revenue was that the said land was registered in the name of his son. In view of these facts, it cannot be said that the capital gains/sale proceed were in any way misused for any other purposes contrary to the provisions of law." We have heard the counsel for the revenue and gone through the aforesaid impugned order. In our opinion, from the impugned order, no substantial question of law is arising for consideration of this Court as the ITAT while recording a pure finding of fact has dismissed the appeal of the revenue. Undisputedly, in this case the assessee had sold the agricultural land which was being used by him for agricultural purposes. Out of sale proceeds of the said sale, the assessee has purchased other piece of land (land in question) in his name and in the name of his only son, who was bachelor and dependent upon him, for being used for agricultural purposes within the stipulated time. Further, it is not the case of the revenue that from the sale proceeds of the agricultural land earlier owned by the assessee, the land in question was purchased for any other purpose than the agricultural purpose. Undisputedly, the purchased land is being used by the assessee only for agricultural purpose and merely because in the sale deed his only son was also shown as co-owner, the ITAT has rightly come to the conclusion that it does not make any difference because the purchased land is being used by the assessee for agricultural purposes. It is not the case of the revenue that the said land is being used exclusively by his son. In our view, a pure finding of fact has been recorded by the ITAT which does not require any interference in this appeal.”
Assessment Year.2013-14 Dhansukhbhai A. Kanani (HUF)
On the similar facts, Hon`ble High Court of Rajasthan in the case of Laxmi Narayan, [2018] 89 taxmann.com 334 (Rajasthan) held that where assessee had purchased new agricultural land out of sale consideration of his agricultural land, assessee could not be denied deduction under section 54B merely because registered document of new land was executed in name of his wife. The findings of the Hon`ble Court is reproduced below:
“7.2 On the ground of investment made by the assessee in the name of his wife, in view of the decision of Delhi High Court in Sunbeam Auto Ltd and other judgments of different High Courts, the word used is assessee has to invest it is not specified that it is to be in the name of assessee. 7.3 It is true that the contentions which have been raised by the department is that the investment is made by the assessee in his own name but the legislature while using language has not used specific language with precision and the second reason is that view has also been taken by the Delhi High Court that it can be in the name of wife. In that view of the matter, the contention raised by the assessee is required to be accepted with regard to Section 54B regarding investment in tubewell and others. In our considered opinion, for the purpose of carrying on the agricultural activity, tubewell and other expenses are for betterment of land and therefore, it will be considered a part of investment in the land and same is required to be accepted. 7.4 In view of the above, all the issues are answered in favour of the assessee and against the department.”
Now coming to the assessee`s case under consideration, in the light of the above noted judicial precedents, we note that entire purchase consideration for agricultural land was paid by utilizing money of HUF. We note that Purchase Deed is in the name of the Coparcener ( one of the HUF members). However, the property (land) is owned by HUF. The property (land) is shown in the Balance Sheet of HUF. The Co-parcerner of the HUF may hold property on behalf of the HUF. The HUF money was utilized to purchase the said agricultural land. The HUF is doing agricultural activities. For example, in case of a company, a property may be registered in the name of the Director, because company is an artificial person which can not talk, walk and think, however, the Directors do all the activities on behalf of the Company, therefore, just because property is registered in the name of director does not mean that director is owner in substance. In substance, the Company will be treated as owner of the property. Likewise, HUF is also an artificial person which can not talk, walk and think, however, the Coparceners (member of HUF) do all the activities on behalf of the HUF. In substance, the HUF is owner of the said agricultural land though it is registered in the name of the Coparcener, as the HUF is enjoying all the fruits of the said agricultural land. Thus, the HUF is entitled to claim exemption/deduction under section 54B of the Act. Therefore, based on these factual position narrated above, we are not inclined to accept the contention of the ld CIT(A) and assessing officer in any Assessment Year.2013-14 Dhansukhbhai A. Kanani (HUF) manner and therefore the addition so made is deleted. Hence this ground of the assessee is allowed.
In the result, appeal of the assessee is allowed.”
As the issue is squarely covered in favour of the assessee by the decision of the coordinate bench, in assessee`s group case of HUF and there is no change in facts and law and the Revenue is unable to produce any material to controvert the aforesaid findings of the Division Bench (supra). We find no reason to interfere in the said order of the Division Bench, therefore, respectfully following the judgment of the Coordinate Bench in assessee’s group of HUF, case we delete the addition of Rs.27,42,500/- made by Assessing Officer on account of disallowance of deduction under section 54B of the Act.
In the result, the appeal filed by the assessee is allowed.
Order is pronounced in the open court on 16/09/2021 by placing the result on the Notice Board as per Rule 34(5) of the Income Tax (Appellate Tribunal) Rule 1963.