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Income Tax Appellate Tribunal, PUNE BENCHES “B” :: PUNE
Before: SHRI S.S.GODARA & DR. DIPAK P. RIPOTE
ORDER
PER DR. DIPAK P. RIPOTE, AM:
This appeal filed by the Assessee is directed against the order of ld.Commissioner of Income Tax(Appeals)-2, Pune dated 22.01.2020 emanating from assessment order under section 143(3) of the Income Tax Act, 1961 dated 22.12.2018. The Assessee has raised the following grounds of appeal:
Shri Sitaram Raosaheb Rahane [A] “1. The learned C1T (A) erred in upholding the action of the A.O. in making the addition of Rs.95,02,863/- towards long term capital gains on sale of agricultural lands without appreciating that the said addition was not justified on facts of the case and in law.
The learned CIT(A) erred in denying the benefit of deduction u/s 54B in respect of investment of Rs. 1,64,98.000/- made towards purchase of another agricultural land at Gat No.309/A, Manerwadi village, Pune vide Registered Agreement dated 13.04.2016 and thereby confirming the addition of Rs.95,02,863/- on account of long term capital gains on transfer of agricultural lands without appreciating that the said addition was not justified on facts and in law.
3. The learned CIT(A) erred in holding that the possession of the impugned land at Gat No.309/A, Manerwadi village, Pune was not handed over to the assessee vide Registered Agreement dated 13.04.2016 and thereby denying the deduction u/s 54B in respect of the investment of Rs. 1,64,98,000/- made by the assessee towards purchase of the said land without appreciating that the said reason did not warrant disallowance of deduction u/s 54B upon the facts of the case.
The learned CIT(A) further erred in holding that the impugned land at Gat No.309/A, Manerwadi village, Pune was under the reservation of ‘Forest Dept.' and hence, it could not be said to be agricultural land as mandated u/s 54B and thereby denying the deduction u/s 54B in respect of the investment of Rs. 1,64,98,000/- made by the assessee towards purchase of the said land vide registered agreement dated 13.04.2016 without appreciating that the benefit of section 5413 was available in respect of any land purchased for being used for agricultural purposes and hence, the said disallowance was not warranted in law.
The learned CTT(A) failed to appreciate that the final purchase deed could not be executed within the stipulated period due to litigation pending before Hon'ble Bombay High Court regarding validity of reservation placed by 'Forest Dept.’ on the impugned land and hence, considering the beneficial nature of provisions of section 54B, it should have been given a liberal interpretation so as to allow the benefit u/s 54B in respect of the amount actually invested towards purchase of the impugned agricultural land within the stipulated time limit.
Without prejudice to the above grounds, the assessee submits that the A.O. has erred in allowing deduction u/s 54B of Shri Sitaram Raosaheb Rahane [A] Rs.34,36,320/- in respect of investment in agricultural land at Gat No.476/2, Makhmalabad village, Nashik as against the correct amount of Rs.36,34,320/- and hence, the A.O. may please be directed to rectify the above mistake which is apparent from record.
Without prejudice to the above grounds, the assessee submits that none of the two sale deeds which resulted into transfer of original asset in the form of agricultural lands were executed in the year under consideration and hence, merely because the said sale deeds were registered in A.Y.2016 - 17, it could not be said that the capital gains on transfer of such lands arose in A.Y.2016 - 17 and therefore, the A.O. is not justified in assessing the long term capital gains arising on transfer of such lands in the asst, u/s 143(3) completed for A.Y.2016 17.
Without prejudice to the above grounds, the assessee submits that the learned A.O. has erred in computing the interest liability u/s 234B on a higher side without appreciating that the interest u/s 234B ought to have been computed only on the quantum of returned income and not on the amount of assessed income.” Brief facts of the case : 2. The assessee is a Government Officer in Irrigation Department Government of Maharashtra. The Assessee filed return of Income for A.Y.2016-17 on 21/09/2016 declaring Salary Income of Rs.9,09,927/-, Income from House Property of Rs.-137650/-, Capital Gain -Zero, Income from Other sources, and Agricultural Income of Rs.1,07,120/-. The assessee’s case was selected for Scrutiny. The Assessing Officer(AO) observed that Assessee had sold Land at Survey No.993/2 Nasik with another Co-owner, assessee’s share in the sale consideration was Rs.1,03,37,900/-. The assessee had sold another property during the year for Rs.91,89,000/-. Thus the Total Sale Consideration
Shri Sitaram Raosaheb Rahane [A] received by the assessee during the year was Rs.1,03,37,900/- + Rs.91,89,000/- = Rs.1,95,26,900/-.
2.1 The assessee claimed that he purchased Agricultural Land during the year and claimed deduction u/s.54B of the Act from Capital gain.
The Assessing Officer (AO) in the assessment order observed that Assessee vide Registered िबनाक�ा साठेखत करारनामा ‘Without Possession SatheKhath’ dated 13/04/2016 claimed to have purchased land. The AO observed that the land was reserved forest with the Government; hence, the assessee could not take possession of the land. The AO denied assessee the deduction u/s.54B of the Act. Ld.CIT(A) confirmed the same. Aggrieved by the order of the Ld.CIT(A) the assessee filed appeal before this Tribunal.
Submission of the Ld.AR : 4. Ld.Authorised Representative of the assessee filed paper book containing 99 pages. The Ld.AR submitted that during the year the assessee has invested the Sale Consideration in the purchase of Agricultural Land. He read out the Marathi
Shri Sitaram Raosaheb Rahane [A] िबनाक�ा साठेखत करारनामा Sathekath dated 13/04/2016. He explained that Assessee has purchased Agricultural Land from various members of Jawalkar Family for total consideration of Rs.3,66,98,000/-. The assessee paid Jawalkar Family Rs.1,50,00,000/- and the remaining amount was to be paid on receiving the possession at the time of Sale deed. The Ld.AR explained that the Government had acquired the impugned land as reserved forest. The Land Owners have filed petition before the Hon’ble High Court and it is pending. Intention of the assessee is to purchase agricultural land. Ld.AR submitted that hence assessee is eligible for deduction u/s.54B.
Submission of Ld.DR : 5. Ld.Departmental Representative of the Revenue relied on the orders of AO and CIT(A). Ld.DR read out the relevant clauses of the िबनाक�ा साठेखत करारनामा ‘Sathe khat’ to explain that possession of the impugned land has not been handed over to the assessee. The Land has been acquired by Government as reserve forest long back. Hence, it is not an agricultural land. To claim benefit u/s.54B, the land should be Agricultural Land. The Seller Jawalkar family had no title in the Shri Sitaram Raosaheb Rahane [A] land and hence they could not sale the impugned land. As per the 7/12 records, the Land Owner is Government and Jawalkar family has been shown as “Other Rights”. Thus, the seller Jawalker Family was not the owner of the land. Since Jawalkar were not the owner of the Land as per 7/12, they could not have sold the impugned land to the assessee. Hence, assessee has not purchased Agricultural Land which is the precondition for deduction u/s.54B. Therefore, the assessee is not eligible for deduction u/s 54B of the Act.
Findings & Analysis : 6. We have heard both the parties and perused the records. The only issue for our consideration is whether the assessee is eligible for deduction u/s.54B of the Act.
6.1 The relevant portion of Section 54B of the Income Tax Act, 1961 is reproduced here as under: Capital gain on transfer of land used for agricultural purposes not to be charged in certain cases. 54B. (1) 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 original asset), and the assessee has, within a period of two years after that date, purchased any other land for being used for agricultural
Shri Sitaram Raosaheb Rahane [A] purposes, then, instead of the capital gain being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the followi.ng provisions of this section, that is to say,— (i) if the amount of the capital gain is greater than the cost of the land so purchased (hereinafter referred to as the new asset), the difference between the amount of the capital gain and the cost of the new asset shall be charged under section 45 as the income of the previous year; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase, the cost shall be nil; or (ii) 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; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase, the cost shall be reduced, by the amount of the capital gain.(emphasis supplied) 6.2 Thus, as per Section 54B, to claim deduction the assessee should have within two years from the Sale of Original asset, purchased any land for being used for Agricultural purpose.
6.3 In this case the assessee vide िबनाक�ा साठेखत करारनामा [Non Possession Sathe Khath] dated 13/04/2016 claimed to have purchased agricultural land from various members of Jawalkar Family.
6.4 To decide this question we have to understand the history of the impugned land. In the िबनाक�ा साठेखत करारनामा [Non Possession Sathe Khath] the Jawalkar family (seller) of the Shri Sitaram Raosaheb Rahane [A] impugned land admitted that the impugned land was acquired by Government as Forest land. It is mentioned in the िबनाक�ा साठेखत करारनामा [Non Possession Sathe Khath] that the Jawalkar family does not have time and resources to fight the court case to get the impugned land back from Government. Therefore, the Jawalkar Family had given rights to file court case to the assessee on-behalf of them. Jawalkar Family has agreed to do Sale deed as and when the land is returned by Government to them. The relevant clauses are reproduced here as under :
Shri Sitaram Raosaheb Rahane [A] ………………..
………………..
Shri Sitaram Raosaheb Rahane [A] 6.5 As per the Affidavit filed by the petitioner (Jawalkar Family members) in the Court, the impugned Land was acquired by the Government in 2006 and it was entered in the 7/12 vide the mutation entry 273 dated 11/05/2006. Vide the mutation entry 273 dated 11/05/2006 the 7/12 record shows Government as owner of the impugned land and Jawalkar Family has been mentioned under the head “other rights”. The relevant paragraph is scanned and reproduced as under :
Shri Sitaram Raosaheb Rahane [A] 6.6 Thus, since 2006, as per the 7/12 form the owner of the land is “Government” and the Jawalkar Family have “other rights”. This was the position in April 2016, when the assessee entered into िबनाक�ा साठेखत करारनामा [Non Possession Sathe Khath] with the Jawalkar Family. Copy of 7/12 form is part of the impugned िबनाक�ा साठेखत करारनामा [Non Possession Sathe Khath]. This is an admitted facts by the Jawalkar family in the impugned िबनाक�ा साठेखत करारनामा[Non Possession Sathe Khath].
7. From these facts it is clear that at the time of impugned Sale, the seller was not owner of the impugned land admittedly. One cannot sale what one does not possess. Nemo Dat Quod
Shri Sitaram Raosaheb Rahane [A] Non Habet. Therefore, there is no purchase of land by the assessee for the purpose of Section 54B of the Income Tax Act.
7.1 Thus, one can say at the most what assessee has actually purchased from the Jawalkar Family, the seller, the “other rights” in the land. Thus, the Assessee at the most has purchased “Other Rights” vide impugned िबनाक�ा साठेखत करारनामा [Non Possession Sathe Khath]. Purchase of “Other Rights” cannot be equated with purchase of land.
7.2 To be eligible to claim deduction u/s.54B, the Assessee should have purchased any land for the purpose of Agriculture.
7.3 In this case the assessee has not purchased any land but has merely purchased “other rights”. Therefore, the Assessee has not fulfilled the condition mentioned in the section 54B of the Income Tax Act 1961.
7.4 The Hon’ble Supreme Court has held in the case of Dilipkumar & Co., in Civil Appeal No. 3327 of 2007 as under : Quote,“52.To sum up, we answer the reference holding as under Shri Sitaram Raosaheb Rahane [A]
(1) Exemption notification should be interpreted strictly; the burden of proving applicability would be on the assessee to show that his case comes within the parameters of the exemption clause or exemption notification.
‘(2) When there is ambiguity in exemption notification which is subject to strict interpretation, the benefit of such ambiguity cannot be claimed by the subject/assessee and it must be interpreted in favour of the revenue.” Unquote.
7.5 Thus, the exemption provision shall be interpreted strictly. In this case, there is no purchase of land. The assessee has at the most purchased “Other Rights” which is not purchase of land. 7.6 Also, there is another condition mentioned in section 54B, that the land should be purchased for Agriculture Purpose. In this case mere purchase of “Other Rights” cannot be for agricultural purpose. 7.7 Therefore, the assessee has failed to fulfill primary conditions of Section 54B. Hence, the Assessee is not eligible for deduction u/s 54B. Accordingly, the Assessment Order is upheld. Accordingly ground number 1 to 5 are dismissed.
Ground Number 7: 8. The assessee pleaded that the impugned sale deeds of Shri Sitaram Raosaheb Rahane [A] Original Assets were not executed in A.Y.2016-17 hence no capital gain in A.Y.2016-17. However, the assessee has not filed any documents to prove the same. On the contrary in the return of income the assessee claimed that sale took place in the AY 2016-17. This is an admitted fact. Therefore, the AO has rightly taxed capital gain in A.Y.2016-17. Ground Number 7 is dismissed.
Ground Number 6: The ground number 6 is as under: 6. Without prejudice to the above grounds, the assessee submits that the A.O. has erred in allowing deduction u/s 54B of Rs.34,36,320/- in respect of investment in agricultural land at Gat No.476/2, Makhmalabad village, Nashik as against the correct amount of Rs.36,34,320/- and hence, the A.O. may please be directed to rectify the above mistake which is apparent from record 9.1 In this ground the assessee has raised an issue that there has been an arithmetical error in the assessment order. The Assessee has submitted copy of the Marathi Sathe Khath ( Sale deed) dated 27/08/2014 for the land at Survey number 476/2 Nashik. As per the said Sathe Khat the purchase price is Rs.34,00,000/-. The assessee has claimed expenditure on Stamp
Shri Sitaram Raosaheb Rahane [A] Duty and registration .The assessee has filed copy of the documents at page 89-94 of the paper book. The AO is directed to verify these facts and appropriately consider the correct amount. Accordingly, to the extent of verification of exact amount the issue is set aside to the AO. The AO shall provide opportunity to the assessee and assessee shall file necessary documents before the AO. 9.2 The ground number 6 is allowed for statistical purpose.
Ground number 8 is consequential hence not adjudicated. Accordingly ground number 8 is dismissed as not adjudicated.
In the result, appeal of the assessee is Partly Allowed.
Order pronounced in the open Court on 30th June, 2023.