SHRI MATHUR LAL,KOTA vs. INCOME TAX OFFICER, WARD-2-2, KOTA

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR Jh fot; iky jko] U;kf;d lnL; ,oa Jh foØe flag ;kno] ys[kk lnL; ds le{k BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA No. 940/JP/2018 fu/kZkj.k o"kZ@Assessment Year :2014-15 cuke Mathur Lal, Income Tax Officer Vs. Near New Hanumanji Temple, Ward 2(2), Songaria, Kota. Kota. TAN/PAN No.: AAOPL 4029 L vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri P.C. Parwal (CA) jktLo dh vksj ls@ Revenue by : Shri Ram Singh (Addl.CIT) lquokbZ dh rkjh[k@ Date of Hearing : 09/10/2018 mn?kks"k.kk dh rkjh[k@ Date of Pronouncement : 12/10/2018 vkns'k@ ORDER

PER: VIJAY PAL RAO, J.M.

This appeal by the assessee is directed against the order dated 19/02/2018 of ld. CIT(A), Kota for the A.Y. 2014-15.

been supported by an affidavit of the assessee.

condonation of delay and considered the cause of delay explained by the

ITA 940/JP/2018_ 2 Mathur Lal Vs ITO

assessee in the affidavit. The ld AR has submitted that the only issue

arising from the assessment order passed U/s 143(3) of the Income Tax

Act, 1961 (in short the Act) is regarding the capital gain assessed by the

Assessing Officer in respect of sale of agricultural land and claim of

deduction U/s 54B and 54F of the Act. After the sale of the said

agricultural land, the grandson of one Shri Raghunath from whom the

land was purchased in the year 1965 by the father of the assessee

challenged the title of the land in question by filing the case on 09/5/2016

in the court of the SDO. The assessee was fighting the said case filed in

the court of SDO and in the mean time, the ld. CIT(A) has passed the

impugned order, which was received by the assessee on 08/3/2018,

however, thereafter on 04/6/2018, the case regarding title of the land in

question was decided against the assessee by the SDO and therefore, the

assessee had to take immediate steps for stay and filed the appeal

against the said order of the SDO. Thus, the assessee got engaged and

busy in the proceedings of the appeal filed before the Court of Revenue

Appellate Authority, Kota and got the stay against the order of the SDO.

Thereafter, the assessee realized that the assessee has not consulted his

counsel for filing the appeal against the impugned order passed by the ld.

CIT(A) and consequently the present appeal was filed. The ld AR has

referred to the orders passed by the SDO as well as the Revenue

ITA 940/JP/2018_ 3 Mathur Lal Vs ITO

Appellate Authority and submitted that both the developments happened

simultaneously and therefore, the assessee could not take steps for filing

the appeal in time. Thus, the ld AR has pleaded for condonation of delay

in filing the present appeal.

condonation of delay and submitted that when the assessee find time to

file the appeal against the order passed by the SDO then at the same

time, the appeal should have been filed against the impugned order

passed by the ld. CIT(A).

material on record we note that the assessee has explained the cause of

delay in paragraphs No. 3 to 6 of the affidavit of the assessee as under:

“3. That in respect of the agricultural land so sold by me a case was filed on 09.05.2016 in the court of SDO by Shri Chouthmal, grandson of Shri Raghunath about the title of this property from whom this land was purchased in 1965 by my father, Late Shri Jaganath. Therefore, during the period when the order passed by CIT(A) was received by me, I got involved in this Court case.

ITA 940/JP/2018_ 4 Mathur Lal Vs ITO

legal counsel about the future course of action to be taken against the order of CIT(A).

We note that the assessee has also filed the orders passed by the

Revenue Appellate Authority whereby the order of the SDO was stayed

and the matter was still pending before the Revenue Appellate Authority.

The reason explained by the assessee in the affidavit are found to be

correct as there was an order of SDO against the assessee whereby the

title of the assessee over the land in question was held to be invalid.

Thus, when the subject matter of the dispute in the appeal itself was

under challenge in the proceedings before the SDO and thereafter the

assessee filed the appeal before the Revenue Appellate Authority then the

reasons and cause of delay explained by the assessee having involved in

protecting the title of the land by contesting the case before the SDO as

well as by filing the appeal before the Revenue Appellate Authority is a

reasonable explanation. Accordingly, we satisfy that the assessee was

ITA 940/JP/2018_ 5 Mathur Lal Vs ITO

having a reasonable cause for not filing the appeal within the period of

limitation. Hence, we condone the delay of 91 days in filing the present

appeal.

has raised following grounds of appeal:

“1. The Ld. CIT(A) has erred on facts and in law in confirming the disallowance of indexed cost of improvement to the extent of Rs.6,75,930/- in computing income from long term capital gain.

cost of improvement amounting to Rs. 6,75,930/- while computing the

long term capital gain. The assessee sold the agricultural land for a

ITA 940/JP/2018_ 6 Mathur Lal Vs ITO

consideration of Rs. 88.00 lacs vide sale agreement dated 11/6/2013 and

subsequently a sale deed was executed on 22/09/2015. Since the stamp

duty valuation was taken at Rs. 1,17,95,288/-, therefore, the full value

consideration U/s 50C of the Act was adopted at Rs.1,17,95,288/-. The

assessee claimed indexed cost of improvement at Rs. 42,12,292/- which

includes the indexed cost in respect of the expenditure incurred for land

levelling cost of Rs. 89,980/- in the year 1984-85. The said claim of Rs.

6,75,930/- towards indexed cost of land levelling cost was disallowed by

the Assessing Officer as the assessee did not file any supporting evidence.

The assessee submitted the receipt of the said expenditure before the ld.

CIT(A), however, the ld. CIT(A) did not accept the claim of the assessee

on the ground that all genuine and allowable cost of improvement has

been allowed.

25/5/1984 and submitted that since it was an old record and the assessee

could not trace at the time of assessment proceedings, however, the

assessee filed the said receipt before the ld. CIT(A) which shows that the

assessee got the work of land levelling and incurred the said expenditure.

Thus, the ld AR has submitted that the denial of claim without considering

the supporting evidence is not justified.

ITA 940/JP/2018_ 7 Mathur Lal Vs ITO

authorities below and submitted that the receipt filed by the assessee is

an afterthought evidence as the assessee has failed to establish the

requirement of levelling of the land in the year 1984-85.

material on record. We note that the Assessing Officer has denied the

claim of cost of improvement to the extent of Rs. 6,75,930/- towards the

land levelling cost of Rs. 89,980/- claimed to have been incurred in the

year 1984 for want of any supporting evidence. The assessee filed the

receipt of the said expenditure before the ld. CIT(A). We have gone

through the receipt filed by the assessee which is placed at page No. 52

of the paper book and found that the said receipt contains all the details

of the tractor with registration number and owner of the tractor who has

issued the receipt. The nature of work done alongwith the rate as well as

the total amount raised against the said work. It is stated in the said

receipt that the levelling of the land was got done for the purpose of

irrigation from canal though subsequently the assessee also got the tube

well bored in the land itself. Thus, having regard to the area of the land

and the contents of the receipt we find that the claim of expenditure

incurred in the year 1984 for land levelling has been established by the

ITA 940/JP/2018_ 8 Mathur Lal Vs ITO

assessee by production of the said receipt. Accordingly, the claim of the

assessee deserves to be allowed. We direct the Assessing Officer to allow

the claim of the assessee for indexed cost of improvement of land at Rs.

6,75,930/-. Hence, this ground of the assessee’s appeal stands allowed.

54B of the Act to the extent of Rs. 18,26,320/-. The assessee claimed

deduction U/s 54B of Rs. 48,43,320/- which includes purchase of

agricultural land of Rs. 7.00 lacs on 16/5/2012 in the name of son and the

expenditure on improvement of the said land of Rs. 10,11,000/- including

the cost of construction of two rooms and further the stamp duty paid by

the assessee in respect of another agricultural land purchased on

05/7/2013. The ld AR of the assessee has submitted that the ld. CIT(A)

while deciding the claim of deduction U/s 54B of the Act has confirmed

the disallowance in respect of the agricultural land purchased on

16/5/2012. However, the assessee received the consideration in respect

of the land sold at the time of the agreement dated 29/12/2011 thus, the

ld AR has submitted that the said consideration to the extent of Rs. 70.00

lacs received at the time of first agreement dated 29/12/2011 was

invested in purchase of agricultural land and therefore, the agricultural

land purchased of Rs. 7.00 lacs on 16/5/2012 is eligible for deduction U/s

ITA 940/JP/2018_ 9 Mathur Lal Vs ITO

54B of the Act. The ld AR has pointed out that though there was

subsequent agreement dated 11/6/2013 and thereafter the sale deed was

executed on 22/09/2015, however, the assessee received part

consideration at the time of first agreement to sell dated 29/12/2011.

Hence, the ld AR has submitted that once the sale consideration received

against the sale of the land in question was used for purchase of

agricultural land then the claim should not be denied on technical

reasons.

Section 54B of the Act clearly envisaged that the deduction is allowable

only in respect of the agricultural land purchased after the sale of existing

agricultural land. Thus, it is the deduction allowed only when the capital

gain is used for purchase of agricultural land within a period of two years

after the date of transfer and not before the transfer. He has relied upon

the orders of the authorities below.

material on record. The provisions of Section 54B of the Act set out the

conditions for allowing the deduction in respect of the capital gain arising

from transfer of agricultural land if the assessee has purchased within a

period of two years, any other land for being used for agricultural

ITA 940/JP/2018_ 10 Mathur Lal Vs ITO

purposes. For ready reference, we quote the provisions of Section 54B of

the Act:

“[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 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 following 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.]

[(2) The amount of the capital gain which is not utilised by the assessee for the purchase of the new asset before the date of furnishing the return of income under section 139, shall be deposited by him before furnishing such return [such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under sub-section (1) of section 139] in an account in any such bank or institution as may be specified in, and utilised in accordance with, any scheme which the Central Government may, by notification in the Official Gazette, frame in this behalf and such return shall be accompanied by proof of such deposit; and, for the purposes of sub-section (1), the amount, if any, already utilised by the assessee for the purchase of the new asset together with the amount so deposited shall be deemed to be the cost of the new asset : Provided that if the amount deposited under this sub-section is not utilised wholly or partly for the purchase of the new asset within the period specified in sub- section (1), then,—

ITA 940/JP/2018_ 11 Mathur Lal Vs ITO

(i) the amount not so utilised shall be charged under section 45 as the income of the previous year in which the period of two years from the date of the transfer of the original asset expires; and

(ii) the assessee shall be entitled to withdraw such amount in accordance with the scheme aforesaid.”

Thus, the provisions envisaged the benefit of deduction when the capital

gain arising from the transfer of agricultural land is used for purchase of

another agricultural land within a period of two years after the date of

transfer. The Legislature has not intended to allow the claim in respect of

the land purchased prior to such transfer as in the case of deduction U/s

54 and 54F of the Act. Thus, the beneficiary provision has to be construed

and interpreted strictly so far as the primary condition for eligibility to be

satisfied though the other ancillary and procedural conditions regarding

keeping the fund in the capital gain account scheme before due date of

furnishing return of income can be construed liberally once the primary

condition for eligibility of the deduction is satisfied. Even otherwise the

assessee initially entered into an agreement to sell on 29/12/2011 and

thereafter another agreement was entered into by the assessee on

11/6/2013, therefore, the first agreement was no more in existence when

the parties have entered into a second agreement which has ultimately

culminated in execution of sale deed on 22/09/2015. It is not the case

that the first agreement dated 29/12/2011 was the basis of the execution

ITA 940/JP/2018_ 12 Mathur Lal Vs ITO

of sale deed. Even otherwise the assessee has declared the transfer of

the land in question for the year under consideration and not in the year

relevant to the first agreement dated 29/12/2011. Therefore, if the

contention of the ld AR of the assessee is accepted then the transfer itself

would take place from the date of first agreement and the entire case has

to be reversed back. Thus, having regard to the facts and circumstances

of the case when the assessee himself has declared the transfer of the

land in question vide agreement dated 11/6/2013 then the earlier

agreement dated 29/12/2011 cannot be considered as a relevant

document for the purpose of transfer of the land in question. There is no

dispute that the land for Rs. 7.00 lacs was purchased by the assessee

vide agreement dated 16/5/2012 which is prior to the sale declared by the

assessee vide agreement dated 11/6/2013. Consequently, the said

purchase prior to the sale of the existing land would not be allowable for

deduction U/s 54B of the Act.

13.1 The next grievance of the assessee is regarding the disallowance of

expenditure of Rs. 10,11,000/- claimed by the assessee on improvement

of the said land which is purchased vide agreement dated 05/7/2013.

Though the ld. CIT(A) has allowed the claim U/s 54B of the Act to the

extent of purchase cost of the said land, however, the claim of

ITA 940/JP/2018_ 13 Mathur Lal Vs ITO

improvement was disallowed by the ld. CIT(A). We find that out of the

said claim of Rs. 10,11,000/-, the assessee has incurred some amount in

respect of levelling of the land and erecting boundary wall and the

balance amount was incurred in respect of the construction of two rooms.

As far as the expenditure incurred by the assessee for improvement of the

agricultural and making it fit for agricultural operations, the said

expenditure can be allowed as cost of the land itself. However, the

expenditure incurred for construction of two rooms cannot be regarded as

an expenditure incurred for the purpose of agricultural land. Hence we

allow the part claim of the assessee to the extent of the expenditure

incurred on improvement of the agricultural land and erection of boundary

wall. The Assessing Officer is directed to recompute the deduction U/s

54B of the Act by allowing the said part of cost of improvement on the

agricultural land.

13.2 The next grievance of the assessee in respect of the claim of

deduction U/s 54B of the Act is regarding the stamp duty expenditure was

not taken as part of cost of purchase of land. The ld AR has referred to

the order of the ld. CIT(A) and submitted that though the ld. CIT(A) has

allowed the claim of deduction U/s 54B of the Act in respect of the land

purchased vide sale deed dated 05/7/2013, however, the stamp duty paid

ITA 940/JP/2018_ 14 Mathur Lal Vs ITO

by the assessee of Rs. 66,410/- was not included in the cost of purchase

of land. We find that the stamp duty is part of cost of purchase of land

and therefore while allowing the claim of deduction U/s 54B of the Act,

the total cost of land including the stamp duty has to be taken into

consideration. Accordingly, we direct the Assessing Officer to consider the

stamp duty paid by the assessee as part of the cost of purchase of

agricultural land while computing the deduction U/s 54B of the Act.

Hence, this ground of assessee’s appeal is partly allowed.

deduction U/s 54F of the Act to Rs. 20,07,687/- as against Rs.

27,39,676/- claimed by the assessee. We have heard the ld. AR as well as

the ld DR and considered the relevant material on record. The assessee

purchased residential plot and then constructed a house. The assessee

has claimed the cost of new house at Rs. 45,65,000/- and filed a copy of

valuation of a registered valuer in support of his claim. The ld. CIT(A)

referred the matter of valuation of cost of the property to the DVO who

has determined the cost of property at Rs. 38,21,640/-. The ld. CIT(A)

has adopted the cost of new house estimated by the DVO and

consequently restricted the deduction U/s 54F of the Act to Rs.

20,07,687/- as against the deduction claimed by the assessee of Rs.

ITA 940/JP/2018_ 15 Mathur Lal Vs ITO

27,39,676/-. The ld AR has pointed out that the assessee has purchased

plot of land for construction of house at Rs. 8.50 lacs as per the

agreement dated 17/08/2013 and also filed an affidavit of the seller to

confirm the purchase consideration of the land. He has further contended

that the DVO has adopted DLC rate at Rs. 5,46,840/- ignoring the actual

purchase consideration paid by the assessee. Further the DVO has not

given any price acceleration while estimating the cost of construction of

the house whereas the registered valuer has added the same @ 19.60%

from the year 2012 to 2014. Thus, the ld AR has submitted that the cost

of new house claimed by the assessee is based on the actual expenditure

incurred by the assessee and shall be allowed for the purpose of

deduction U/s 54F of the Act.

authorities below and submitted that the ld. CIT(A) has already allowed

the claim of assessee to the extent of cost of new house determined by

the DVO. The assessee has not pointed out any defect in the value

determined by the DVO except raising the minor issues which is nothing

but the subject matter of estimates.

on record at the outset, we note that, so far as the purchase

ITA 940/JP/2018_ 16 Mathur Lal Vs ITO

consideration of residential plot, the assessee has produced the evidence

of Rs. 8.50 lacs as recorded in the purchase agreement dated 17/8/2013

and further an affidavit of the seller was filed by the assessee. Therefore,

to the extent of the cost of plot of land in question is concerned when the

assessee has produced the evidence of actual purchase consideration paid

by the assessee then the question of estimation of the purchase

consideration does not arise. Even otherwise when the land in question is

within the village abadi land then the DLC rate adopted by the DVO is not

proper. Hence, to the extent of the cost of purchase of land we allow the

claim of assessee of Rs. 8.50 lacs being the actual purchase consideration

paid by the assessee. As regards the cost of construction of the house,

we find that the assessee has filed a valuation report of registered valuer

estimating the cost of construction at Rs. 37,03,630/- whereas the DVO

has estimated the cost of construction at Rs. 32,74,800/-. Since the claim

of assessee as well as the department is based on the estimated cost of

construction determined by the respective valuers, therefore, it is a pure

subject matter of estimate not based on actual expenditure incurred.

Having regard to the facts and circumstances of the case when two

separate estimates are the basis of claim of both the parties then to bring

the controversy to an end we find it proper to estimate the cost of

construction of the house as average of both the estimates made by the

ITA 940/JP/2018_ 17 Mathur Lal Vs ITO registered valuer as well as by the DVO. The Assessing Officer is directed

to take the cost of construction of house as average of both the

valuations done by the registered valuer and by the DVO. Hence, this

ground of appeal is partly allowed.

Order pronounced in the open court on 12/10/2018.

Sd/- Sd/- ¼foØe flag ;kno½ ¼fot; iky jko½ (VIKRAM SINGH YADAV) (VIJAY PAL RAO) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 12th October, 2018 *Ranjan आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू vihykFkhZ@The Appellant- Shri Mathur Lal, Kota. 1. izR;FkhZ@ The Respondent- The ITO, Ward 2(2), Kota. 2. vk;dj vk;qDr@ CIT 3. vk;dj vk;qDr¼vihy½@The CIT(A) 4. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 5. xkMZ QkbZy@ Guard File (ITA No. 940/JP/2018) 6. vkns'kkuqlkj@ By order,

सहायक पंजीकार@Aेेज. त्महपेजतंत