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Facts
The Assessing Officer (AO) computed the total income of the assessee at Rs. 5,17,36,874/- by disallowing a deduction of Rs. 3,68,49,454/- claimed under Section 54B of the Income Tax Act. The assessee had sold land used for agricultural purposes and purchased new agricultural land. The AO disputed the agricultural use of the land sold.
Held
The Tribunal held that the assessee was eligible to claim the deduction under Section 54B. The Khasra Girdawari entries and other evidence corroborated the claim that the land was used for agricultural activities for the relevant period prior to sale, and the department failed to produce contrary evidence. Thus, the disallowance made by the AO was deleted.
Key Issues
Whether the land sold by the assessee was used for agricultural purposes for two years prior to the transfer to qualify for deduction under Section 54B.
Sections Cited
54B, 143(2), 142(1), 45, 63, 65
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, JAIPUR BENCHES,”A” JAIPUR
Before: SHRI GAGAN GOYAL, AM & SHRI NARINDER KUMAR, JM vk;dj vihy la-@ITA No. 244/JP/2024
vkns'k@ ORDER PER: NARINDER KUMAR, JUDICIAL MEMBER
On 21.12.2022, assessment order relating to the Assessment Year 2021-22 was passed by Assessing Officer computing the total income of the assessee at Rs. 5,17,36,874/- while disallowing deduction of Rs. 3,68,49,454/- claimed by the assessee u/s 54B of the Income Tax Act (for short ’Act’). appeal.
Ld. CIT(A), NFAC, vide order dated 15.01.2024, allowed the appeal and held that the assessee was eligible to claim deduction of Rs.
3,68,49,454/-, u/s 54B of the Act. Accordingly, addition for equal amount made by Assessing Officer was deleted.
The department felt dissatisfied by the impugned order passed by ld. CIT(A), NFAC. Accordingly, the department is in appeal before this Appellate Tribunal.
Arguments heard. File perused.
The only argument advanced by Ld. DR for the department-appellant is that in order to claim deductions u/s 54B of the Act, it was for the assessee to prove before the Assessing Officer that the land sold by him was used by him for agriculture activities for a period of two years immediately preceeding the date of transfer.
Further, it has been submitted that when the assessee failed to discharge onus to prove the above said facts, Assessing Officer was justified in declining the claim of the assessee for deduction of Rs. of the assessment order. Ultimately, Ld. DR has urged that the impugned order passed by Ld. CIT(A) allowing the deductions u/s 54B of the Act and the deleting the addition made by the Assessing Officer, deserves to be set aside.
Admittedly, assessee filed return of income for the Assessment Year under consideration declaring total income of Rs. 1,47,87,420/-. It is also not in dispute that case of the assessee was selected for scrutiny under CASS and notice u/s 143(2) of the Act came to be issued, followed by the notices u/s 142(1) and a show cause notice dated 13.12.2022.
Section 54B of the Act needs to be reproduced here for a ready reference. When reproduced, it reads as under:-
54B. [ Capital gain on transfer of land used for agricultural purposes not to be charged in certain cases. [Inserted by Act 19 of 1970, Section 11 (w.e.f. 1.4.1970).]
- [(1)] [ Substituted by Act 11 of 1987, Section 19, for sub-Section (2) (w.e.f. 1.4.1988).][Subject to the provisions of sub-section (2), where the capital gain arises] [ Substituted by Act 11 of 1987, Section 20, for certain words (w.e.f. 1.4.1988).][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 or a parent of his for agricultural purposes ] [Inserted by Act 19 of 1970, Section 11 (w.e.f. 1.4.1970).][(hereinafter referred to as the original asset)] [ Inserted by Act 19 of 1978, Section 11 (w.r.e.f. 1.4.1974).][, 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,-
(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.
Admittedly, during scrutiny proceeding, the assessee produced copy of sale deed in proof of his claim that the asset transferred thereby was an agriculture land.
As per documents submitted by the assessee, on 20.04.2021 he had purchased agriculture land, comprised in Khasra No. 112/01 Village Todi ncluding stamp duty.
During scrutiny proceedings, the assessee claimed to have deposited capital gain tax of a sum of Rs. 1,10,75,389/- earlier not deposited by him in capital gains scheme account before due date of furnishing the return of income.
In the assessment order, the Assessing Officer observed that as per 2nd para, page 3 of sale deed, assessee had sold 0.2148 hectares’ lands with residential building, out of 0.69 hectares’ land; and that as per para 1, page 5 of the sale deed a double storeyed residential building with an area of 8000 Sq. Ft. was lying constructed on the land sold by him.
From these contents of the sale deed, the Assessing Officer was of the view that 23121 Sq. Ft. of land with 8000 Sq. Ft. i.e. double storeyed residential building was sold by the assessee and further that excluding the area of 8000 sq. ft i.e. the residential area, the remaining area measuring about 15000 sq. ft appurtenant to the said residential building, could not be used for agriculture activities.
Act was issued to the assessee calling upon him to furnish details or information specified therein and also to furnish copy of Khasra Girdawari for the F.Y 2018-19 in respect of the land sold by the assessee.
In his reply, the assessee claimed before Assessing Officer that construction was done in an area of 4000 sq. ft with no flooring on the ground floor for cultivation non seasonal vegetable and other agriculture produce.
As regards construction, assessee claimed that the same was never used by him for residential purpose, and rather, it was used for agriculture purpose only.
In this way, the assessee denied that construction was in an area of 8000 sq.ft. He further claimed that for want of resources, only Bajra crop was sown
The Assessing Officer, on going through column No. 36 of the Khasra Girdawari pertaining to non tilled land, observed that as per entry No. 145 in the said document word “ residential” was found mentioned therein; that as per entry No. 146, there was mentioned of a school-Saint Marry Higher Assessing Officer, said school was appurtenant to the land in question.
Accordingly, Assessing Officer was of the view that the original asset sold by the assessee was not being used for agriculture activities during a period of two years immediately preceding the date on which the transfer of the land took place.
Assessing Officer also observed in sub-para (iv),9 of para 3 of the assessment order that there was no iota of evidence regarding cultivation carried on by the assessee with reference to the nature of crop grown, labourers or any details of the expenditure incurred or products sold.
Therefore, the Assessing Officer concluded that the assessee had not fulfilled the conditions stipulated u/s 54B of the Act.
When the matter came up in appeal, Ld. CIT(A) took into consideration, the material available on record and concluded that the appellant was eligible for deductions u/s 54B of the Act. Ld. CIT(A) arrived at the said conclusion by observing at page No. 15 and 16 as under:-
“The submissions of the appellant have also been perused. The primary document i.e. the sale deed dated 18.08.2020 quite unambiguously classifies the land sold (the capital asset in question) as "Agricultural Land". As per the report of Revenue Officer i.e. Patwari, Patwar Mandal, Jagatpura, Tehsil Sanaganer, ACIT vs. Chinrji Lal Sharma Jaipur agricultural activity was carried upon by the appellant on the land i.e. whole of the 23121 Sq. Feet of the land. The said Revenue Officer has in his verification report (Khasara Girdawari Report) on entry no.145 stated that the land belonging to the appellant was cultivated during the last three years and Bajra was grown on the said agricultural land.
Further, there is no bar on constructing a residential house on the agricultural land as that does not change the nature of the activities being carried out on the land. Further, the said residential house was used as per the appellant as a godown. The Ld. AO has not made any inquiries to determine the land use if any contrary to the claim made by the appellant to come to his conclusions.
In respect of the nature of crop grown, the labour employed, details of expenditure incurred or products sold- the details thereof are available in the Khasara Girdawaril Report, as well as the copies of voucher submitted by the appellant. The Ld. AO's assertion that the remaining land approximately 15000 Sq. Feet being appurteniant to the residential building cannot be used for agricultural activities is without any basis or evidence. In so far as the presence of school appurtenant to the building is concerned, the school is not only appellant's land.
It would be pertinent note the judgment of Hon'ble Supreme Court in the case of Smt. Sarifabibi Mohmed Ibrahim V. CIT [1993] 204 ITR 631. Amongst the primary tests considered by the Hon'ble Court for the classification of the capital assets as agricultural land were: What was the classification of land in revenue records; Whether it was subject to payment of land revenue, Whether the land was actually or ordinarily used for agricultural purposes at or about the relevant time etc.
Whether a land in question is agricultural or not needs to be tested on the facts and circumstances of each case. There may be factors both for and against a particular point of view and the question needs to be answer on cumulative consideration of all the facts. In the facts of this case the factors are squarely in the appellants favour like the land being classified as agricultural land in the revenue records, the land was actually used for agricultural purposes at the relevant time and the user of land was not temporary in nature.
The case laws cited by the Ld. AO in the assessment order are clearly distinguishable on facts. Here reliance is placed on the order of Hon'ble ITAT in the case of Murtuza Shabbir Jamnagarwala Vs. Income Tax Officer Ward-4(5), Pune [2019] 175 ITD 494 (Pune-Trib.) wherein it has been stated that:-
ACIT vs. Chinrji Lal Sharma “………..Land sold by assessee was classified in revenue record as agricultural land and was subjected to land revenue and, further, land was being cultivated on which jowar crop was grown, land transferred by assessee was an 'agricultural land and capital gain arising from sale of such land was eligible for exemption under section…….”
In view of the facts and the circumstances as stated above, the appellant is eligible for deduction u/s 54B, the disallowance and the addition made by the Ld. AO amounting to Rs. 3,68,49,454/- are hereby deleted. The ground of appeal No. 1 is allowed. “.
As regards agricultural activities and grant of benefit of provisions of section 54B, Learned AR for the assessee relied on the decision in Ashokbhai Kanubhai Patel v. ACIT, decided on 31.5.2021. We have gone through the said decision.
We have also come across a decision in the case of Smt. Sarifabibi Mohmd Ibrahim vs. CIT, 204 ITR 631 (SC), Hon’ble Apex Court upheld the decision of the High Court to the effect that subject land in that matter was not agricultural land at the time of its sale, and the income arising out of its sale was not exempt from capital gains.
In para 20 of the abovesaid decision, Hon'ble Apex Court narrated various circumstances appearing for and against the assessee's case. For ready reference and convenience, relevant portion of said para is extracted hereunder:-
……..The facts in their favour are; land being registered as agricultural land in the Revenue records: payment of land revenue in respect thereof til the ACIT vs. Chinrji Lal Sharma year 1968-69, absence of any evidence that it was put to any non-agricultural me by the appellants, that the land was cultivated till and including the agricultural year 1964-65, that there were agricultural land shutting the said land and that the appellants had no other source of income except the income from the said land. As against the above facts, the fact appearing against their case the land was situated within the municipal limits. It was situated at a distance of one kilometer from the Surat railway station, the land was not being cultivated from the year 1965-66 until it was sold in 1969 the appellant had entered into an agreement sale with a Housing Cooperative Society to sell the said land for an avowed non- agricultural purposes namely construction of houses; they had applied in June, 1968 and March 1969 for permission to sell the said land for non-agricultural purposes under Section 63 of the Bombay Tenancy and Agricultural lands Act and obtained the same on 22nd April, soon after obtaining the said permission they executed sale-deeds in the following month i.e. in May 1969, the land was sold at the rate of Rs. 23 per sq, yd and the purchaser-society commenced construction operation within three days of purchase What is the inference that flows from a cumulative consideration of all the aforesaid contending facts? This question has to be answered keeping the criteria evolved in Begumpet Palace case set out hereinabove. In our opinion, the entering into the agreement to sell the land for housing purposes, the applying and obtaining the permission to sell the land for non-agricultural purposes under section 63 of the Bombay Tenancy and Agricultural Lands Act and its sale soon thereafter and the fact that the land was not cultivated for a period of our years prior to its sale coupled with its location, the price at which it was sold do outweigh the circumstances appearing in favour of the appellant's case. The aforesaid facts do establish that the land was not an agricultural land when it was sold. The appellant had no intention to bring it under cultivation at any time after 1965-66, certainly now after they entered into the agreement to sell the same to a Housing Cooperative Society. Though a formal permission under section 65 of the Land Revenue Court was not obtained by the appellants, yet their intention is clear from the fact of their application for permission to sell it for a non-agreement under section 63 of the Bombay Tenancy and Agricultural Act."
Copy of Khasra Girdawari for the period Samvat 2074 to 2077, pertaining to Village Todi Ramijipura, Luniyawas, Jagatpura, Jaipur, has been made Learned CIT(A).
As per entry at Sr. No. 145, land in an area of 0.69 hectares, belonged to Chiranji Lal and his brother Chote Lal, Khatedars to the extent of half share each, and they had sown Bajra crop in Samvat 2075, 2076 and 2077.
Above said entry in the Khasra Girdawari lends corroboration to the claim of the assessee that the land sown by him was under agriculture activities during the relevant period of two years prior to the date of transaction of sale thereof.
The department did not bring on record anything to the contrary to the entries recorded in the Khasra Girdawari.
In view of the above discussion, we hold that Ld. CIT(A) was justified 18. in allowing the claim of the assessee as regards the deductions claimed u/s 54B of the Act on the basis of agricultural activities done on the said land.
No other argument has been argued before us on behalf of the department.
As a result, this appeal filed by the department deserves to be dismissed. We order accordingly.
Appeal file be consigned to the record room after the needful is done by the office.
Order pronounced in the open court on 06/03/2025.
Sd/- Sd/- ¼xxu xks;y ½ ¼ujsUnz dqekj½ (GAGAN GOYAL) (NARINDER KUMAR) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 06/03/2025 *Ganesh Kumar, Sr. PS आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. The Appellant- ACIT, Circle-07, Jaipur 2. izR;FkhZ@ The Respondent- Chinrji Lal Sharma, Jaipur vk;dj vk;qDr@ The ld CIT 3. vk;dj vk;qDr¼vihy½@The ld CIT(A) 4. 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 6. xkMZ QkbZy@ Guard File (ITA No. 244/JP/2024) vkns'kkuqlkj@ By order,
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