Loading judgment…
Facts
The assessee sold an agricultural land and claimed exemption under Section 54B on the investment made in a new agricultural land. The Assessing Officer (AO) denied the exemption solely on the ground that the assessee did not deposit the capital gains in the Capital Gains Deposit Scheme before the due date of filing the return.
Held
The Tribunal held that Section 54B is a beneficial provision and cannot be denied on a procedural technicality, especially when the investment in new agricultural land was made within the stipulated period. The Tribunal relied on decisions from other ITAT benches that have taken a similar view.
Key Issues
Whether the denial of exemption under Section 54B on a procedural ground (non-deposit of capital gains in the scheme) is justified when the investment in the new asset was made within the prescribed period.
Sections Cited
54B, 54F, 143(3), 139(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI VIJAY PAL RAO & SHRI B.M. BIYANI
आदेश / O R D E R
Per B.M. Biyani, A.M.:
Feeling aggrieved by appeal-order dated 24.01.2024 passed by learned Commissioner of Income-tax (Appeal), NFAC, Delhi [“CIT(A)”] which in turn arises out of assessment-order dated 11.12.2017 passed by ITO, 3(5), Indore [“AO”] u/s 143(3) of Income-tax Act, 1961 [“the Act”] for Assessment-Year [“AY”] 2015-16, the revenue has filed this appeal on following effective ground:
“(2) That the learned AO erred in law and fact of the case and made disallowance of exemption claimed u/s 54B of the Income-tax Act, at Rs. 3,09,64,475/- without considering full facts and reasoning. The addition made is totally wrong and illegal on the facts of the case.”.
The background facts leading to this appeal are such that the assessee-individual filed return of AY 2015-16 declaring a total income of Rs. 4,64,460/-. In the return so filed, the assessee declared capital gain from sale of an agricultural land after claiming exemption u/s 54B. The case of assessee was subjected to scrutiny-assessment due to large claim of exemption. During proceedings, the AO found that the assessee, jointly with his two brothers, sold an agricultural land situated at Gram Tigriya Badshah, Indore on 10.12.2014 for a consideration of Rs. 9,31,38,041/-.
The assessee declared 1/3rd share in land at Rs. 3,10,46,013/- against which claimed indexed cost of acquisition of Rs. 81,538/-, leaving net capital gain of Rs. 3,09,64,475/-. From such capital gain, the assessee claimed exemption u/s 54B of Rs. 3,09,64,475/- on the strength of investment in another agricultural land situated at Gram Bijukhedi, Indore purchased for Rs. 3,11,00,000/- on 26.08.2016. When the AO asked assessee to explain the exemption claimed, the assessee submitted details of purchase of aforesaid new agricultural land for which exemption u/s 54B had been claimed. Additionally, the assessee also made a new claim of exemption u/s 54F on the basis of another investment of Rs. 16,44,370/- in a residential house property. The AO allowed exemption u/s 54F to assessee
Page 2 of 5 but disallowed the exemption u/s 54B. Aggrieved, the assessee carried matter in first-appeal and contested the issue of availability of exemption u/s 54B. The CIT(A) accepted assessee’s claim. Now, the revenue has come in this appeal.
Heard the learned Representatives of both sides and case records perused.
In Para 3 to 5 of assessment-order, the AO has noted that the assessee sold agricultural land on 10.12.2014 during the financial year 2014-15 relevant to AY 2015-16 and made investment in new agricultural land on 26.08.2016. Thus, the new investment has been made within the prescribed period of 2 years in section 54B which is not disputed by AO.
However, the sole reason of denial of exemption u/s 54B as assigned by AO in assessment-order is such that assessee did not follow the procedure of depositing capital gain in Capital Gain Deposit Scheme by the due date for filing of return u/s 139(1) for AY 2015-16. The AO is of the view that the proper procedure would have been to deposit money in Capital Gain Deposit Scheme before due date u/s 139(1) and thereafter utilize such deposited money in new investment within 2 years.
The CIT(A) has, in first-appeal, accepted assessee’s submission that the section 54B is a beneficiary provision and must be interpreted in a beneficial manner. He accepted that the purpose of section 54B is to encourage re-investment in agricultural land which stands satisfied. The CIT(A) relied upon certain decisions and granted exemption u/s 54B holding
Page 3 of 5 that the investment has been ultimately made in new land within the stipulated period of section 54B.
During hearing before us, Ld. DR for revenue/appellant supported the order of AO. Per contra, Ld. AR for assessee/respondent relied upon order of CIT(A).
We have considered rival submissions of both sides and perused the orders of lower-authorities and facts of case in the light of judicial view. The undisputed fact is that the assessee has made investment in new agricultural land within the prescribed period of 2 years as per section 54B.
The only point is that the assessee has not followed the route of Capital Gain Deposit Scheme while making such investment. This very situation has been directly dealt in following cases where it has been held that the exemption provision is a beneficial law and the benefit of same cannot be denied on hyper-technical ground of procedural lapse where the assessee has made investment in new asset within the prescribed period:
(i) ITAT, Delhi in Ms. Sarita Gupta Vs. PCIT, order dated 07.12.2023 (ii) ITAT, Banglore in Sri Ramaiah Dorairaj Vs. ITO, Bangalore, ITA No.
1899/Bang/2018 order dated 09.12.2020
The view taken by CIT(A) is supported by above decisions of ITAT benches. Therefore, we do not find any illegality in the order of CIT(A) granting exemption u/s 54B to assessee. Accordingly, the order of CIT(A) is hereby upheld and the revenue’s appeal is dismissed being devoid of merit.
Resultantly, this appeal is dismissed.
Order pronounced in the open court on 07.10.2024.