Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, DELHI BENCHES, NEW DELHI
Before: SHRI I. C. SUDHIR & SHRI PRASHANT MAHARISHI
O R D E R PER PRASHANT MAHARISHI, A. M. 1. This is an appeal preferred by the assessee against the order dated 31.08.2015 of ld CIT (A), Meerut for the Assessment Year 2012-13.
2. The assessee has raised the following grounds of appeal:- “1. That the A.O. has not justified to interpret the provision of section 54B of IT. Act especially when the assessee has complied with all the conditions stated there in and the A.O. is in error ignoring the definition of assessee U/s 2(7) of I.T. Act and CIT(A) has not justified while confirming the same.
2. That the CIT(A) has not appreciated the provision of section 54B, that it uses the word assessee and assessee is as defined U/s 2(7) of the I.T. Act. The amendment made by the Finance Bill 2012 is curative.
3. That Ld. A.O. as well as CIT(A) has not considered that the A.O. has assessed capital gain on the basis of documents of agreement on stamp paper of Rs. 100/-, which was unregistered document. As per amended provision of section 53A of T.P. Act no such transfer is valid, therefore, without sale of agriculture land assessment of capital gain is bad in law.
4. That the A.O. is in error to assess balance amount of Rs. 26,81,600/-, which is yet not received and neither the assessee has received full consideration nor the possession has been passed over to the other party from the assessee. So as it cannot be treated to be the transfer within provision of section 2(47)-V of the I.T. Act The CIT(A) has not given any finding on this issue. Hence A.O. and CIT(A) both are in error in computing capital gain without transfer.
5. That the A.O. and CIT(A) are incorrect by stating that the assessee handed over the possession. In fact there was agreement to make balance payment within 6 month and due to the non compliance of agreement possession was taken back. Hence, rejection of case law is unjustified.
6. That the initiation of penalty proceeding is bad in law, as the assessee has not concealed any income.
7. That the interest charged U/s 234A, 234B and 234C is not according to law as income of the assessee is relates to capital gain.”
3. Ground No. 1 and 2 are against denial of deduction to the assessee under section 54B of the income tax act and Ground No 3 & 4 area against the chargeability of capital gain on sale of property through unregistered documents. Brief facts of the case are that assessee is Hindu undivided family and filed return of income on 28th of July 2012, declaring income of Rs. 7 7890/-and agricultural income of Rs. 128600/-. Assessee has sold agricultural land through agreement dated 21st of February 2012 on consideration of Rs. 19681600/-. Contention of the assessee was that the sale was made through two unregistered agreement of sale and possession of the property was given accordingly. According to the agreement the purchaser was to give balance consideration which was not given and therefore the possession was taken back on 15.03.2012. Therefore, there is no transfer according to the income tax act. However it was also noted by lower authorities that the possession of the property was handed over to the buyer. Against the total sale consideration of Rs 1,96,81,600/- assessee has already received Rs. 1,70,00,000/- and balance of Rs 26816000/- was shown to be outstanding .As the assessee has received substantial consideration and has also parted with the possession of the property Learned assessing officer was of the view that there is a transfer of an asset and capital gain is chargeable to tax. Further assessee has claimed deduction under section 54B of the income tax act amounting to Rs. 6233100/-. This deduction was denied to the assessee holding that deduction u/s 54B of the act is available only to the individual assessee and not to HUFs. Assessee preferred an appeal before CIT appeal who in turn confirmed the action of the assessing officer on taxation of capital gains on sale of land and secondly on denial of deduction under section 54B of the income tax act in the hands of HUF assessee. Therefore assessee is in appeal before us.
4. Firstly we take up ground no 3, 4 and 5 of the appeal which are against chargeability of capital gain on property where the document evidencing sale/ agreement of sale is thorough unregistered documents. Page 3 of 10
Ld. authorized representative of the assessee submitted written submission along with paper book, wherein details of transfer of the property along with relevant case laws are attached. It was submitted by him that there was only a temporary transfer of the possession of the property and subsequently possession was taken back by the assessee from buyer, further the part of the consideration was not received and therefore capital gain was not chargeable in view of provisions of section 2(47) of the Income tax act, 1961. For this he relied on the decision of Honourable Punjab and Haryana high court in case of C S Atwal V CIT 59 taxmann.com 359. His contention was that that the assessee is an HUF and therefore according to the provisions of section 54B of the income tax act Assessee should be entitled to deduction. For this proposition he relied on the decision of CIT V T Narayanswamy 156 ITR 194 (mad), K S Jain & sons (HUF) V ITO 173 taxman 114 and Jaspal Singh v ITO 186 taxmann 26(del).
Ld. departmental representative relied on the orders of lower authorities and submitted that there is no dispute about the transfer of the agricultural land as assessee has received consideration substantially and also parted with possession of the property to buyer. Therefore the temporary taking back of the possession is without any evidence and is of no consequences because ultimately on receipt of money the possession is given to the buyer. Further temporary taking back of possession is also not supported with credible evidence. Therefore, he submitted that the capital gain has rightly been charged to tax. Regarding deduction under section 54B of the income tax act, it was submitted that assessee being an HUF is not entitled to the deduction as per clear cut language of the section. 7. We have carefully considered the rival contentions and also perused the details filed by the assessee. It is undisputed fact that assessee has Page 4 of 10
entered into an agreement to sell with the buyer for consideration of Rs 1,96,81,600/- and received part of the consideration of Rs 1,70,00,000/- and the possession of the property was given to the buyer. According to the provisions of section 2(47) (v) of the act transfer includes any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882.Therefore, in the transaction entered into by the assessee. All the ingredients of transfer are satisfied, and therefore we are of the view that though assessee might not have received the full consideration but transfer of property has occurred in view of handing over the possession of the property to the buyer. For repossession of property assessee produced a an undated notarised understanding on stamp paper of Rs 10/- .Merely because the possession of the property has been taken back by the seller on account of non payment of part of the consideration cannot save capital gain in the hands of the assessee when subsequently the same agreement was honoured. Furthermore for taking back the possession of the property assessee produced an undated notarised understanding on stamp paper of Rs 10/-. For repossession of the property assessee produced an undated notarised understanding on stamp paper of Rs 10/- between the buyer and seller However subsequently the transaction of sale has happened at the agreed price between the parties. Further it is difficult to appreciate that when assessee has received substantial consideration and only meagre consideration is outstanding how assessee has taken possession of the property back from the buyer without returning any payment to the buyer. Reliance by the assessee on decision of Honourable Punjab and Haryana high court in case of C S Atwal V CIT (supra) is also misplaced as in that case the fact of handing Page 5 of 10 over possession of the property to the buyer was presumed as per para no 40 of the decision where in the case of the assessee the facts of handing over possession at the time of entering in to agreement to sale of property in undisputed. In view of this, we confirm the findings of Commissioner of income tax (Appeals) and dismiss ground No. 3, 4 and 5 of the appeal of the assessee.
Now we take up the ground No. 1 and 2 of the appeal of the assessee which are against denial of deduction under section 54B of the income tax act to the assessee for the sole reason that assessee is not an individual, but an HUF. Provisions of section 54 B of the act as it stood at relevant times are as under :-
CAPITAL GAIN ON TRANSFER OF LAND USED FOR AGRICULTURAL PURPOSES NOT TO BE CHARGED IN CERTAIN CASES (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 or a parent of his 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.
With effect from 1-4-2013 this section was amended as under CAPITAL GAIN ON TRANSFER OF LAND USED FOR AGRICULTURAL PURPOSES NOT TO BE CHARGED IN CERTAIN CASES. (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,— 10. Therefore it is apparent that exemption granted in respect of capital gains on transfer of land used for agricultural purposes where the whole of capital gains is reinvested in the purchase of agricultural land in the next two years was extended to a Hindu undivided family, by substitution of the words in sub-section (1), “the assessee or a parent of his”, by the words “the assessee being an individual or his parent, or a Hindu undivided family” with effect from April 1, 2013, i. e., for the assessment year 2013-14 and subsequent assessment years. Hence according to the plain language of law the Deduction to assessee HUF was not available for Ay 2012-13. However appellant has relied on the decision of K S Jain Page 7 of 10
& sons HUF V ITO 173 taxman 114 (Delhi) where in the coordinate bench has held that assessee who is an HUF is also entitled to deduction u/s 54B of the income tax Act. We have carefully perused the decision and we have noted that in that decision in para no 6 it is held as under:-
“6. In the ground No. 2 the assessee challenges denial of deduction under section 54B of the Act. In the re-assessment proceedings the Assessing Officer on the basis of following decisions held that the assessee being an HUF is not entitled to deduction under section 54B. Those cases are:—
CIT v. G.K. Devarajulu [1991] 191 ITR 211 (Mad.);
CIT v. R. Vijay Kumar [1995] 214 ITR 483 (Mad.);
3.Pravin Chand Mohin Kumar v. CIT [1994] 208 ITR 11 (Raj.).
The Assessing Officer held that in all these cases it was held that the assessee being an HUF cannot be granted deduction under section 54(1) of the Act. Applying the analogy the deduction under section 54B cannot be allowed.”
However we have perused these decisions and found that following decision are directly on the issue of deduction u/s 54B of the Act in case of HUF. The issue before honourable Courts in following cases were as under :- a. CIT V G K Devarjulu 191 ITR 211
“The assessee is a Hindu undivided family. In respect of the assessment year 1972-73, on sale of agricultural lands, it was assessed to capital gains on a sum of Rs. 2,99,500 which, on appeal to the Appellate Assistant Commissioner, was reduced to Rs. 1,30,500. On a petition filed by the assessee that it had purchased agricultural lands within two years from the date of sale, the Income-tax Officer allowed exemption from capital gains under section 54B(ii) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"). On the basis of an audit objection that exemption under section 54B(ii) of the Act is available only to individual assessees and not to a Hindu undivided family, the Income-tax Officer reopened the assessment under section 147(b) of the Act and the exemption granted under section 54B(ii) of the Act was withdrawn.” b. CIT V R Vijay Kumar 214 ITR 483
“Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the assessee is entitled to exemption under section 54B even though he is assessed to tax in the status of a Hindu undivided family, and consequently no capital gains could be assessed to tax for the assessment year 1975- 76 ? 12. In view of above facts we are of the view that the decision relied up on by the assessee in case of K S jain & Sons HUF V ITO ( 173 taxman 114 ( Delhi) has been rendered on the incorrect facts laid down before the coordinate bench. Therefore same cannot be followed in view of the decision of honourable madras high court in above noted cases. Hence we are of the view that the impugned assessement year is AY 2012-13 and assessee is HUF which is not entitled to deduction u/s 54 B of the act.
Therefore we confirm the order of Ld. CIT (A) on this issue and ground no 1 & 2 of the appeal are dismissed.
Ground No 6 & & of the appeal are as under
6. That the initiation of penalty proceeding is bad in law, as the assessee has not concealed any income.
That the interest charged U/s 234A, 234B and 234C is not according to law as income of the assessee is relates to capital gain.”