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Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: SHRI WASEEM AHMED, & SHRI SIDDHARTHA NAUTIYAL
आदेश/O R D E R PER BENCH:
The captioned appeal has been filed at the instance of the Revenue against the order of the Learned Commissioner of Income tax(Appeals), Jamnagar, dated 17/02/2016 arising in the matter of assessment order passed under s.143 of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year 2012-13.
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The only issue raised by the Revenue is that the learned CIT (A) erred in confirming the order of the AO by sustaining the disallowance of the deduction claimed under section 54B of the Act amounting to Rs. 5,58,67,007.00 only.
The assessee in the present case is an individual and claimed to be engaged in the business of land development and also drawing salary income. The assessee was the owner of agricultural land bearing survey number 384/2 situated at Thaltej. The assessee entered into MOU to transfer the impugned land dated 4th November 2010 and further handed over the possession to the buyer dated 2 April 2011. The assessee got the NA status of the impugned land dated 23rd May 2011. Finally, the assessee transferred the property by way of the registered deed dated 26th May 2011. The assessee has shown the sale consideration of the impugned land at ₹ 5.51 crores whereas the DVO has determined the same at ₹ 7,07,97,650/- which was also accepted by the assessee as sale consideration for the purpose of calculating the capital gain. However the assessee, claimed the exemption of ₹5,57,10,450/- on the transfer of impugned land under the provisions of section 54B of the Act. As such, it was contended by the assessee that he has purchased another piece of land for the purpose of agricultural activity amounting to ₹5,57,10,450/- and accordingly the exemption under section 54B of the Act was claimed.
However, the AO found that condition for claiming the exemption under section 54B of the Act that the land which was transferred should be used for a period of 2 years before the date of transfer for agricultural purpose. But the impugned land has not been used for the purpose of the agricultural activity in between the period beginning from 4 November 2010 till 25 May 2011. Likewise, the land was handed over dated 2nd April 2011 to the prospective buyer and NA status was received on 23 May 2011. Thus, there is no iota of doubt that the land was not used immediately before the transfer for the purpose of the agricultural activity. Thus, the AO denied the exemption claimed by the assessee under provision of section 54B of the Act and added to the total income of the assessee.
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Aggrieved assessee preferred an appeal to the learned CIT-A.
The assessee before the learned CIT-A submitted that the actual transaction for the transfer of the property was completed as on 2nd April 2011, though the sale deed was executed on 26-05-2011 but the possession was handed over on a later date. As such the delay has happened for the reason that the assessee was using the impugned land for the purpose of agricultural activities. Accordingly, the assessee contended that there was sufficient compliance of the provisions of section 54B of the Act. The assessee in support of his contention has also relied on various judgments before the learned CIT-A.
The learned CIT-A after considering the submission of the assessee allowed the appeal of the assessee by observing as under:
I have duly considered the submission of the appellant and also gone through the discussion made in the assessment order. I am inclined to agree with the appellant's submission that the provisions of section 54B(1) talks about the sale of "land" on which agricultural activities were being done and subsequent purchase of agricultural land. The conditions laid down in this provisions for availing exemption from Capital Gain Tax, have been fulfilled i.e. agricultural land has been purchased within 2 years by investing gain arising on sale of land. Hence the appellant is very much eligible for exemption. The court cases cited by the appellant too are in his favour. Hence the AO is directed to allow exemption claimed by the appellant.
8 Being aggrieved by the order of the learned CIT-A, the revenue is in appeal before us.
Both the learned DR and the AR before us vehemently supported the order of the authorities below as favourable to them.
We have heard the rival contentions of both the parties and perused the materials available on record. A bare reading of the provisions of section 54B of the Act provides that the land should be used agricultural purpose by the assessee for
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2 years immediately preceding the date on which the transfer took place. Admittedly, the transfer has taken place at the time when the assessee has handed over the possession under the provisions of section 2(47)(v) of the Act read with section 53A of Transfer of Property Act. The relevant clause reads as under:
In this Act, unless the context otherwise requires,— (47) "transfer", in relation to a capital asset, includes,— (v) 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 (4 of 1882) ;
10.1 Thus the date of transfer shall be taken as 2nd April 2011 and therefore the period of 2 years has to be counted from the date of transfer. This fact can be verified from the contention of the assessee which are reproduced as under:
SR. Assessment year under consideration Remarks No. 01. F.Y.30/08/2006 to 31/03/2007 == 2007-08 Used as agricultural land 02 2008-2009 As above 03 2009-2010 As above 04 2010-2011 As above 05 2011-2012 As above 06 Used up to 02/04/2011 i.e. transfer of physical Date of handing possession to possession buyer 07 New agricultural land purchased at SR. No. 355/1 The fact of purchase of on 15/07/2011 for Rs.5,57, 10,450.00. agricultural land is not disputed by AO -
10.2 The above contention of the assessee has not been countered by the learned DR for the Revenue.
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10.3 We also find that Hon’ble Gujarat High Court in the case of Gordhanbhai Kahandas Dalwadi vs. CIT reported in 127 ITR 664 in similar fact and circumstances has observed as under: It has been observed by the Supreme Court in CWT v. Officer-in-Charge (Court of Wards) , Paigah [1976] 105 ITR 133 that if the law has not been correctly appreciated by the Tribunal, its appreciation of facts is bound to be affected by the wrong approach to the evidence. Now, in the instant case, the Tribunal has held against the assessee because permission to sell the land for non-agricultural use was obtained. This court has pointed out in CIT v. Manilal Somnath [1977] 106 ITR 917 that the permission granted by the revenue authorities under s. 63 of the Bombay Tenancy and Agricultural Lands Act clearly goes to show that in case the land did not cease to be agricultural land, the permission would be treated as cancelled and, therefore, the sale in favour of the particular purchaser would be infructuous and the land would revert to the assessee as agricultural land. In such an eventuality, the land would still continue to be agricultural land because the permission to sell to a non-agriculturist would be treated as cancelled. It has to be borne in mind that the correct test that has to be applied is whether on the date of the sale the land was agricultural land or not. Because after the sale the purchaser was going to put the land to non-agricultural use, it does not mean that the land had leased to be agricultural land at the date of sale. The crucial date for the purpose of finding out the character of the land is the date of sale and the question that has to be asked is whether on the date of sale the land was agricultural land or not. However, we find that what has weighed with the Tribunal, inter alia, is the fact that after the sale the purchaser was going to use the land for non-agricultural purposes and it is in the light of what was going to happen in future that the Tribunal held that the land was non-agricultural in character at the relevant time. It must be borne in mind, as was held by this court in Chhotalal Prabhudas v. CIT [1979] 116 ITR 631, that if the land is actually used for agricultural purposes as indicated in Manilal Somnath's case [1977] 106 ITR 917 (Guj) or by the Supreme Court in Begumpet Palace's case [1976] 105 ITR 133 , at least, prima facie it can be said to be land which is either actually used or ordinarily used or meant to be used for agricultural purposes. If it is actually used at the relevant date for agricultural purposes and there are no special features, as for example, a building site being actually used as a stop-gap arrangement for agricultural purpose, it would be agricultural land. Potential use of the land as non-agricultural land is totally immaterial. Entries in the record of rights are good prima facie evidence regarding land being agricultural and if the presumption raised either from actual user of the land or from entries in revenue records is to be rebutted, there must be material on the record to rebut the presumption. The approach of the fact-finding authorities, namely, the income-tax authorities and the Tribunal, should be to consider the question from the point of view of the presumption arising from entries in the record of rights or actual user of the land and then consider whether that presumption is dislodged by the presence of other factors in the case.
10.4 In view of the above and after considering the facts in totality, we do not find any reason to interfere in the finding of the learned CIT-A, thus we direct the
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AO to allow the exemption to the assessee under the provisions of section 54B of the Act. Hence, the ground of appeal of the revenue is hereby dismissed.
In the result, the appeal filed by the Revenue is dismissed.
Order pronounced in the Court on 16/09/2022 at Ahmedabad.
Sd/- Sd/- (SIDDHARTHA NAUTIYAL) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 16/09/2022 Manish