2013 (5) TMI 837 - AT - Income Tax

Claim for exemptions under Section 54B denied - Held that - CIT(A) correctly came to the conclusion that the Assessing Officer has not satisfactorily rebutted the presumption attached to the entries in the 7/12 extract i.e. the Land Revenue records. As per the Assessing Officer the declaration of agricultural income for assessment years 2005-06 to 2007-08 by the assessee were not scrutinized by the Department and therefore the genuineness of the claim of agricultural income for those years was not proved and therefore he was not satisfied with the explanation. In our considered opinion assessee had duly discharged the initial onus cast on him to establish his case that the said land was being used for agricultural purposes based on the entries in the 7/12 extract and the declaration of agricultural income in the returns filed for assessment years 2005-06 to 2007-08. Thereafter the burden was on the Assessing Officer to rebut the stand of the assessee which was backed by the presumption attached to the Land Revenue records as per Section 157 of the Maharashtra Land Revenue Code 1966 and also the factum of declaration of agricultural income by the assessee in the respective assessment years. The Assessing Officer has merely disbelieved the explanation furnished by the assessee without any credible material to negate the same. Having regard to the material and evidence on record and the legal position in our view the CIT(A) was justified in holding that the assessee discharged the burden cast on him to establish that the land was being used for agricultural purposes in the two years immediately preceding the date of transfer. We hereby affirm the same and accordingly the Revenue has to fail on this aspect. - Decided in favour of assessee Claim for exemption under Section 54F denied - Held that - No justification on the part of the Revenue to deny exemption under Section 54F of the Act merely on the ground that the residential building constructed by the assessee consisted of several independent residential units. The calculation of cost of construction of the residential portion of the new building and it also asserted that such details were placed before the Assessing Officer. The learned Departmental Representative has not negated the aforesaid plea and there is no adverse discussion emerging from the order of the lower authorities on this aspect. Therefore so long as the assessee s claim of exemption is limited to the investment in the construction of the residential portion of the building the same is held to be allowable. Thus on this aspect assessee succeeds and his claim for exemption under Section 54F of the Act is upheld.- Decided in favour of assessee

Issues Involved:
1. Exemption under Section 54B of the Income Tax Act.
2. Exemption under Section 54F of the Income Tax Act.

Detailed Analysis:

1. Exemption under Section 54B of the Income Tax Act:

The dispute revolves around whether the assessee is entitled to exemption under Section 54B of the Income Tax Act, 1961, which pertains to capital gains arising from the transfer of agricultural land used for agricultural purposes for two years prior to the transfer. The Assessing Officer (AO) denied the exemption, arguing that the assessee failed to substantiate the agricultural use of the land, despite the entries in the 7/12 extract indicating agricultural activities.

The CIT(A) allowed the exemption, stating that the entries in the 7/12 extract, which showed agricultural operations, were presumed correct under Section 157 of the Maharashtra Land Revenue Code, 1966, and the AO did not provide material evidence to rebut this presumption. The Tribunal upheld the CIT(A)'s decision, emphasizing that the assessee had declared agricultural income in previous returns and provided relevant Land Revenue records, thus fulfilling the conditions under Section 54B.

2. Exemption under Section 54F of the Income Tax Act:

The assessee claimed exemption under Section 54F, which relates to capital gains from the transfer of any long-term capital asset (not being a residential house) used to construct a residential house within three years. The AO denied the exemption on two grounds:
1. The construction of the new residential house was not completed within three years.
2. The investment was in a "commercial-cum-housing complex" rather than a single residential house.

The CIT(A) dismissed the first ground, clarifying that Section 54F does not require the completion of construction within three years but only the investment of sale consideration within that period. However, the CIT(A) upheld the second ground, stating that the exemption under Section 54F applies to a single residential house, not multiple dwelling units or a commercial-cum-housing complex.

The Tribunal disagreed with the CIT(A) on the second ground, referencing the Delhi High Court's decision in CIT vs. Gita Duggal and the Karnataka High Court's decision in CIT vs. D. Ananda Basappa, which held that the term "a residential house" includes multiple residential units within a single building. The Tribunal concluded that the assessee's investment in multiple residential units within a single building qualifies for exemption under Section 54F, provided the claim is limited to the residential portion and excludes commercial areas.

Conclusion:

The Tribunal dismissed the Revenue's appeal regarding Section 54B, affirming the CIT(A)'s decision to allow the exemption. For Section 54F, the Tribunal allowed the assessee's appeal, overturning the CIT(A)'s decision and granting the exemption for the residential portion of the investment. The Tribunal's decision applies to all co-owners involved in the case, resulting in the dismissal of the Revenue's appeals and the allowance of the assessees' appeals.

← Previous Next →