2017 (11) TMI 1622 - HC - Income Tax

Revision u/s 263 - Section 54B applicability regarding investment in tubewell - investment made by the assessee in the name of his wife - Held that - On the first issue of sec.263 in view of the decision of Malabar Industrial company Ltd. (2000 (2) TMI 10 - SUPREME Court) Sec.263 provisions are taken only on the ground of prejudicial and interest loss of the revenue to the Government. Merely change of opinion will not give any right u/s 263 hence, the issue regarding Sec. 263 is required to be answered in favour of the assessee and against the department. On the ground of investment made by the assessee in the name of his wife, in view of the decision of Delhi High Court in Sunbeam Auto Ltd. 2009 (9) TMI 633 - Delhi High Court , the word used is assessee has to invest it is not specified that it is to be in the name of assessee. It is true that the contentions which have been raised by the department is that the investment is made by the assessee in his own name but the legislature while using language has not used specific language with precision and the second reason is that view has also been taken by the Delhi High Court that it can be in the name of wife. In that view of the matter, the contention raised by the assessee is required to be accepted with regard to Section 54B regarding investment in tubewell and others. In our considered opinion, for the purpose of carrying on the agricultural activity, tubewell and other expenses are for betterment of land and therefore, it will be considered a part of investment in the land and same is required to be accepted. - Decided in favour of assessee

Summary

Issues Involved:
1. Justification of ITAT in upholding the order under Section 263.
2. Disallowance of exemption under Section 54B for investment in wife’s name.
3. Disallowance of exemption under Section 54B for investment in tubewell and other expenses.

Detailed Analysis:

1. Justification of ITAT in upholding the order under Section 263:

The appellant challenged the ITAT’s decision which upheld the order passed under Section 263. The court examined the prerequisites for invoking Section 263, which requires the order to be both erroneous and prejudicial to the interests of the revenue. The court cited several judgments, including *Malabar Industrial Co. Ltd. vs. CIT* and *CIT vs. Ganpat Ram Bishnoi*, emphasizing that an order cannot be revised merely because the Commissioner has a different opinion. The court concluded that the original assessment by the AO was conducted after due verification, and merely having a different opinion does not justify invoking Section 263. Therefore, the court ruled in favor of the assessee on this issue.

2. Disallowance of exemption under Section 54B for investment in wife’s name:

The appellant argued that the exemption under Section 54B should be allowed even though the investment was made in the name of his wife, who had no separate source of income. The court referred to various judgments, including *CIT vs. Ravinder Kumar Arora* and *CIT vs. Kamal Wahal*, which held that the investment need not be in the name of the assessee alone. The court noted that the entire investment was made by the appellant and not a single penny was contributed by the wife. Therefore, the court ruled that the exemption under Section 54B should be allowed, and this issue was decided in favor of the assessee.

3. Disallowance of exemption under Section 54B for investment in tubewell and other expenses:

The appellant contended that the expenses incurred on the construction of a tubewell, rooms, boundary walls, and stamp duty should be considered part of the investment in agricultural land under Section 54B. The court agreed, stating that these expenses are for the betterment of the land and are integral to carrying out agricultural activities. The court cited the decision in *CIT vs. Gurnam Singh* which supported the inclusion of such expenses as part of the investment in agricultural land. Consequently, the court ruled in favor of the assessee on this issue as well.

Conclusion:

The court allowed the appeals, ruling in favor of the assessee on all issues. The ITAT’s order upholding the Section 263 revision was found unjustified, the exemption under Section 54B was allowed for investments made in the wife’s name, and the expenses on tubewell and other improvements were accepted as part of the investment in agricultural land.