2014 (4) TMI 470 - AT - Income Tax

Grant of deduction u/s 54B - CIT(A) granted deduction u/s 54B by holding that transfer took place on 17-03-2007 Held that - CIT(A) found that under Income-tax Act, there was a transfer on 17-03-2007 when physical possession of property was handed over - This finding of CIT(A) is not disputed by the revenue - Assessee invested Rs.56,00,006 on 17-04-2007 for purchase of the property - Though the investment was made for purchase of another property, it is not known whether the assessee has actually purchased the property or not - Assessing officer has to reconsider matter and find out when actually sale was completed under Income-tax Act for purchase of property investing sale consideration - In absence of any material, Tribunal is not in a position to conclude when actually the purchase transaction completed for claiming exemption u/s 54B of the Act - Accordingly, order of lower authorities are set aside and the assessing officer is directed to find out the date on which assessee has actually purchased another agricultural land - Thereafter decide the issue of exemption u/s 54B of the Act in accordance with law Decided partly in favour of Revenue.

Summary

Issues:
Grant of deduction u/s 54B of the Income Tax Act for the assessment year 2009-10.

Analysis:
The appeal and cross objection were heard together against the order of CIT(A)-V, Kochi. The main issue was the grant of deduction u/s 54B of the Act. The revenue contended that the transfer of property took place on 17-03-2007, so the deduction could only be claimed in the assessment year 2007-08. On the other hand, the assessee argued that the purchase of another agricultural land was completed within two years after the transfer, making them eligible for the deduction in the relevant assessment year.

The Tribunal examined the agreement details where the possession of the property was handed over to the purchaser on 17-03-2007. The assessing officer rejected the deduction claim as the investment was made before the execution of the registered sale deed on 28-06-2008. However, the Tribunal found that under the Income-tax Act, the transfer occurred when the possession was handed over, not necessarily upon registration of the sale deed. The Tribunal agreed with the CIT(A) that the transfer took place on 17-03-2007.

The critical question was whether the assessee could claim exemption u/s 54B in the assessment year under consideration. The assessee had invested in another property on 17-04-2007, immediately after receiving the sale consideration. However, it was unclear if the actual purchase of the property had been completed within the stipulated two-year period. The Tribunal emphasized that the assessee must have control over the property through physical possession or completing the entire sale transaction to claim the exemption. As there was no evidence of when the purchase transaction was finalized, the assessing officer was directed to determine the actual purchase date for deciding the exemption u/s 54B.

In conclusion, the appeal of the revenue and the cross objection of the assessee were allowed for statistical purposes. The Tribunal emphasized the importance of completing the purchase transaction within the specified timeframe to claim the exemption under section 54B of the Income Tax Act.