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2015 (7) TMI 486 - HC - Income TaxEntitlement to the claim exemption u/s 54B - the asset sold was not a long term capital asset but a short term capital asset that is not eligible for exemption under section 54B, 54D and 54F as is clear from CBDT Circular No.495 dated 22.09.1987 as per AO - ITAT allowed claim - Held that - All the ingredients of Section 54B exist in the present case. Firstly, the land sold by the assessee was a capital asset. Secondly, this capital asset was land. Thirdly, during the two years immediately preceding the date on which the transfer took place, the land was being used by the respondent for agricultural purposes. We will shortly demonstrate the existence of the third ingredient but on a basis different from the Tribunal. The fourth and the fifth ingredients are also present in this case as, admittedly, the assessee had within a period of two years after the sale purchased another land for being used for agricultural purposes. The third ingredient is established by the evidence on record. The respondent had tendered a compilation of documents before the CIT(A). A copy thereof was tendered before us by Mr. Jain, the learned senior counsel appearing on behalf of the respondent. Page-44 of this compilation is a record/statement of the Patwari which confirms that the respondent had utilized the land sold by him for agricultural purposes during the period 03.07.2003 to 27.01.2006. There is nothing on record that suggests the contrary. The respondent, therefore, used the said land for a period of more than two years prior to the date of sale i.e. 26.09.2005. The plain language of Section 54B requires the land sold to have been in use by the assessee or by his parents or the HUF for agricultural purposes for a period of two years immediately preceding the date on which the transfer took place. There is nothing in this section that bifurcates the period of the use during these two years. There is nothing in this section that indicates that the land should have been used continuously only in the second of the two years and only for a few days in the first of the two years. Nor are we able to infer such a limitation from the plain language of this section on principle. - Decided in favour of assessee. Failure to furnish evidence to show that the land was being used for agricultural purpose for two year immediately preceding the date on which transfer took place? - ITAT allowed claim - Held that - The Tribunal, after considering the facts, came to the conclusion that the land was being used for agricultural purposes. Firstly, we have already referred to the statement of the Patwari that establishes the same. Secondly, as noted by the Tribunal, the respondent had derived an agricultural income of ₹ 10,000/- from the use of the said land. A question of law, therefore, does not arise - Decided in favour of assessee. Entitlement to the benefit under Section 54-B in respect of the property purchased from the sale proceeds in the name of wife - Held that - Section 54B requires the assessee to purchase the property from out of the sale consideration of the capital asset. It does not entitle the assessee to the benefit conferred therein if the subsequent property is purchased by a person other than the assessee including a close relative even such as his wife or children. If the legislature intended conferring such a benefit, it would have provided for the same expressly. Indeed, an assessee can purchase an asset or a part thereof in the name of his wife but he would not be entitled then to the benefit of Section 54B. Moreover, it is not the case of the assessee that he purchased the asset benami in the name of his wife. We have proceeded on the basis that his wife invested the amount of ₹ 16,84,700/- herself. The order of the Tribunal to this extent is, therefore, overruled. It is declared that respondent shall be entitled to the benefit of Section 54B on the basis that he invested only a sum of ₹ 44,76,000/- in the agricultural property purchased by him after the sale of the agricultural property earlier owned by him - Decided against assessee. Addition on account of law house hold withdrawals - addition deleted by the Ld. CIT(A) - Held that - The CIT(A) found that the Assessing Officer had made the estimate out of the household expenses of ₹ 60,000/- on a vague and arbitrary basis unsupported by any evidence or material on record. We see no reason to interfere with this finding of fact - Decided against revenue.
Issues Involved:
1. Eligibility for exemption under Section 54B of the Income Tax Act. 2. Requirement of evidence for agricultural use of land. 3. Correlation between agricultural income and the land for which exemption is claimed. 4. Enhancement of exemption amount beyond the claimed amount. 5. Classification of capital gain as long-term or short-term. 6. Addition of Rs. 60,000 for low household withdrawals. 7. Entitlement to Section 54B benefit for property purchased in the name of the assessee's wife. Issue-wise Detailed Analysis: Re: Questions No.1 and 5: The appellant contended that the gain from the sale of land should be taxed as a short-term capital gain since the property was held for less than three years. The court clarified that Section 54B applies to any capital asset, not specifically to long-term or short-term capital assets. The land sold was a capital asset as defined under Section 2(14)(iii) and was used for agricultural purposes for more than two years preceding the sale. The court concluded that the respondent met all the requirements of Section 54B, and thus, the capital gain should be computed accordingly. Questions No.1 and 5 were answered in favor of the respondent. Re: Question Nos.2 and 3: The court dismissed these questions as they were factual in nature. The Tribunal had already established that the land was used for agricultural purposes, supported by the statement of the "Patwari" and evidence of agricultural income. Therefore, no substantial question of law arose. The appeal was dismissed regarding these questions. Re: Questions No.4 and 7: The court addressed the issue of the respondent claiming exemption for an amount exceeding the actual investment in the new agricultural property. The respondent invested Rs. 44,76,000 out of Rs. 60,00,000, with the remaining amount paid by his wife. The court held that Section 54B requires the assessee to purchase the property from the sale consideration and does not extend the benefit to purchases made in the name of the assessee's wife. The court cited the case of Jai Narayan vs. Income-Tax Officer, affirming that the exemption under Section 54B applies only if the property is purchased in the name of the assessee. Consequently, the Tribunal's order was overruled, and the respondent was entitled to the benefit of Section 54B only for the amount of Rs. 44,76,000. Questions No.4 and 7 were answered in favor of the appellant. Re: Question No.6: The court found no issue of law in the addition of Rs. 60,000 for low household withdrawals. The CIT(A) had determined that the Assessing Officer's estimate was vague and unsupported by evidence. The court saw no reason to interfere with this factual finding. The appeal was dismissed regarding this question. Conclusion: The appeal was partly allowed and partly dismissed. The court upheld the respondent's eligibility for exemption under Section 54B for the amount of Rs. 44,76,000 but not for the amount paid by his wife. The court dismissed the other questions as they did not raise substantial questions of law. The appeal was disposed of accordingly.
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