2019 (1) TMI 1657 - AT - Income Tax

Exemption u/s 54B - Revenue not allowed the claim of the assessee being beyond 8 km from the municipal limits area - as per assessee land sold was agricultural land and used for agriculture. HELD THAT - Assessee had sold agricultural land. The corresponding evidences regarding the sale of land and nature of land has been annexed in the paper book filed before us. Similarly, it is not disputed that the land purchased is agricultural in nature. There are evidences on record such as kisan kitab, Kistbandhi Khataoni issued by Patwari, P-II Khasra and returned filed which disclosed agricultural income. DR did not dispute this fact that the assessee was not in possession of agricultural land where agricultural activities were done continuously which was sold and then another agricultural land was purchased. Thereafter also, agricultural activities were performed continuously. Even in the return of income filed evidence of agricultural income has been shown. Regarding sale agreement, period of 2 years for the purpose of Section 54B of the Act, it is absolutely clear from the decision of the Hon ble Apex Court in the case of Sanjeev Lal Vs. CIT 2014 (7) TMI 99 - SUPREME COURT that date to be calculated from the date of sale agreement and not from the date of registration for the purpose of counting period of investment. The moment the sale agreement is executed between vendor and vendee, some right of the vendor goes out and some rights of the vendee comes in. The right of personam have been created in favour of the vendee, the moment agreement to sale is executed in favour of the vendee, some rights have accrued to the vendee because of which there could not be any interruption in the transaction and it has to be continued in the same and exact manner decided in the sale agreement. Therefore, the period of investment to be counted from the date of sale agreement itself and not from the date of registration. Further, we agree with the submissions of the Ld. AR that it is duty of the Assessing Officer to guide the assessee and allow the deduction wherever and whenever it is applicable depending on facts and circumstances of each case. The Income Tax laws are welfare in nature and the very purpose of welfare legislation is that there should not be any cohesive action by the quasi-judicial Authority In the present case, all the relevant documents viz. sale deed regarding sale and purchase of agricultural land, kisan kitab, Kistbandhi Khataoni issued by Patwari, P-II Khasra were filed before the Assessing Officer. Therefore, in all probability and fairness, the Assessing Officer should have allowed the claim of deduction u/s.54B to the assessee. In view of the matter, we set aside the order of the Ld. CIT(Appeals) and allow the appeal of the assessee.

Summary

Issues:
Claim of exemption u/s.54B for sale of agricultural land within 8 km of municipal limits area.

Analysis:
The appeal pertains to the assessment year 2009-10, where the Assessing Officer denied exemption claimed by the assessee on the sale of agricultural land situated within 8 km from the local limit of the municipality. The Assessing Officer treated the land as a capital asset under section 2(14)(iii) of the Income Tax Act, 1961, and added the long term capital gain to the total income of the assessee. The Ld. AR argued that the assessee had purchased another agricultural land after selling the impugned land and invested the sales consideration in the new land, making the assessee eligible for exemption u/s.54B of the Act.

The Ld. CIT(Appeals) upheld the addition made by the Assessing Officer, leading the assessee to appeal before the ITAT. During the hearing, the Ld. AR presented various pieces of evidence to support the claim of exemption u/s.54B, including sale agreements, purchase deeds, agricultural income disclosures, and documents proving the agricultural nature of the lands involved. The Ld. AR also cited judicial precedents and emphasized the need for a purposive interpretation of section 54B to encourage cultivation.

The ITAT analyzed the facts, referring to the evidence provided, and noted that the assessee had sold agricultural land and purchased another agricultural land for continuing agricultural activities. The ITAT highlighted the importance of the sale agreement date for calculating the 2-year period under section 54B, as per the decision of the Hon’ble Supreme Court. The ITAT also stressed the duty of the Assessing Officer to guide the assessee and allow deductions where applicable, ensuring fairness and justice in tax assessments.

In conclusion, the ITAT set aside the order of the Ld. CIT(Appeals) and allowed the appeal of the assessee, emphasizing the need for the Assessing Officer to consider all relevant facts and documents provided by the taxpayer. The ITAT's decision was based on the principles of natural justice and fairness in tax assessments.

Judgment:
The ITAT, in its judgment delivered on January 15, 2019, allowed the appeal of the assessee, overturning the decision of the Ld. CIT(Appeals) and granting the claim of exemption u/s.54B for the sale of agricultural land within 8 km of the municipal limits area.