2018 (9) TMI 2096 - AT - Income Tax

Denial of deduction u/s 54B - investment made in the purchase of the agricultural land in the name of his sons - HELD THAT - Assessee being an old aged person and was not keeping well thought it prudent to buy the agricultural land in the name of his sons to avoid future family disputes relating to the inheritance of the property of the assessee after his death. The sale proceeds from the sale of agricultural land were duly invested in the purchase of agricultural land itself. We, therefore, do not find any justification on the part of the lower authorities in denying the claim of deduction the assessee u/s 54B of the Act. In view of this, order of the lower authorities is hereby set aside and the AO is directed to allow deduction to the assessee u/s 54B of the Act in respect of the investment made in the purchase of the agricultural land in the name of his sons. Appeal of the assessee is hereby allowed.

Summary

Issues:
Denial of deduction under section 54B of the Income-tax Act, 1961.

Analysis:
The appellant, an agriculturist, appealed against the denial of deduction under section 54B of the Income-tax Act, 1961. The appellant had sold ancestral agricultural land jointly with others and received his share of the sale consideration. The assessing officer initiated proceedings under section 147 as the appellant had not filed an income tax return showing the income from the sale. The appellant claimed exemption under section 54B for the agricultural land purchased in his sons' names. However, the assessing officer disallowed the exemption. The Commissioner of Income Tax (Appeals) upheld the assessing officer's decision. The appellant argued that the land was ancestral, and due to his age and health condition, he purchased new agricultural land in his sons' names to avoid future family disputes. The Tribunal noted that the sale proceeds were invested in the new agricultural land and found no justification for denying the deduction under section 54B. Consequently, the lower authorities' order was set aside, directing the assessing officer to allow the deduction for the investment made in the agricultural land in the sons' names.

In conclusion, the Tribunal allowed the appeal, emphasizing that the appellant, being an elderly person with health issues, purchased agricultural land in his sons' names to prevent future family disputes. The Tribunal found that the sale proceeds were reinvested in the new agricultural land, justifying the appellant's claim for deduction under section 54B. The assessing officer was directed to allow the deduction, overturning the lower authorities' decision.