2018 (6) TMI 1826 - AT - Income Tax

Disallowance of deduction claimed u/s 54B - HELD THAT - In the case of the co-owner Shri Keshav Sunderam Rajam 2017 (12) TMI 1852 - ITAT CHENNAI this Tribunal remitted the matter back to the file of the AO. AO was directed to re-examine the matter afresh in the light of the material that may be produced by the assessee and thereafter decide the issue afresh in accordance with law after giving a reasonable opportunity to the assessee. Since the present assessee is also one of the co-owners of the property for the sake of consistency this Tribunal is of the considered opinion that the matter needs to be re-examined by the AO - Accordingly the orders of both the authorities below are set aside and the issue raised by the assessee is remitted back to the file of the AO. AO shall re-examine the matter in the light of the material that may be produced by the assessee more particularly the Adangal extract and other relevant documents and thereafter decide the issue afresh in accordance with law after giving a reasonable opportunity to the assessee. Appeal filed by the assessee is allowed for statistical purposes.

Summary

Issues:
Disallowed deduction under Section 54B of the Income-tax Act, 1961 for claimed agricultural land sale.

Analysis:
The appeal concerned the disallowance of a deduction claimed by the assessee under Section 54B of the Income-tax Act, 1961. The assessee had sold an agricultural land and claimed a deduction of ?50 lakhs under Section 54EC and the balance of ?3.08 Crores under Section 54B. The representative argued that the investment made was legitimate, with long-term capital gains invested in the Capital Gains Account Scheme and an advance payment made for acquiring another agricultural land. However, the Assessing Officer disputed the classification of the land sold as agricultural, stating it was dry land according to State Revenue records. The representative clarified that the land was cultivated with coconut trees and situated near the seashore, making it unsuitable for cultivation. The land was classified as CRZ III, prohibiting construction activities without permission.

Regarding the classification issue, the Departmental Representative argued that the land was classified as residential by the State Registration Department and dry land by the State Government, emphasizing that planting coconut trees did not change its character. The CIT(Appeals) upheld this view, considering the land's location within city limits. The Tribunal noted a similar case involving a co-owner where the matter was remitted back to the Assessing Officer for re-examination. In line with consistency, the Tribunal decided to remit the issue back to the Assessing Officer for further review based on the material provided by the assessee, including the Adangal extract and other relevant documents. Consequently, the orders of the lower authorities were set aside, and the appeal was allowed for statistical purposes.

In conclusion, the Tribunal's judgment focused on the disputed deduction claimed by the assessee under Section 54B, emphasizing the importance of proper classification of the land in question as agricultural for eligibility. The decision highlighted the need for a thorough re-examination by the Assessing Officer based on the material presented, ensuring a fair assessment of the issue in accordance with the law.