2019 (8) TMI 983 - AT - Income Tax

Deduction u/s 54B - sale of agriculture land - sale conditions were such that post-dated cheques were received by assessee - HELD THAT - The contention of the DR is not acceptable on the ground that the amount of capital gain can be invested in purchase of land only on receipt of the sale consideration and the intention of the legislature is that the amount of sale consideration should not be utilized otherwise other than purchase of agriculture land and in the instant case the assessee has invested the wholesale consideration in purchase of another agriculture land within two days which is clear from the bank statement of the assessee. The period of six month or condition of investment prior to the filing of ROI is applicable only in the cases where sale consideration has been received before filing of ROI. When the sales consideration itself was received after filing of ROI then the case law relied upon by the AR is squarely applicable in the instant case. Specially the case of CIT Vs Jagriti Aggarwal 2011 (10) TMI 279 - PUNJAB AND HARYANA HIGH COURT wherein it has been held. That the assessee is entitle to claim benefit u/s 54, if the investment was made in purchase of new assets or deposit in account before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment whichever is earlier under sub-s. (4) of s. 139. Contention of the ld CIT-DR that the second proviso to section 54E is also relevant, But this is not a case of compulsory acquisition where second proviso to section 54E is applicable similarly the provisions of section 54 and 54B are pari materia, but the provision of section 54E / 54EC are not pari materia with 54B / 54F. We found that the case law cited by the learned AR in the case of Chanchal Kumar Sircar Vs ITO 2012 (2) TMI 363 - ITAT KOLKATA is applicable because of the circumstances in that case it was held that the period of limitation for making deposit or investment in new assets should be reckoned from the date of actual receipt of the consideration- If period is reckoned from date of agreement and receipt of part payment at the first instance, then it would lead to an impossible situation by asking assessee to invest money in specified asset before actual receipt of the same. Likewise in other cases it was held by the various authorities that the liberal interpretation should be considered in case of exemption. The case of Jyotindra H Shodhan Vs ITO 2003 (7) TMI 255 - ITAT AHMEDABAD is also not applicable because the case is related to the provision of section 54E and not 54B. We direct the AO to allow the assessee s claim of deduction U/s 54B on sale of agricultural land. Sold agriculture and was capital assets or not - Other grounds raised by the assessee with regard to the fact that agricultural land so sold by the assessee are not an asset U/s 2(14)(iii)(a) or (b) as these provisions stood then and therefore no capital gains are leviable. The assessee had also raised a ground that the agricultural land sold by the assessee is not urban but rural agricultural land. As we have already decided the issue for granting deduction U/s 54B we are not going into the grounds taken by the assessee with regard to nature of land so held and sold by the assessee being in the nature of agricultural land or not.

Summary

Issues Involved:
1. Deduction under Section 54B of the Income Tax Act, 1961.
2. The applicability of Section 2(14)(iii) regarding the nature of agricultural land sold.

Detailed Analysis:

1. Deduction under Section 54B of the Income Tax Act, 1961:
The core issue revolves around the assessee's claim for deduction under Section 54B for the sale of agricultural land and subsequent purchase of new agricultural land. The assessee sold agricultural land for ?5,68,81,546 and claimed a deduction of ?5,39,67,384 under Section 54B by purchasing new agricultural land for ?5,50,00,000 on 28/08/2014. The Assessing Officer (A.O.) denied the deduction because the sale proceeds were not deposited in the capital gain account scheme before the due date of filing the return under Section 139(1), and the investment in new land was made after the due date.

The CIT(A) upheld the A.O.'s decision, stating that the assessee did not fulfill the requirements of Section 54B as the investment was not made within the stipulated time, nor was the amount deposited in the capital gain account scheme. The assessee argued that the sale consideration was received through post-dated cheques in August 2014, and the investment was made immediately thereafter, within the extended period allowed under Section 139(4).

The Tribunal, after considering various judicial pronouncements, concluded that the investment made by the assessee falls within the period for filing the return under Section 139(4) and allowed the deduction under Section 54B. It was noted that the assessee could not invest the sale consideration by the due date under Section 139(1) as the funds were received later. The Tribunal emphasized the spirit of the law, which aims to ensure that the sale proceeds are used for purchasing new agricultural land.

2. The applicability of Section 2(14)(iii) regarding the nature of agricultural land sold:
The assessee raised additional grounds claiming that the agricultural land sold was not a capital asset under Section 2(14)(iii) as it was rural agricultural land and not urban agricultural land. The assessee argued that the land was under the jurisdiction of a Gram Panchayat and not a municipality, thus not falling within the definition of a capital asset subject to capital gains tax.

The Tribunal did not delve into this issue in detail as it had already decided in favor of the assessee regarding the deduction under Section 54B. However, the assessee provided substantial arguments and case laws to support the claim that the land was rural and not subject to capital gains tax.

Conclusion:
The Tribunal allowed the assessee's appeal, granting the deduction under Section 54B for the investment in new agricultural land made within the extended period under Section 139(4). The Tribunal emphasized the importance of the spirit of the law and the genuine circumstances that delayed the investment. The issue of whether the land was a capital asset under Section 2(14)(iii) was not addressed in detail as the primary relief was granted under Section 54B.