2022 (3) TMI 775 - AT - Income Tax

Exemption u/s 54B - claim denied as property was not purchased in the name of assessee - whether exemption u/s 54B can be allowed when the new property is purchased in the name of someone other than the assessee? - variety of views - HELD THAT - AO has relied on the judgment of Hon ble jurisdictional High Court in the case of Prakash Vs. ITO 2008 (9) TMI 234 - BOMBAY HIGH COURT in which it has been held that when a new property is purchased in the name of son with clear intention to transfer the property to him and the son becomes the full owner of property for all the purposes, the assessee cannot claim the benefit of exemption u/s 54B. When discordant views are rendered by different High Courts, an inferior authority under one of such High Courts, is bound to follow its jurisdictional High Court notwithstanding that other view of the non-jurisdictional High Court may sound more appealing on individual level vis-a-vis the view of the jurisdictional High Court. The principle of following a view in favour of the assessee when contrary views are available, applies to the authorities acting under a neutral High Court, namely, which has not expressed any opinion for or against - on that point. Once the jurisdictional High Court decides a particular issue in a particular manner, that manner has to be mandatorily followed by all the authorities acting under it so long as it holds the field and is not deactivated by the Hon ble Supreme Court. In that view of the matter, I am bound to follow the view taken by the Hon ble jurisdictional High Court. The ld. AR failed to draw my attention towards any other subsequent decision rendered by the Hon ble Bombay High Court in favour of the assessee on this issue. I, therefore, hold that the authorities below were justified in making the assessee not eligible to exemption u/s 54B of the Act - Appeal dismissed.

Summary

Issues:
- Exemption u/s 54B of the Income-tax Act, 1961

Analysis:
The appeal before the Appellate Tribunal ITAT Pune was centered around the denial of exemption u/s 54B of the Income-tax Act, 1961 to the assessee in relation to the assessment year 2011-12. The factual background revealed that the assessee had sold agricultural land and purchased new agricultural land in the name of her sons, which led to a dispute with the Assessing Officer (AO) regarding the eligibility for exemption u/s 54B. The AO contended that the new property should be purchased in the name of the assessee only, relying on the judgment of the Hon’ble Bombay High Court in a similar case. The CIT(A) upheld the AO's decision, prompting the assessee to appeal to the Tribunal.

The Tribunal analyzed the conflicting decisions of various High Courts on the issue of claiming exemption u/s 54B when the new property is purchased in someone else's name. While the Hon’ble Delhi High Court and Hon’ble Punjab & Haryana High Court had ruled in favor of the assessee in similar cases, the Hon’ble Bombay High Court had taken a different stance, as seen in the case of Prakash Vs. ITO and others. The Tribunal highlighted the principle that decisions of the jurisdictional High Court are binding on subordinate authorities, emphasizing the need to follow the precedent set by the High Court within its jurisdiction.

In light of the divergent views of different High Courts, the Tribunal underscored the obligation of inferior authorities to adhere to the decision of their jurisdictional High Court. Despite arguments in favor of the assessee based on decisions from other High Courts, the Tribunal concluded that the precedent set by the Hon’ble Bombay High Court in the case at hand dictated the denial of exemption u/s 54B to the assessee. The Tribunal, therefore, dismissed the appeal, affirming the decisions of the authorities below and holding the assessee ineligible for the exemption u/s 54B.

In conclusion, the Tribunal's judgment highlighted the significance of following the decisions of the jurisdictional High Court when conflicting views exist among different High Courts. The case serves as a reminder of the binding nature of precedents set by the High Court within its jurisdiction, even in the presence of alternate interpretations from other High Courts. The assessee's appeal was dismissed, and the denial of exemption u/s 54B was upheld based on the precedent established by the Hon’ble Bombay High Court.