2022 (4) TMI 1127 - AT - Income Tax

Addition on account of long term capital gain - Nature of land sold - the abstracts of 7x12 issued by the E-dhara Mamlatdar showing the position as on 12.10.2009 was filed wherein the name of the new purchaser was rightly mentioned in the said abstracts instead in the name of the assessee - HELD THAT - Regarding the first contention after considering the statement of the Talati and the cross-examination made by the assessee it was found that the land was not agricultural one as stated by the Talati is not borne by any record rather the collectors order way back in 2004 already classified the land in question as agricultural land. We, therefore, agree with the decision taken by the Ld. CIT(A). Eligible for benefit u/s 54B - Whether the advance payment made by the assessee which is more than the capital gain tantamount to purchase of the property? - It is an undisputed fact that when the initial payment of ₹ 12.15 crores has been made for purchase of the new asset that too more than the amount of capital gain to the tune of ₹ 2.90 crores before the due date of filing of the return of income under Section 139(1) of the Act. Considering the CBDT s Circular No. 471 dated 15.10.1986, Circular No. 672 dated 06.12.1993 the said to be treated as construction for the purpose of Section 54/54F. Further that considering the Circular No. 672 issued by the CBDT the said amount paid out of the net sale consideration in the original asset is required to be treated as purchase / construct. Further that though the above clarification is for Section 54F, the analogy in our considered opinion has been rightly applied by the CIT(A) in the case in hand considering the facts and circumstances therein. Hence, advance payment by the appellant to purchase agricultural land from the sale proceed of the land sold by him has been rightly found eligible for benefit under Section 54B of the Act by the Ld. CIT(A) without any ambiguity so as to warrant interference. Once the main issue is decided in favour of the assessee consideration of the third limb relating to deposit of capital gain amount has become nugatory. The Revenue s appeal is, therefore, dismissed.

Summary

Issues:
- Appeal against addition made on account of long term capital gain.
- Dispute on whether agricultural activities were carried out on the sold land.
- Treatment of advance payment for new land purchase under Section 54B.
- Compliance with provisions of the Income Tax Act regarding capital gain.

Analysis:

Issue 1: Addition on account of long term capital gain
The Revenue appealed against the addition of ?2,90,08,640 on account of long term capital gain. The assessee, engaged in construction and transportation businesses, sold a plot of agricultural urban land and purchased new agricultural land. The Revenue rejected the claim under Section 54B, which was upheld by the CIT(A). The Tribunal, after considering evidence and submissions, found that the land in question was indeed put to agricultural use, contrary to the AO's assertion. The Tribunal agreed with the CIT(A)'s decision, dismissing the Revenue's appeal.

Issue 2: Agricultural activities on the sold land
The Revenue contested the claim that agricultural activities were carried out on the sold land. The AO based the rejection on the land not being utilized for agricultural purposes by the appellant or their parents. However, after thorough examination of records and cross-examination, it was found that the land was classified as agricultural by the Collector in 2004. The Tribunal upheld the CIT(A)'s decision, concluding that the land was indeed used for agricultural purposes.

Issue 3: Treatment of advance payment for new land purchase
The dispute centered on whether the advance payment made by the assessee for purchasing new land qualified under Section 54B. The AO argued that the payment was an advance and not a purchase. However, the Tribunal, considering relevant circulars and precedents, agreed with the CIT(A) that the advance payment fulfilled the conditions of Section 54B. The Tribunal held that the advance payment for the new asset was eligible for the benefit under Section 54B.

Issue 4: Compliance with Income Tax Act provisions
The Tribunal addressed the compliance with Income Tax Act provisions regarding capital gain and new asset purchase. It was established that the initial payment for the new asset was made before the due date of filing the return, meeting the requirements of Section 139(1) of the Act. The Tribunal, citing CBDT circulars, concluded that the advance payment constituted a purchase for the purpose of Section 54B. As the main issue was decided in favor of the assessee, the consideration of the deposit of the capital gain amount became irrelevant, leading to the dismissal of the Revenue's appeal.

In conclusion, the Tribunal dismissed the appeals filed by the Revenue, upholding the decisions of the CIT(A) regarding the addition on account of long term capital gain, agricultural activities on the sold land, and the treatment of advance payment for new land purchase under Section 54B. The Tribunal's detailed analysis and adherence to legal provisions resulted in the dismissal of the appeals.