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2024 (2) TMI 221 - AT - Income TaxLTCG - Deduction u/s 54B - claim denied as Banakhat (Agreement of Sale) was unregistered and the Banakhat was meant only for 12 months period, therefore the assessee does not get right over the property - sale consideration received by the assessee through registered Sale Deed as Confirming Party cannot be treated as a transfer and not a capital asset in the hands of the assessee as assessee does not get right over the property by merely entering into an agreement (Banakhat) HELD THAT - From reading of clause 4 of the Banakhat makes it clear that the seller is to obtain title clearance certificate and non-agricultural permission in respect of the land to the seller namely the assessee herein, failure of the same, the tenure of the Banakhat shall deem to have extended automatically. Thus it is clear that the Civil disputes over the land was cleared between the parties in Civil Suit by Principal Sr. Civil Judge withdrawing the suit unconditionally and N.A. permission in respect of the land was obtained from the Collector. The above details are very much reflecting in the registered Sale Deed executed on 05.01.2013 registered as Document No. 174 of 2013 with the Office of the Sub Registrar, Ahmedabad-2, Wadaj. It is in the above registered Sale Deed, the respondents/assessees herein are shown as the Confirming Parties and received the consideration through various payment from the buyer/developer. Thus the allegations and averments made by the AO does not stand good in the eye of law namely Banakhat is unregistered and the Banakhat after 12 months period is invalid in law are not properly understood by the Ld. A.O. in legal prospective. Therefore the grounds are liable to the dismissed. No infirmity in the order passed by the Ld. CIT(A) who held that rights held by the assessee as a Confirming Party in the Sale Deed as a capital asset within the meaning of Section 2(14) of the Act and liable for LTCG and the assessee is also eligible to claim deduction u/s. 54B of the Act. Decided against revenue.
Issues Involved:
1. Classification of income from the sale of agricultural land. 2. Validity of the Banakhat (Agreement of Sale) without registration. 3. Right created by the Banakhat in favor of the assessee. 4. Alleged scheme to lower tax liability. 5. Applicability of the Supreme Court's decision in Suraj Lamp and Industries Pvt. Ltd. case. 6. Deduction under sections 54B/54D/54G of the Income Tax Act. Summary: Issue 1: Classification of Income from Sale of Agricultural Land The Revenue contended that the sale consideration received by the assessee as a Confirming Party in the sale transaction should be treated as "income from other sources" and not as a transfer of a capital asset. The CIT(A) disagreed, holding that the Banakhat clearly provided the assessee with rights over the property, making it a capital asset under section 2(14) of the Income Tax Act. The Tribunal upheld this view, confirming that the income should be classified as Long Term Capital Gain (LTCG). Issue 2: Validity of the Banakhat Without Registration The Assessing Officer argued that the Banakhat was not registered, making it invalid. The CIT(A) countered this by stating that as per the amended section 17 of the Registration Act, 1871, registration of the Banakhat was not mandatory. The Tribunal agreed, noting that the Banakhat was later registered on 01.06.2013, thus nullifying the Revenue's argument. Issue 3: Right Created by the Banakhat in Favor of the Assessee The Revenue claimed that the Banakhat did not create any enforceable right. The CIT(A) and the Tribunal found that the Banakhat included a clause extending its tenure automatically until the vendor provided a title clearance certificate. This clause, along with the subsequent registration and the payment received, confirmed that the assessee had a right in the property, making it a capital asset. Issue 4: Alleged Scheme to Lower Tax Liability The Assessing Officer suggested that the Banakhat was an afterthought to avoid tax. The CIT(A) found no evidence supporting this claim, noting that the parties involved were not related and that the assessee had genuinely utilized the amount received. The Tribunal upheld this finding. Issue 5: Applicability of the Supreme Court's Decision in Suraj Lamp and Industries Pvt. Ltd. Case The Revenue relied on the Supreme Court's decision in Suraj Lamp and Industries Pvt. Ltd. to argue that an unregistered agreement of sale does not create any charge on its subject matter. The CIT(A) and the Tribunal distinguished this case, noting that the decision was not applicable due to the extended meaning of "transfer" under section 2(47) of the Income Tax Act and the subsequent registration of the Banakhat. Issue 6: Deduction under Sections 54B/54D/54G of the Income Tax Act The CIT(A) allowed the assessee to claim deductions under sections 54B/54D/54G, which the Tribunal upheld, directing the Assessing Officer to allow the deductions if found otherwise allowable as per the provisions of the Act. Conclusion: The Tribunal dismissed the appeals filed by the Revenue, confirming that the income from the sale transaction should be treated as LTCG and that the assessee is entitled to claim deductions under the relevant sections of the Income Tax Act.
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