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2017 (3) TMI 1949 - AT - Income TaxLTCG - Exemption u/s 54B - assessee invested the advance money received in specific assets before date of transfer of asset - HELD THAT - Purchaser has paid substantial amount to the assessee as advance money as against total sale consideration of Rs. 5.64 crores. No purchaser would make such a huge advance without taking the possession of the land. The contention of the assessee is therefore correct that assessee has handed over the possession of land to the purchaser sometime in April 2008 otherwise the purchaser would not make the huge advances to the assessee. It is also proved that when substantial amount was received against the sale of land it is available to the assessee for making investment in purchases of land. The assessee claimed that he has made investment of Rs. 51, 80, 000/- in the purchase of another land vide purchased deed dated 9.6.2008. Therefore authorities below cannot deny deduction claimed u/s 54B. Since the assessee has invested the advance money in purchase of land before the date of transfer of the land the amount invested will qualify for exemption u/s 54B of the I.T. Act. The evidence and material on record clearly prove that payment for purchase of land was made out of advance received by the assessee against sale of land in the year under consideration. The claim of the assessee for deduction u/s 54B is thus supported by the Board Circular No. 359 (supra)and the decisions relied upon by the assessee. The authorities below were therefore not justified in denying the deduction claimed u/s 54B. We direct the AO to grant deduction claimed u/s 54B - Assessee appeal allowed.
Issues Involved:
1. Valuation of land for capital gains 2. Deduction under Section 54B of the Income-tax Act, 1961 Issue-wise Detailed Analysis: 1. Valuation of Land for Capital Gains: The assessee sold some land, with the indexed cost initially taken at Rs. 49,29,540/-. A deduction under Section 54B was claimed against the capital gain of Rs. 7,37,126/- due to investment in agricultural land. During assessment proceedings, the Assessing Officer (AO) referred the matter to the Tehsildar, Patiala, who reported the indexed cost as Rs. 1,07,303/-. The AO, after confirming the Tehsildar's report and providing the assessee an opportunity to confront the Revenue authorities, adopted this value. The Ld. CIT(A) confirmed the AO's valuation, and the assessee did not press ground Nos. 1 & 2 of the appeal, leading to their dismissal. 2. Deduction under Section 54B: The main contention was whether the assessee was entitled to a deduction under Section 54B. The AO noted that the land was sold on 19th February 2009, but the purchase deed for the new land was dated 9th June 2008. The assessee argued that possession of the sold land was handed over in April 2008, and the purchase was funded by withdrawals from the savings account on 9th and 10th June 2008. However, the AO found the sale deed mentioned possession was given on 19th February 2009, thus rejecting the assessee's claim and computing the capital gain at Rs. 55,59,363/-. The Ld. CIT(A) upheld the AO's decision, noting the sale deed indicated possession was given on the sale date, thus disallowing the deduction under Section 54B. The assessee's counsel reiterated previous submissions, highlighting substantial advance payments received in 2007 and the investment in new land in June 2008. The counsel referenced CBDT Circular No. 359, which allows exemption if earnest money or advance is invested before the transfer date. Supporting judgments from ITAT Amritsar, ITAT Pune, ITAT Chennai, and the Hon'ble Bombay High Court were cited, emphasizing that investments made from advances before the transfer date qualify for exemption under Section 54B. The Tribunal agreed, noting the substantial advances received and the investment in new land before the transfer date. The Tribunal directed the AO to grant the deduction of Rs. 51,80,000/- under Section 54B and re-compute the capital gains accordingly. Conclusion: The appeal was partly allowed, with the Tribunal directing the AO to grant the deduction under Section 54B and re-compute the capital gains. The order was pronounced in the Open Court.
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