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2023 (6) TMI 1425 - AT - Income TaxLTCG - deduction u/s 54B - purchase of the agricultural land - transfer of agriculture land and purchased of another parcel of land - Claim of assessee is not acceptable for simple reason that purchase deed of the new land has not been shown and it is not being shown that land parcel belongs only to the assessee - Reason given by the assessee before the AO was that two of the co-owners were minor due to which application had been filed in the appropriate court for permission to purchase land and sell land in their name. The assessee was acting as a guardian for these minors. HELD THAT - We state that registration of the purchased land was pending due to court permission because of the reason that two of the co-sellers were minor at the time of purchase of the said land but now at present both the above two parties became major and they have executed a notarized declaration of accepting the transactions and confirmed the enforceability of the documents in form of Satakhat/sale agreement and possession letter signed by their guardians on their behalf and therefore a documents on which basis, assessee had purchased is valid and enforceable in law. The assessee had claimed the amount already paid for the purchase of a new agriculture land which is confirmed by the above parties and also confirmed the enforceable of transaction and documentation in assessee s favour and hence assessee s claim u/s 54B of the Act is allowable as the transaction is enforceable in the eyes of the law. On the identical facts, in the case of Balraj 2001 (12) TMI 51 - DELHI HIGH COURT held that section 54 of the Act speaks of purchase only and for availing benefit under this section, it is not necessary that assessee should become owner of property. Where assessee paid a sum at time of entering into an agreement for purchase of a property within a year from sale of another property, he would be entitled to benefit provided under section 54 even though there was no registration within said period. We note that assessee s issue under consideration is also squarely covered by a decision of the Apex Court in CIT v. T.N. Aravinda Reddy 1979 (10) TMI 1 - SUPREME COURT where it has been held that the word 'purchase' occurring in section 54(1) of the Act had to be given its common meaning, viz., buy for a price or equivalent of price by payment in kind or adjustment towards a debt or for other monetary consideration. Each release in this case was a transfer of the releasor's share for consideration to the release and the transferee, the assessee, purchased the share of property therefore, assessee is entitled to the relief under section 54(1) of the Act. In normal circumstances by executing an agreement to sell in respect of immovable property, a right in personam is created in favour of the transferee/vendee and when such a right is created, the vendor is restrained to sell the said property to someone else because the transferee has got a legitimate right to enforce specific performance of said agreement to sell. Hence, we direct the AO to give the benefit of deduction u/s 54B of the Act, to the assessee. Assessee appeal allowed.
Issues Involved:
1. Disallowance of deduction claimed under Section 54B of the Income Tax Act, 1961. 2. Non-allowance of exemption under Section 54B for the purchase of agricultural land. 3. Initiation of penalty proceedings under Section 271(1)(c) of the Income Tax Act, 1961. 4. Initiation of penalty proceedings under Section 271F of the Income Tax Act, 1961. Detailed Analysis: 1. Disallowance of Deduction Claimed Under Section 54B: The primary issue revolves around the disallowance of a deduction of Rs. 4,04,08,003 claimed under Section 54B of the Income Tax Act, 1961. The assessee had sold agricultural land and claimed this deduction for the purchase of new agricultural land. However, the Assessing Officer (AO) disallowed the deduction on the grounds that the purchase deed for the new land was not registered, and the transaction was not valid under the law due to the involvement of minors in the agreement. 2. Non-Allowance of Exemption Under Section 54B: The AO issued a show cause notice stating that the assessee had not furnished the registered document for the purchase of the new land. The assessee responded that the registration was pending due to the need for court permission, as two co-sellers were minors at the time of purchase. The assessee provided notarized declarations from the now-major co-sellers affirming the transaction's enforceability. Despite this, the AO concluded that the affidavit and agreement to sale did not confer any legal right to the land without registration, thus disallowing the exemption under Section 54B. 3. Initiation of Penalty Proceedings Under Section 271(1)(c): The AO initiated penalty proceedings under Section 271(1)(c) for alleged concealment of income or furnishing inaccurate particulars of income. This was based on the disallowance of the Section 54B deduction. 4. Initiation of Penalty Proceedings Under Section 271F: Similarly, penalty proceedings under Section 271F were initiated for failure to furnish the return of income within the prescribed time. Tribunal's Findings: On Disallowance of Deduction Under Section 54B: The Tribunal found merit in the assessee's contention that the transaction was enforceable despite the lack of registration due to minors' involvement. The Tribunal cited multiple precedents, including the Delhi High Court's decision in Balraj, which held that for Section 54 benefits, it is not necessary for the assessee to become the legal owner of the property within the stipulated period. The Tribunal also referenced the Supreme Court's ruling in T.N. Aravinda Reddy, which stated that the term "purchase" should be given its common meaning and that the absence of registration does not negate the transaction's validity. Based on these precedents and the evidentiary documents provided by the assessee, the Tribunal directed the AO to allow the deduction under Section 54B. On Penalty Proceedings: The Tribunal noted that the penalty proceedings under Sections 271(1)(c) and 271F were premature and did not require adjudication at this stage. Conclusion: The appeal filed by the assessee was allowed. The Tribunal directed the AO to give the benefit of the deduction under Section 54B of the Income Tax Act, 1961, to the assessee. The penalty proceedings under Sections 271(1)(c) and 271F were deemed premature and not adjudicated. Order Pronounced: The order was pronounced on 26/06/2023 in the open court.
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