2013 (12) TMI 194 - AT - Income Tax

Deduction u/s 54B The land was continuously used by the assessee for agricultural purposes - The agricultural income from the said property has been declared by the assessee in his return of income - Held that - The land was entered in the revenue records as agricultural land - The land was always treated as agricultural land and that only limited cultivation was possible on account of scarcity - The assessee had in fact cultivated a part of its lands according to the Adangal Register and no further cultivation was possible because of lack of water. The use referred to in the section can only be regarded as such use as the lands are capable of with the aid of facilities available and the assessee cannot be denied the relief The assessee was actually unable to put the land to use due to vagaries of nature and non-availability of resources It is not the fault of the assessee if rained lands are not actually put to use during the drought Decided against Revenue.

Summary

Issues involved:
Allowability of deduction u/s. 54B of the Income-tax Act, 1961 for assessment year 2006-07.

Analysis:

Issue 1: Allowability of deduction u/s. 54B
The appeals by the Revenue were against the orders of the CIT(A) regarding the allowability of deduction u/s. 54B of the Income-tax Act, 1961 for three assessees. The common issue across all appeals was whether the land sold was eligible for deduction u/s. 54B as agricultural land. The Assessing Officer disallowed the claim, but the CIT(A) allowed it based on the agricultural activities carried out on the land. The Revenue contended that the conditions of section 54B were not met by the assessee, citing lack of proof of regular land revenue payments and agricultural operations. The assessee argued that the land was used for agricultural purposes, supported by various pieces of evidence such as Pattadar Passbooks, Google Earth images, and cultivation details. The Tribunal analyzed the evidence and legal provisions to determine the eligibility for deduction u/s. 54B.

Issue 2: Interpretation of agricultural land
The Tribunal examined the definition of agricultural land under Section 2(14) and the introduction of Section 54B by the Finance Act, 1970. The Revenue argued that the lands, though classified as agricultural, were not used for agricultural purposes within two years prior to the sale. However, the Tribunal emphasized that the objective of the exemption under Section 54B was to encourage cultivation. It noted that the lands were intended for agricultural use, as evidenced by revenue records and previous assessments. The Tribunal highlighted that the inability to cultivate due to factors like water scarcity should not disqualify the assessee from claiming the deduction. The Tribunal relied on the legislative intent and legal precedents to support its decision in favor of the assessee.

Conclusion:
The Tribunal upheld the CIT(A)'s decision, dismissing all Revenue appeals. It concluded that the assessee was entitled to relief under Section 54B as the land in question was intended for agricultural use, and the inability to cultivate due to external factors did not negate the claim for deduction. The judgment provided a detailed analysis of the evidence presented and the legal provisions applicable to determine the allowability of deduction u/s. 54B.