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2018 (10) TMI 128 - AT - Income TaxAddition on account of long term Capital gains - sale of agriculture land - Held that - As stated on oath that the residential plots sold during the year were effected by him only and he has duly received the sale consideration from various plot owners and those transactions had no financial relation with the assessee. There is no dispute about the price of agriculture land per acre which is at ₹ 41,50,000/- per acre and is above the prevailing rate of ₹ 40,48,552/- as provided in the guidelines of Zila Panjiyak Sanyojak. Therefore are of considered view that both the lower authorities erred in calculating the sale consideration by invoking provisions of Section 50C and applying the price of each plot of land sold during the year and thereby computing the Long Term Capital Gain. Allow this issue in favour of the assessee and direct the revenue authorities to calculate the Long Term Capital Gain by taking the sale consideration of impugned agriculture land at ₹ 1,68,90,500/- as against the sale consideration confirmed by the CIT(A) at ₹ 3,83,79,019/-. Decided in favour of the assessee. Denying the benefit of exemption u/s 54B for investment in agriculture land in the name of son and daughter of the assessee - Held that - The provisions of Section 54B is mainly focused on providing the benefit to such assessee who sells their agriculture land and invest the sale consideration so received for purchasing another piece of agriculture land. The main weightage is for applying the consideration for purchase of agriculture land and it is not specifically mentioned as to whether it has to be purchased in the name of the assessee. For better perusal we mention below the provisions of Section 54B. Reason that why the benefit should not be given for purchase of agriculture land in the name of his son and daughter who are not someone not connected or strangers to the assessee and as held by the Hon ble High Court that the assessee includes his legal heirs also so as to give the vide and legal interpretation. We therefore are of the view that the CIT(A) erred in denying the exemptions u/s 54B of the Act to the assessee for investment of sale consideration for purchasing agriculture land in name of his son and daughter at ₹ 49,86,085/- and ₹ 12,50,175/- respectively. We accordingly set aside the findings of both the lower authorities and direct the Ld. Assessing Officer to give the benefit of exemption u/s 54B to the assessee at ₹ 62,36,260/- which is over and above the benefit of ₹ 91,18,190/- already allowed by Ld.CIT(A) u/s 54B. In the result the issue No.3 raised by the assessee under Ground No.2 of the appeal is allowed. Adoption of cost of acquisition of land sold by the assessee - Held that - There was sale of agriculture land measuring 1.647 hectare. The cost of acquisition on 1.04.1981 was taken at ₹ 5 lakhs per hectare thereby computing the cost of acquisition at ₹ 8,23,500/-. The onus to prove the basis of taking the cost of ₹ 5 lakh per hectare was on the assessee. However during the course of assessment proceedings two registration sale deeds of the nearby agriculture land situated at Village Raslakhedi were available. As per the sale deed dated 25.7.1985 the rate of land was ₹ 10,000/- per acre and in another case of registered sale deed dated 31.7.85 also the rate was ₹ 10,000/-. No new evidences were brought on record. We are of the view that cost of acquisition for 1.647 acres should be adopted at ₹ 1 lakh per hectare which will work out the acquisition cost at ₹ 1,64,700/- per hectare. Ld.A.O is hereby directed to adopt the cost of acquisition at ₹ 1,64,700/- as against ₹ 8,23,500/- adopted by the assessee. This ground of appeal of the assessee is partly allowed.
Issues Involved:
1. Validity of the unregistered agreement to sale dated 20.03.2009. 2. Application of Section 50C of the Income Tax Act for computing Long Term Capital Gains. 3. Denial of exemption under Section 54B for the purchase of agricultural land in the name of the assessee's son and daughter. 4. Determination of the cost of acquisition of the land sold by the assessee. Detailed Analysis: 1. Validity of the Unregistered Agreement to Sale: The primary issue was whether the unregistered agreement to sale dated 20.03.2009 between the assessee and Shri R.K. Lalwani could be considered valid for the purposes of computing capital gains. The Assessing Officer (A.O.) and the Commissioner of Income Tax (Appeals) [CIT(A)] held that the agreement was invalid as it was not registered under the Registration Act, 1908, and thus could not be used to claim transfer under Section 53A of the Transfer of Property Act. However, the Tribunal relied on the judgment of the Co-ordinate Bench in the case of Smt. Sapnaben Dipakbhai Patel V ITO, which held that even unregistered agreements could be considered valid for specific performance and other collateral purposes. Therefore, the agreement to sale dated 20.03.2009 was held valid, and the transfer of agricultural land to Shri R.K. Lalwani was recognized under Section 2(47)(v) of the Income Tax Act. 2. Application of Section 50C: The A.O. invoked Section 50C of the Income Tax Act to compute the Long Term Capital Gains by adopting the sale consideration based on the market value determined by the Stamp Valuation Authority, which was significantly higher than the consideration shown in the sale deeds. The Tribunal found that the sale consideration agreed upon in the unregistered agreement to sale was above the prevailing market rate and that the sale consideration received by the assessee was for agricultural land, not residential plots. Therefore, the Tribunal directed that the sale consideration for computing Long Term Capital Gains should be taken as ?1,68,90,500/- as per the agreement to sale, and not ?3,83,79,019/- as adopted by the CIT(A). 3. Denial of Exemption under Section 54B: The A.O. denied the exemption under Section 54B as the claim was made in a revised return, which was not accepted. The CIT(A) allowed the exemption for the purchase of agricultural land in the name of the assessee and his wife but denied it for the land purchased in the name of the assessee's son and daughter. The Tribunal, relying on judicial precedents, held that the benefit of Section 54B should be given for investments made in the names of the assessee's son and daughter as well, as they are legal heirs and the investment was made out of the sale consideration received. Therefore, the Tribunal directed the A.O. to allow the exemption under Section 54B for the investments in the names of the assessee's son and daughter. 4. Determination of the Cost of Acquisition: The A.O. and CIT(A) adopted the cost of acquisition of the land at ?27,580/- based on the rates of nearby agricultural land in 1985-86. The assessee had claimed a higher cost of acquisition based on the fair market value as of 01.04.1981. The Tribunal, considering the facts, directed that the cost of acquisition should be adopted at ?1,00,000/- per hectare, which would be fair to both parties. Consequently, the cost of acquisition was determined at ?1,64,700/- per hectare. Conclusion: The Tribunal partly allowed the appeal, holding the unregistered agreement to sale as valid, directing the computation of Long Term Capital Gains based on the sale consideration of ?1,68,90,500/-, allowing the exemption under Section 54B for investments in the names of the assessee's son and daughter, and determining the cost of acquisition at ?1,64,700/- per hectare.
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