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2019 (7) TMI 175 - AT - Income TaxRevision u/s 263 - allowability of deduction u/s 54B - claim allowed by the A.O. based on the agreement to purchase of agricultural land - transfer of agricultural land by Scheduled Caste person was prohibited under Land Reforms Act of State of Rajasthan - HELD THAT - The assessee has accepted the fact that after the said agreement, sale deed could not be executed due to the reason that the agricultural land could not be transferred by the seller in favour of the assessee as prohibited by the law. The assessee has claimed that once the assessee has paid the consideration and the possession was handed over to the assessee then it amounts to transfer in terms of Section 2(47)(v) (vi). No merit in the contention of the ld AR because of the simple fact that the agricultural land belonging to the Scheduled Caste cannot be transferred to non- Scheduled Caste person until and unless the same is converted to non-agricultural land. Even if the said agricultural land can be transferred in future after converting the same from agricultural to non-agricultural land, it would not be a case of purchase of agricultural land but it must be purchase of non-agricultural land. The moment, the agricultural land is converted to non-agricultural land, it loses the character of agricultural land and consequently the said investment would not be eligible for deduction U/s 54B. In the case in hand when the transfer itself is prohibited then the alleged agreement would not bring the case in the category of transfer of ownership without any formal deed of title. Further we find that the order of the A.O. is erroneous so far as the crucial aspect and the very basis of allowability of deduction U/s 54B of the Act was not considered by the A.O. and hence we find that the PCIT has rightly invoked the provisions of Section 263 when the claim of the assessee is absolutely impermissible under law. Accordingly, no error or illegality in the impugned revision order of the ld. PCIT, Alwar passed U/s 263 - Decided against assessee.
Issues:
1. Revision order passed by ld. Pr.CIT under Section 263 of the Income Tax Act, 1961 challenged by the assessee. 2. Claim of deduction under Section 54B allowed by AO disputed by ld. PCIT. 3. Interpretation of transfer of agricultural land and entitlement to deduction under Section 54B of the Act. Issue 1: Revision Order Challenge The appeal was against the revision order dated 18/02/2019 by ld. Pr.CIT under Section 263 for A.Y. 2011-12. The grounds of appeal included challenging the legality of the order and seeking its quashing. The assessee contended that the order was erroneous and prejudicial to revenue, leading to a request for alteration or modification of any ground of appeal. Issue 2: Disputed Deduction Claim The assessee claimed NIL capital gain for the year, citing deduction under Section 54B of ?34,35,418. The AO accepted this claim initially, but the ld. PCIT found it erroneous. The dispute arose from the fact that the agricultural land was purchased through an agreement, not a sale deed, due to legal restrictions on transfer to non-Scheduled Caste persons. The ld. PCIT held that the assessee was not entitled to the deduction under Section 54B, leading to the order being set aside for a fresh assessment. Issue 3: Interpretation of Transfer and Deduction Entitlement The assessee argued that possession and full payment for the land justified the deduction under Section 54B, emphasizing the definition of 'transfer' under Section 2(47) of the Act. However, the ld. PCIT and ld. CIT-DR contended that the legal restrictions on transfer rendered the deduction impermissible. The tribunal found that the land's status as Scheduled Caste property and legal transfer restrictions precluded the deduction claim. The tribunal upheld the ld. PCIT's revision order, dismissing the appeal. In conclusion, the tribunal upheld the ld. PCIT's revision order, denying the deduction claim under Section 54B due to legal restrictions on the transfer of agricultural land. The tribunal emphasized the importance of legal ownership and transfer restrictions in determining entitlement to deductions under the Income Tax Act.
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