2023 (12) TMI 1163 - HC - Income Tax

LTCG - Deduction u/s 54B - investment in purchase of new agricultural land was made by the assessee not in his own name, but in the name of his wife - interpretation of exemption clause - HELD THAT - It will be apt to refer the decision rendered by the Supreme Court in the matter of Mangalore Chemicals and Fertilisers Limited vs. Deputy Commissioner of Commercial Tax and Others 1991 (8) TMI 83 - SUPREME COURT wherein it has been observed that the choice between a strict and a liberal construction arises only in case of doubt in regard to the intention of the legislature manifest on the statutory language. Wife of the appellant cannot be termed as an assessee as per Section 2 (7) of the IT Act. So enlarging the scope of the assessee as defined under Section 2(7) to envelope the wife of the appellant to envelop the transaction to exemption would amount to superseed the legislative requirement and the spirit of the provision. When the person who claimed exemption or concession he has to establish that he is entitled to that exemption or concession. A provision providing for an exemption, concession or exception, as the case may be, has to be construed strictly with certain exceptions depending upon the settings on which the provision has been placed in the Statute and the object and purpose to be achieved. Plain reading of Section 54B would show that the benefit is available to the assessee and when the exemption is demanded. In absence of any ambiguity the scope of definition of assessee cannot be enlarged so as to include the wife of the assessee. In other words, the exemption clause has to be construed strictly. Applying the well settled principles of law and for the reasons mentioned hereinabove, the ITAT was justified in holding that the deduction under Section 54B of the IT Act cannot be allowed to the assessee as the land was not purchased in his own name. Decided against assessee.

Summary

Issues Involved:
1. Whether the ITAT was justified in denying the deduction under Section 54B of the Income Tax Act, 1961, when the investment in new agricultural land was made in the name of the assessee's wife.

Summary:

Issue 1: Justification of ITAT's Decision on Section 54B Deduction

The core issue was whether the ITAT was justified in holding that the deduction under Section 54B of the Income Tax Act, 1961 cannot be allowed to the assessee since the investment in the purchase of new agricultural land was made in the name of his wife.

The appellant sold agricultural land and claimed deduction under Section 54B for investments made in new agricultural lands, including those purchased in his wife's name. The CIT (A) allowed the exemption, but the ITAT annulled it, stating that the exemption could only be allowed if the investment was made in the assessee's own name.

The appellant argued that Sections 54, 54B, and 54F of the IT Act are pari materia and cited precedents where deductions were allowed for property purchased in the name of a spouse. The appellant also invoked the principle that when two interpretations are possible, the one favoring the taxpayer should be preferred.

The respondent countered that the term 'assessee' under Section 2(7) of the IT Act must be strictly interpreted, and the exemption cannot be extended to property purchased in the name of the assessee's wife.

The court examined the statutory language of Section 54B and relevant case law, including the Supreme Court's rulings on strict interpretation of exemption provisions. The court concluded that the term 'assessee' as defined under Section 2(7) does not include the spouse, and thus, the exemption cannot be extended to investments made in the wife's name.

Applying these principles, the court held that the ITAT was justified in denying the deduction under Section 54B of the IT Act, as the land was not purchased in the assessee's own name.

As a result, the appeal was dismissed with no order as to costs.