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TMI Blog2016 (6) TMI 1251X X X X Extracts X X X X X X X X Extracts X X X X ..... te of sale, it remains undisputed that, as per the remand report, that the payments were made out of advance received by the assessee against the sale of land. Such payments having been made directly by the persons who purchased the land from the assessee, to the person who sold it to the assessee. The CBDT Circular No.359 dated 10.05.1983, though applicable to section 54E, as correctly observed by the ld. CIT(A), it is applicable equally to section 54B. In view of the above, the assessee claimed deduction under section 54 of the Act was rightly allowed by the ld. CIT(A). - Decided in favour of assessee. Computation of capital gain - Held that:- Capital gain, on the basis of fair market value of the property as on 14.1981, such value was adopted at ₹ 2923/- per marla. This was based on the report of the local revenue authority, which remained undisputed. Besides, the valuation adopted regarding similar land was also relied on by the assessee, wherein, the valuation of ₹ 5000/- per marla had been considered. CIT(A) was well justified in accepting the rate of ₹ 2923/- per marla as on 01.04.1981 concerning the assessee’s land. It was due to these facts that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edings and the Assessing Officer has verified the contentions of the appellant in this regard to be correct. Since the said amount paid as earnest money had to be paid for ensuring the smooth sale of the impugned property the said amount has to be reduced from the gross sale consideration to work out the net sale consideration for the purposes of computation of Capital Gain. The Assessing Officer has verified during the remand proceedings that the land sold by the appellant had been used for agricultural purposes and the land purchased was also being used for the purposes of agriculture only. 8. The next issue raised by the Assessing Officer is that since the land in question is being used for the agricultural purposes by the persons who had the possession of the land and those persons had to be paid eviction charges as detailed above, the claim of the assessee would not fall under the purview of section 54B as the said laid was not being used by the assessee himself for agricultural purposes, I do not agree with the view of the Assessing Officer on the issue as the requirement of usage of agricultural land is with reference to the land and not with reference to the person who o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Board have decided that if the assessee invests the earnest money or the advance received in specified assets before the date of transfer of asset the amount so invested will qualify for exemption under s. 54E of the Income Tax Act, 1961. 9. It has been clarified that the intention of the legislature was to ensure that the net consideration was invested in specified assets and earnest money or advance being part of sale consideration should be considered to have been invested for exemption under section 54E of the Income Tax Act, 1961. The facts of the present case are on the same lines and the legislature s intention in respect of section 54B cannot be said to be different as the essential purpose of incorporating the impugned provision of section 54B is to ensure that anybody selling agricultural land should not be subjected to taxation if the proceeds thereof are used for buying agricultural land. The fact that the advance/ earnest money had been used for making the consequential purchase should not come in the way of allowing the claim of deduction under section 54B. Even otherwise, the AR has placed reliance on the judgment of Hon ble Apex Court in the case of Sanjeev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h was not within the control of the assessee, they could not execute the sale deed and the sale deed had been registered only on 24th September, 2004, after the suit filed by R, challenging the validity of the Will, had been dismissed. In the light of the aforestated facts and in view of the definition of the term transfer , one can come to a conclusion that some right in respect of the capital asset in question had been transferred in favour of the vendee and therefore, some right which the assessee had, in respect of the capital asset in question, had been extinguished because after execution of the agreement to sell it was not open to the appellants to sell the property to someone else in accordance with law. A right in personam had been created in favour of the vendee, in whose favour the agreement to sell had been executed and who had also paid ₹ 15 lacs by way of earnest money. No doubt, such contractual right can be surrendered or neutralized by the parties through subsequent contract or conduct leading to no transfer of the property to the proposed vendee but that is not the case at hand. In addition to the fact that the term transfer has been defined under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is allowed. The difference of Rs. (-)15,79,477/- pointed out by the Assessing Officer between sale and purchase consideration also would not lead any taxable Capital Gain as benefit of indexation given on any reasonable value would lead to negative gain. Therefore no Capital gain is leviable on the impugned transaction.The addition made by the Assessing Officer is therefore directed to be deleted. 4. The ld. DR has contended that the ld. CIT(A) has erred in deleting the addition correctly made by the AO; that while doing so, the ld. CIT(A) has failed to appreciate that the decision of the Hon ble Supreme Court in the case of Sanjeev Lal vs. CIT , 269 CTR 1 (SC), is not at all applicable to the facts of the present case; that the ld. CIT(A) further erred in ignoring the remand report of the AO; that the ld. CIT(A) has further erred in allowing expenses of ₹ 79,70,797/- under section 148(1), for eviction of land to the third party cultivators of land when the assessee was Khud Kasht; that the ld. CIT(A) has also erred in allowing deduction under section 54B even in the face of the fact that the land was purchased befor3 the sale of land, on which, capital gain has arisen. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so, even the demand has not been worked out properly. V. No reasons were even confronted to the assessee which has given rise to proceedings u/s 148 which seem to be vague and untenable. (iii) Without prejudice to the above legal issues on facts it is submitted as under:- That the assessee during the year sold his share of land app. 651 marlas for ₹ 2,76,67,500/- although the Deptt. has take 186.40 Marlas for ₹ 2,65,76,750/-. This amount is to further go down when an amount of ₹ 79,70,797/- is subtracted for amount paid for eviction of land to the persons who were in possession thereof and shall qualify for the deduction u/s 48(1) of the Act. Complete details with documentary evidence is enclosed for which the assessee is separately moving application under Rule 46A of the Act. Thus the net consideration comes to (2,76,67,500 79,70,797 = 1,96,96,703/-). The assessee as per the documents enclosed had purchased the following agricultural land after receipt of sale consideration to the extent of ₹ 1,96,96,703/-. i) Agricultural Land 62K 5M in Village Kingra for ₹ 1,16,71,875/- + Expenses ₹ 6,00,000/-. Thus totaling ₹ 1,22,71,8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O. This remand report. This remand report, as reproduce in para 4 of the impugned order is as follows: 4. The submissions of the appellant were sent to the Assessing Officer for his comments seeking his opinion on the issue of framing assessment under section 144 of I.T.Act, 1961 and also to verify the claim of the appellant with regard to NIL capital gain arising out of the impugned transaction. The Assessing Officer vide his report dated 24.09.2014 submitted his comments as under:- In this connection, it is submitted that this case was assessed under section 144 of the Income Tax Act, 1961 at an income of ₹ 2,42,24,176/- . The assessment record reveals that inspite of number of opportunities as mentioned in the assessment order, the assessee did not comply and furnish any reply. However, it is seen that the assessee is an agriculturist with little knowledge of law. Therefore, in view of the principles of natural justice, additional evidence may be admitted in this case. The merits of the case in light of the submission of the assessee in the office of your goodself are being discussed as follows:- i. As regards the sale consideration received by the assessee, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counter comments to the remand report. These are as follows: i. That as far as admission of additional evidence under rule 46A of the Act is concerned, the A.O. has absolutely no objection to its admission and therefore no comments are offered. ii. Coming to the merits of the case the A.O. has conceded that the land sold and purchased is Agricultural which is the basic requisite of section 54B of the Income Tax Act for claim of exemption. iii. The A.O. has also perused the evidence and has agreed that eviction charges to the extent of ₹ 79,70,797/- were paid as per the evidence filed which shall be deducted from the sale of sale consideration u/s 48(1). iv. However the A.O. has the following objections:- i) Since the land sold was not being used by the himself in view of the eviction charges paid, the claim doesn t fall under the purview of section 54B, ii) That the four registrations of purchase as per following details predates the date of sale:- a) Registry dated 29.08.2008 ₹ 1,00,72,500/- b) Registry dated 28.08.2008 ₹ 1,27,92,500/- c) Registry d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 1,00,72,500/- b) Registry dated 28.08.2008 ₹ 1,27,92,500/- c) Registry dated 21.08.2008 ₹ 1,32,60,000/- d) Registry dated 17.09.2008 ₹ 8,50,000/- That the A.O. has lost sight of the fact that although in four above cases the registrations took place after the purchase but the entire amount in the first three Registration was received much before the Registrations as per following details:- i) ₹ 1,00,72,500/- received on 21/01/2008 ii) ₹ 1,27,92,500/- received on 21/01/2008 iii) ₹ 1,32,60,000/- date not clear but in any case before 21/04/2008 It was against this money that the purchase was made. The legal position and Courts are clear on the subject. In exactly similar circumstances the Supreme Court in latest judgment of Sanjeev Lal etc. Vs. CIT reported as (2014) 269 CTR (SC) 1 has held that purchase made with Advance or earnest money, although the Registrations effected later shall qualify for exemption. Your honours attention is further invited to the circular of the board vide circular ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the A.O. is that as far as purchase of land amounting to ₹ 25,13,000/- is concerned, the Regd has not been done. That the A.O. was explained that the Regd. could not be made because the matter was in Court of law and this fact finds place in the very Agreement itself. Here too the verdict of Sanjeev Lal Jain Vs. CIT reported as (2014) 269 CTR (SC) shall apply which has held as under:- In normal circumstances, a right in personam is created in favour of the transferee/vendee by executing an agreement to sell in respect of an immovable property When such a right is created the vendor is restrained from selling the said property to someone else as the vendee in whose favour the right in personam is created has a legitimate right to enforce specific performance of the agreement if the vendor for some reason is not executing the sale deed-Thus, by virtue of the agreement to sell some right is given by the vendor to the vendee Though the entire property cannot be said to have been sold at the time when the agreement to sell is entered into, in view of the provision of s. 2(47) which defines the word transfer in relation to a capital assets, it can be said that if a rig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of agriculture only. 8. The next issue raised by the Assessing Officer is that since the land in question is being used for the agricultural purposes by the persons who had the possession of the land and those persons had to be paid eviction charges as detailed above, the claim of the assessee would not fall under the purview of section 54B as the said laid was not being used by the assessee himself for agricultural purposes, I do not agree with the view of the Assessing Officer on the issue as the requirement of usage of agricultural land is with reference to the land and not with reference to the person who owns it. For instance, if a person owns agricultural land and derives rent from the same, it also qualifies as agricultural income not taxable under Income Tax Act, 1961 even though the agricultural operations are not performed personally by said owner of agricultural land. The situation in the current case is also same as the owner of the land had given impugned agricultural land for the purpose of tiling who in the course of time developed vested interest in the form of possession of land but the fact remains that land itself had been used for agricultural purposes all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are on the same lines and the legislature s intention in respect of section 54B cannot be said to be different as the essential purpose of incorporating the impugned provision of section 54B is to ensure that anybody selling agricultural land should not be subjected to taxation if the proceeds thereof are used for buying agricultural land. The fact that the advance/ earnest money had been used for making the consequential purchase should not come in the way of allowing the claim of deduction under section 54B. Even otherwise, the AR has placed reliance on the judgment of Hon ble Apex Court in the case of Sanjeev Lal etc. Vs. CIT 269 CTR 1 which is directly on the issue of definition of transfer under section 2(47) and claim of deduction under section 54. The Hon ble Court has observed that even an agreement to sell could amount to a transfer for the purposes of section 2(47)/54. .. In view of the above facts circumstances and direct judicial pronouncements by the Hon ble Apex Court on the issue, the appellant s claim for deduction under section 54 is allowed. The difference of Rs. (- )15,79,477/- pointed out by the Assessing Officer between sale and purc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - per marla and on the back @ ₹ 4000/- per marla which was upheld by the Tribunal as per copies of both Orders enclosed herewith. Even if average is taken (6000 + 4000), the rate works out at ₹ 5000/- per marla as against ₹ 2923/- adopted by the assessee, which is requested to be accepted being on much lower side. VERY IMPORTANT:- The aforesaid rate and valuation has been accepted by the A.O. during his remand proceedings and his report is clear on the subject. 11. I have considered the arguments of the AR on the issue and it is seen that the Fair Market Value as adopted at ₹ 2923/- per marla is based upon the report of the local revenue authority which is quite logical and records various facets of the impugned land and its related valuation on the given date. The AR has also brought on record the valuation adopted in respect of similar land in respect of particular case heard by Hon ble ITAT Amritsar wherein the valuation at ₹ 5,000/- per marla has been considered. In view of these indisputable facts, the valuation adopted by the appellant at ₹ 2923/- per marla as on 01.04.1981 is reasonable and therefore acceptable. The computation of ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and on such right, vendor is restrained from selling the immovable property, the vendee having a right to enforce specific performance of the agreement otherwise. 14. In view of the above, the assessee claimed deduction under section 54 of the Act was rightly allowed by the ld. CIT(A). 15. Apropos capital gain, on the basis of fair market value of the property as on 14.1981, such value was adopted at ₹ 2923/- per marla. This was based on the report of the local revenue authority, which remained undisputed. Besides, the valuation adopted regarding similar land was also relied on by the assessee, wherein, the valuation of ₹ 5000/- per marla had been considered. 16. In these facts, the ld. CIT(A) was well justified in accepting the rate of ₹ 2923/- per marla as on 01.04.1981 concerning the assessee s land. It was due to these facts that the ld. CIT(A) arrived at the conclusion and, in our considered opinion, correctly so, that the computation of capital gain came to Nil. Moreover, the issue stands directly covered in favour of the assessee by the decision of this Bench of the Tribunal in the cases of brother and sister of the assessee, for A.Y. 2009-2010, i. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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