Case Law Details
Brief Facts of the case:
An assessee has sold 343 acre of agriculture land for Rs 2,02,00,000/- and incurred a capital gain of Rs 1,78,84,855/-on the sale transaction .From the sale proceeds an assessee has purchased agriculture land of Rs 1.45,00,000/-for claiming exemption u/s 54B and also incurred expenditure of Rs 34,00,000/-on the leveling and filling of the agricultural land.The assessee has also produced vouchers and bills of leveling and filling of land and also included the same as cost of land while computing the exemption u/s 54B.
AO was not satisfied with the calculation of the cost of land for claiming exemption u/s 54B by assessee and disallowed the expenditure which the assessee incurred on the leveling and filling of land and considered only the cost of land.
Contention of the Revenue:
AO argued that in IT act it is only written “asset” which is agricultural land and it nowhere mentions about that the purchased land has to be highly fertile or barren. Therefore cost spent on the leveling and filing of land is not to be taken in the process of computation of exemption under Income Tax act.
So AO disallowed the cost of leveling and filing of land in the computation of exemption.
Then assessee filed an appeal before CIT(A).
CIT(A) observed that cost of leveling and filling of land are incidental to the cost of agricultural land So the same should be taken into consideration for claiming exemption u/s 54B and allowed the appeal of assessee.
After that appeal has been filed before ITAT As per sec 54B a) if capital gain is greater than cost of land then difference will be charged as per sec 45. b) If capital gain is equal or less than cost of land then sec 45 is not applicable.
After considering above section it is apparent that exemption u/s 54B will only be allowed for the cost of land only. It does not include any other expenses like that of leveling and filing of land.
ITAT has also referred the cases of Bombay tribunal Vs DCIT 291 ITR169(TBOM).
Contention of the Assessee :
Cost of leveling and filing the land of Rs 33,84,855/-is also incidental to the purchase of land So ,the same should be included in the cost of the land and should be considered for calculating exemption u/s 54B
Held by respective court:
Appeal of the revenue stands allowed and only the cost of theland has to be considered for calculating exemption u/s 54B no other expenses will be taken into account. So ITAT disallowed the expenses of leveling and filing of land and set aside the order of CIT(A) and restore that of A.O on this issue.
(Analysed by CA Rishabh Mehra)
