K. Devarajulu (HUF) Vs DCIT (Madras High Court)
The Madras High Court allowed an appeal filed by the assessee against the order of the Income Tax Appellate Tribunal, Chennai, relating to Assessment Year (AY) 2000-01. The case arose from the denial of exemption claimed by a Hindu Undivided Family (HUF) on long-term capital gains following the sale of agricultural land.
The assessee filed its return of income on 30.01.2003, declaring that it had acquired 1.22 acres of land during the financial year 1991-92. During the previous year 1999-2000, it sold 70 cents of the land and claimed exemption under Section 54B of the Income Tax Act in respect of long-term capital gains reinvested under the Capital Gains Accounts Scheme. Subsequently, the Commissioner of Income Tax invoked powers under Section 263 and issued a notice proposing revision of the assessment on the ground that exemption under Section 54B amounting to Rs.14,70,000 had been wrongly allowed.
The Commissioner took the view that, for the relevant assessment year, Section 54B granted exemption only to an individual and not to an HUF. In response to the notice, the assessee admitted that the claim under Section 54B had been made in error and requested that the exemption instead be considered under Section 54EB. However, the Commissioner remanded the matter to the Assessing Officer for fresh assessment. Thereafter, the Assessing Officer, the Appellate Authority and the Income Tax Appellate Tribunal consistently held that an HUF was not entitled to exemption under Section 54B and rejected the claim.
