Case Law Details
Dharmendra J. Patel Vs DCIT (ITAT Ahmedabad)
ITAT observe that the new property was primarily purchased out of advances received from sale of two agricultural properties. Evidently, the advances so received by the assessee were invested in the new agricultural property after the same were received and within a period of 2 years from the date of receipt of advance. In the case of DCIT v. Shri Indranil Sanjaybhai Rajyaguru, Sanjayraj Estate, Race Course, Rajkot in ITA number 358/Rjt/2015, the ITAT held that advance payment by the appellant to purchase agricultural land from the sale proceed of the land sold by him has been rightly found eligible for benefit under Section 54B of the Act. Again, in the case of Sh. Inderjit Singh Mann v. ACIT in ITA number ITA No. 1136/CHD/2014, the Assessing officer noted that the assessee has sold his land on 19th February 2009 but the registration deed of purchase of the other land was dated 9.6.2008. In this connection the assessee has submitted that though the land was sold on 19.2.2009, yet actual possession of the land was handed over earlier in April 2008 and this land was purchased for Rs. 51,80,000/- by way of withdrawals from his saving bank account dated 9.6.2008 and 10.6.2008. However, the Assessing officer noted that in the sale deed dated 19.2.2009, it has been mentioned that possession of the above land was given to the company on the spot. Therefore, the contention of the assessee that possession was given earlier was not found tenantable. In view of this, the Assessing officer withdrew the exemption claimed u/s 54B of the I.T. Act and computed the capital gain at Rs. 55,59,363/-. The ITAT while allowing relief to the assessee made the following observations:
14. We have considered the rival submissions. The assessee has filed copy of the sale deed dated 19.2.2009 in the paper book in which it is specifically mentioned that assessee received various advances from the purchasers on different dates in the year 2007 before execution of sale deed. According to the chart prepared by the Ld. Counsel for the assessee, upto November 2007, the assessee has received advance money of Rs. 4,63,35,060/-. It would, therefore, prove that purchaser has paid substantial amount to the assessee as advance money as against total sale consideration of Rs. 5.64 crores. No purchaser would make such a huge advance without taking the possession of the land. The contention of the assessee, is therefore, correct that assessee has handed over the possession of land to the purchaser sometime in April 2008 otherwise the purchaser would not make the huge advances to the assessee. It is also proved that when substantial amount was received against the sale of land, it is available to the assessee for making investment in purchases of land. The assessee claimed that he has made investment of Rs. 51,80,000/- in the purchase of another land vide purchased deed dated 9.6.2008. Therefore, authorities below cannot deny deduction claimed u/s 54B of the I.T. Act. Since the assessee has invested the advance money in purchase of land before the date of transfer of the land, the amount invested will qualif y for exemption u/s 54B of the I.T. Act. The evidence and material on record clearly prove that payment for purchase of land was made out of advance received by the assessee against sale of land, in the year under consideration. The claim of the assessee for deduction u/s 54B is thus supported by the Board Circular No. 359 (supra)and the decisions relied upon by the assessee. The authorities below were, therefore, not justified in denying the deduction claimed u/s 54B of the Act for a sum of Rs. 51,80,000/-. In view of the above discussion and in the light of the Board’s Circular and the decisions cited above, we direct the Assessing officer to grant deduction claimed u/s 54B of the I.T. Act in a sum of Rs. 51,80,000/-. Since the Assessing officer computed the capital gain of Rs. 55,59,363/-, therefore, the Assessing officer is directed to re-compute the capital gains by giving deduction to the assessee of Rs. 51,80,000/-. This ground of the appeal of the assessee is allowed.
In the case of Ramesh Narhari Jakhadi v. ITO 41 ITD 368 (Pune), the ITAT held that investment made prior to date of transfer out of earnest money or advanced would also be eligible and should be considered as investment made out of sale proceeds for purposes of section 54B.
Accordingly, in view of the facts of the above case and judicial precedents on the subject as discussed above, we are of the considered view that the assessee should be allowed the benefit of deduction under section 54B of the Act since the purchase in the new property has been made out of advances received towards sale of agricultural properties held by the assessee.
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