Case Law Details
Inderjit Singh Mann Vs ACIT (ITAT Chandigarh)
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 qualify 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.
FULL TEXT OF THE ORDER OF ITAT CHANDIGARH
This appeal by the assessee has been directed against the order of Ld. CIT(A), Patiala dated 26.11.2014 for assessment year 2009-10.
2. Ld. Counsel for the assessee did not press ground Nos. 1 & 2 of the appeal. The same are dismissed being not pressed.
3. Ground No.3 of the appeal of the assessee reads as under:-
3. Because the action is under challenge on facts & law, while having re-computed the investment in the purchase of the agricultural land at an amount of Rs. 7,37,126/- whereas the investment actually made from the Saving Bank Account withdrawals are Rs. 51,80,000/- & the quantum of addition is under challenge.
4. We have heard Ld. Representatives of both the parties and perused the material available on record.
5. The facts of the case are that assessee has sold some land. Indexed cost of land has been taken at Rs. 49,29,5409/-. Deduction u/s 54B of the Income-tax Act, 1961 was claimed against the capital gain of Rs. 7,37,126/- on account of investment in agricultural land. During the course of assessment proceedings, the Assessing officer referred the matter to the Tehsildasr, Patiala for determination of acquisition of the land. As per report the indexed cost was Rs. 1,07,303/- only. When confronted, the assessee submitted that he has also adopted the cost of acquisition on the basis of report of the Tehsildar. The Assessing officer again referred the matter to the Tehsildar alongwith objection of the assessee. The Tehsildar was summoned u/s 131 and his statement was recorded. The Tehsidar in his further report dated 23.12.2011, re-confirmed the rates of land as submitted to the Assessing officer earlier. The Assessing officer has also given opportunity to the assessee to confront the Revenue authorities regarding the dispute in valuation of land. However, the assessee apparently has not chosen to do so. The Assessing officer adopted the value of the land as per report received from Tehsildar. The second issue i.e. on deduction u/s 54B, 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/-.
6. The Ld. CIT(A) confirmed the order of the Assessing officer as regards valuation of land for the capital gain on which assessee also did not press ground Nos. 1 & 2 of the appeal. However, as regards deduction claimed u/s 54B, the assessee had contended that possession of the land sold vide sale deed dated 19.2.2009 was actually given on April 2008 and the money was received. The Ld. CIT(A) however, noted that as per sale deed the possession is given on the date of sale, therefore, deduction claimed u/s 54B is not allowable to the assessee. This ground of appeal of the assessee was accordingly dismissed.
7. Ld. Counsel for the assessee reiterated the submissions made before authorities below. He has referred to PB-16 which is copy of the bank account. PB-50 is copy of the sale deed dated 19.2.2009 and referred to the averments contained in the sale deed to show that on various dates, advance money has been received from the purchaser in year 2007 which is also tabulated in supporting chart. Ld. Counsel for the assessee therefore, submitted that upto November 2007, the total advance money of Rs. 4,63,35,060/- was received before purchase / re-investment u/s 54B dated 9.6.2008 as against the total sale consideration of Rs. 5.64 crores. Ld. Counsel for the assessee submitted that no purchaser would give such a huge advance without taking possession of the property. Ld. Counsel for the assessee referred to PB33A, which is copy of the purchase deed dated. 9.6.2008 in which he has invested Rs. 51,80,000/- for purchase of the agricultural land. He has submitted that advance received on account of sale of land was invested in the purchase of another land which is also clear from the entries contained in the sale deed and tabulated in a supporting chart.
7. He has relied upon CBDT Circular No. 359 dated 10.5.1983, which reads as under:-
“SECTION 54E
Section 54E of the Income-tax Act, 1961 provides for exemption of long-term capital gains if the net consideration is invested by the assessee in specified assets within a period of six months after the date of such transfer. A technical interpretation of section 54E could mean that the exemption from tax on capital gains would not be available if part of the consideration is invested prior to the date of execution of the sale deed as the investment cannot be regarded as having been made within a period of six months after the date of transfer.
2. On consideration of the matter in consultation with the Ministry of Law, it is felt that the foregoing interpretation would go against the purpose and spirit of the section. As the section contemplates investment of the net consideration in specified assets for a minimum period and as earnest money or advance is a part of the sale consideration, 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 section 54E of the Income-tax Act, 1961.”
8. Order of ITAT Amritsar Bench in the case of DCIT v Assa Singh in ITA No. 26(Asr)/2015 dated 11.3.2016, in which it was held as under:-
“We have heard the rival parties and have gone through the material placed on record. We first take up the appeal in ITA No.26{Asr)2oi5, we find that the first grievance of Revenue is the action of learned CIT by which he had deleted an addition of Rs.2,40,9,1017- relying upon the decision of Sh. Sanjeev Lai Vs. CIT 269 CTR 0001 decided by Hon’ble Apex Court. It is an undisputed fact that assessee had not co-operated during the assessment proceedings and therefore, assessment was completed u/s 144 and it is only during appellate proceedings that assessee filed his submissions. The learned CIT(A) forwarded the submissions to Assessing Officer for remand report. The Assessing Officer in his remand report had observed that assessee for the claim u/s 54B had purchased agricultural land measuring 61 kanal at village Kingra for Rs.1,20,37,500/- but he observed that date of purchase of this land predate the date of sale of the land sold by the assessee and he raised further objection regarding another land measuring 28 Kanal 17 Marias for Rs.53,00,000/-. The Assessing Officer observed that the final registry of this land was not got done in favour of assessee as the matter was under appeal. Therefore it was submitted that the eligibility of exemption u/s 54B may be decided accordingly. As regards the first objection of purchase of some part of agricultural land before the date of sale, the learned CIT(A) has made a clear finding of fact that payment for purchase of such land was made out of advances received by assessee against sale of land and in fact he Asst. Year: 2009-10 has held that payments were directly made by buyer of agricultural land to the seller who had sold land to the appellant. The learned CIT(A) has further relied upon the CBDT circular No-359 dated 10.05.1983 which refers to section 54E of the Act. As per said circular the exemption u/s 54 E of the Act is available to an assessee if part of sale consideration or earnest money or the advances received against sale of asset is invested in specified assets before the date of transfer of assets. The learned CIT(A) has further held that intention of legislator in respect of section 54B cannot be different as the essential purposes of incorporating the provisions of section 54B is to be ensure that anybody selling agricultural land should not subjected to tax if the proceeds thereof are used by assessee for purchase of agricultural land.”
9. Order of the ITAT Pune Bench in the case of Ramesh Narhari Jakhadi Vs. ITO in (1992) 11 CCH 0081, in which it was held as under:-
“The section contemplates user of agricultural land in the two years immediately preceding the date of transfer and therefore, the reference is to the years and not during the whole period of two years as viewed by the authorities. In other words, if the asset has been used for the whole of the immediately preceding year and some days of the year earlier to the preceding year, still the requirement of section 54B would be satisfied. Applying the definition of short term capital asset with reference to the word “held”, it could be said that any asset held in the two years immediately preceding the date of transfer would be eligible for relief under section 54B on the capital gains arising on its sale. Since it is common practice to obtain earnest money or advance or instalments before a property is conveyed by registering sale deed, the investment made would amount to investment out of sale consideration. For this conclusion, the Circular No. 359, dated 10-5-1983 issued by the Board in connection with relief under section 54E is relied upon. In other words, the logic in the aforesaid circular issued in connection with 54E would apply with equal force to relief under section 54 B also. Inasmuch as the above circular has been issued by the Board keeping in view the purpose and spirit of section 54E, same consideration would apply for relief under section 54B also, because if an agriculturist is dispossessed of his agricultural land and obtains possession of another agricultural land for the purpose of being used for agricultural purposes, the same benefit available under the Board’s circular should be extended to the assessee governed by section 54B also. In this connection, it is also necessary to consider the question whether the investment should be made in new agricultural land necessarily within a period of two years after the date of transfer or not. Applying the spirit of the circular of the Board, it could be said that the investment made prior to the date of transfer would also be eligible and should be considered as investment made out of sale proceeds. The limit of two years’; period after transfer is an outer limit, while the investments made earlier to the date of transfer out of the earnest money or advances should be considered to fall within two years’; time limit period and which would be the inner limit, so to say.”
10. Order of ITAT Chennai Bench in the case of ACIT Vs. Dr. S. Balasundarm in (2013) 36 CCH 107, in which it was held as under:-
“According to the AO, the purchase consideration paid by the assesses was not eligible for deduction u/s 54B of the Act. It was not the case of the AO that the sale consideration received by the assesses under use for the purpose of purchase of the property. The only dispute was the assessee has purchased the property before transfer of the property. Therefore, the AO had denied the claim of the assessee. From the record, it was found that the assessee had entered into an agreement to sell the property. As it was a fact that though the sale deed was executed on 30.12.2008, but the assessee purchased three properties with the sale consideration received. The intention of the Legislature was that the assessee had to use the sale consideration received for the purpose of buying agricultural land. In the present case, the assessee sold agricultural land was not disputed by the AO and also purchased agricultural land. The CIT (A) in his order had given a finding that though the sale deed was executed on 30.12.2008, but the possession was given on 10.09.2008. He had also observed that the sale deed had to be executed on or before four months from the date of agreement. There were certain dispute between the assessee and the purchaser. Therefore, the execution of sale deed was delayed and the sale deed was executed in December, 2008. So far as the objection raised by the revenue was that the property was only transferred in December, 2008, therefore, the property purchased before that date was not eligible for claiming deduction u/s 54B. It was opined, this was only a hyper technical objection raised by the revenue, because, the assessee had received substantial amount from the purchaser before executing sale deed. It was held that so far as registration of the sale agreement was concerned, if both the parties proceeded to carry the execution of the sale as per the agreement whether it was registered agreement or not, there was no effect so far as transfer was concerned. In view of the above, no infirmity was found in the order passed by the CIT (A) & the ground raised by the Revenue dismissed.”
11. Judgement of the Hon’ble Bombay High Court in the case of CIT-II Pune Vs. Subhash Vinayak Supnekar in Income Tax Appeal No. 1009 of 2014 dated 14.12.2016 in which in para 3 to 6 held as under:-
“3. The short question that arises for our consideration in this appeal is whether an amount received on sale of a capital asset as an advance on the basis of Agreement to Sale and the same being invested in specified bonds before the final sale, would entitle the respondent assessee to the benefit of Section 54EC of the Act.
4. The impugned order of the Tribunal records the fact that an Agreement to Sale for the subject property was entered into on 21st February, 2006. The final sale took place under a Sale Deed dated 5t h April, 2007. The respondent assessee had invested an amount of Rs.50 lakhs from the advance received under the Agreement to Sale in the Rural Electrification Corporation Ltd. bonds on 2nd February, 2007. The Assessing officer as well as the Commissioner of Income Tax (Appeals) held that the respondent assessee is not entitled to the benefit of Section 54EC of the Act as the amounts were invested in the bonds prior to the sale of the subject property on 5th April, 2007. The impugned order of the Tribunal placed reliance upon the decision of its co-ordinate bench in Bhikulal Chandak HUF Vs. Income Tax Officer, 0126 TTJ 545 wherein it has been held that where an assessee makes investment in bonds as required under Section 54EC of the Act on receipt of advance as per the Agreement to Sale, then the assessee is entitled to claim the benefit of Section 54EC of the Act.
5. The grievance of the Revenue before us is that the Agreement to Sale dated 21st February, 2006 was never produced before the authorities. Therefore, the respondent assessee is not entitled to the benefit of Section 54EC of the Act.
6. We find that the Sale Deed dated 5th April, 2007 is produced. This itself in clause (d) thereof records the fact that the Agreement to Sale had been entered into on 21s‘ February, 2006 in respect of the subject property and the amounts being received by the vendor (respondent assessee) under that Agreement to Sale. Thus, these amounts when received as advance under an Agreement to Sale of a capital asset are invested in specified bonds, the benefit of Section 54EC of the Act is available. In the above view, the Tribunal holds that the facts of the present case are similar to the facts before the Tribunal in Bhikulal Chandak HUF (supra). The Revenue does not dispute the same before us. Moreover, on almost identical facts, this Court in Ms. Parveen P. Bharucha Vs. DCIT, 348 ITR 325, held that the earnest money received on sale of asset, when invested in specified bonds under Section 54EC of the Act, is entitled to the benefit of Section 54EC of the Act. This was in the context of reopening of an assessment and reliance was placed upon CBDT Circular No. 359 dated 10th May, 1983 in the context of Section 54E of the Act.”
12. Ld. Counsel for the assessee therefore, submitted that assessee invested the advance money received in specific assets before date of transfer of asset, the amount invested will qualify for exemption u/s 54B of the I.T. Act.
13. On the other hand, Ld. DR relied on the orders of the authorities below.
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 qualify 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.
15. In the result, the appeal of the assessee is partly allowed.
Order pronounced in the Open Court.
