Amartbhai Mandanbhai Desai Vs PCIT (ITAT Ahmedabad)
In the recent ruling ITAT held that deduction u/s 54B would not be applicable in case land was not used for agricultural purposes in two years preceding date of transfer.
Assessee filed return for AY 2017-18 at Rs. 3,26,550/- after claiming deduction under Section 54B on account of capital gain on sale of property, which was accepted. Subsequently, PCIT observed that the assessee had sold agricultural land along with three co-owners and the assessee’s share in the property was 1.73 crores whereas assessee had claimed deduction by way of deposit of Rs. 85 lakhs in the capital gains account and the assessee also claimed to have purchased new agricultural land jointly with two other persons on 09.11.2016 for a consideration of 1.98 crores, wherein the assessee’s share in investment was Rs. 69,93,533/-. PCIT observed that claim of deduction u/s 54B was properly examined by AO as in order to claim deduction u/s 54B, the first condition is that the land which was sold was being used for agricultural purposes for two years immediately preceding the date on which the transfer took place. PCIT observed that assessee sold the land on 26.10.2016, whereas the assessee submitted computation of income for succeeding AYs which is irrelevant. Assessee failed to demonstrate that land was used for agricultural purpose for two years immediately preceding the sale. PCIT observed that no agricultural activity was carried out from the year 2014 till 2018 in both the lands i.e. the agricultural land which was transferred by the assessee and also the land which was purchased by the assessee. PCIT observed that neither the land sold nor the newly purchased land had been used for agricultural purposes by the assessee for the period between 2014 to 2018. Therefore, the claim of deduction u/s 54B was not tenable. PCIT further observed that while making purchase of new land on which deduction u/s 54B was claimed, the assessee made payment of Rs. 8,33,333/- to the original agricultural landowner and made another payment of Rs. 57,66,666/- to the “confirming parties” for relinquishment of their rights in their said agricultural land. Therefore, PCIT was of the view that this amount of Rs.57.66 lakhs had not been spent for purchase of agricultural land but for relinquishment of rights of the “confirming parties” which was held as not liable for deduction u/s 54B. PCIT noted that AO ought to have made necessary enquiries / investigation before allowing the claim of the assessee u/s 54B and absence of such basic investigation rendered the assessment order as being erroneous and prejudicial to the interest of the Revenue.
