Chandra Shekar Muni Reddy Kannelli Vs ACIT (ITAT, Bangalore Bench)
Harvesting Exemption Before the Sale Deed: Advance Sale Consideration Invested in New Agricultural Land Qualifies U/s 54B
Summary: The assessee was an agriculturist who also earned a small amount of business income & income from house property. He filed his return of income for AY 2018-19 on 29.08.2018.
The return was selected for limited scrutiny to examine the assessee’s claim for capital-gains exemption. Notices u/ss 143(2) & 142(1) were issued, calling for details of the capital asset sold & the new asset acquired.
In the return, the assessee had claimed deduction u/s. 54F. During assessment proceedings, however, he furnished the computation of long-term capital gains & revised the legal basis of the claim to s.54B, contending that both the original asset sold & the new asset purchased were agricultural lands.
AO Rejects Both Sections 54F & 54B
The AO first rejected the deduction originally claimed u/s. 54F. He thereafter examined the alternative claim u/s. 54B but rejected it on two grounds:
First, according to the AO, the assessee had not established that the land sold had been used for agricultural purposes during the two years immediately preceding its transfer.
Secondly, the AO held that the new agricultural land had not been purchased within two years after the date of sale of the original land.
