Introduction: The Income Tax Appellate Tribunal (ITAT) Delhi recently ruled in the case of Ravinder Kumar vs ITO, addressing the eligibility of capital gain deduction under section 54B of the Income Tax Act. The appellant, Ravinder Kumar, challenged the decision of the Commissioner of Income Tax (Appeals) related to the Assessment Year 2011-12.
Detailed Analysis: Ravinder Kumar had sold agricultural land, resulting in Long Term Capital Gain (LTCG) of ₹12,78,456. Seeking exemption under section 54B, he asserted that the amount was reinvested in the purchase of another agricultural land, albeit in his spouse’s name. The Assessing Officer (AO) denied the deduction, contending that the property was acquired in the wife’s name.
In the appeal before the CIT(A), various case laws were referred to, and the order of the AO was upheld. The appellant then approached the ITAT, arguing that section 54B doesn’t prohibit purchasing property in the name of a family member. Additionally, the appellant highlighted the spouse’s illiteracy and lack of income, emphasizing that the land purchase was solely funded by the proceeds from the original asset sale.
The ITAT considered the decision in the case of Ashok Kumar ITO, where it was held that purchasing agricultural land in the spouse’s name is eligible for deduction under Section 54B. The ITAT rejected the dismissal of Special Leave Petition (SLP) by the Supreme Court in another case, emphasizing that the dismissal doesn’t merge the order with that of the High Court. The tribunal favored the assessee, citing precedents and directed the AO to allow the deduction under Section 54B.
Conclusion: The ITAT, in its order pronounced on 8th November 2023, allowed Ravinder Kumar’s appeal, stating that the investment in agricultural land in the spouse’s name is eligible for deduction under Section 54B. This decision provides clarity on the interpretation of the law and reinforces the principle that High Court decisions in favor of the assessee should be adopted in case of conflicting decisions.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal filed by the assessee is directed against the order of Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC)-Delhi dated 13.06.2023 pertaining to Assessment Year 2011-12.
2. The grounds of appeal filed by assessee, which reads as under:
1. “That the ld. Commissioner of Income Tax (Appeals) is erred in law and otherwise on facts and circumstances of the case while holding and denying to allow benefit of section 54B being the entire consideration received in sale of agricultural land (original assets) and invested the same in purchase of another agriculture land, certainly in the name of assessee’s spouse whereas section 54B does not debar the ‘Assessee/Appellant’ to not to purchase the property in name of any of his/her family member. The ld. CIT (Appeals) did not appreciate the facts the spouse of assessee is an illiterate lady had no income and it is established facts the land was purchased only out of fund received on sale of original assets.
2. That the CIT (Appeals) is erred in law and on facts while not relied upon the case law duly mentioned in the appellate order and intern took re-course of five cases those are specially not matched with facts and circumstances of our case even one or two are favouring us. In view of the above, the order so passed by him liable to be quashed /reverse and appeal may be allowed.
3. The Appellant/ Assessee craves leave to take additional grounds of appeal before or at the time of hearing of the appeal and/or modify any of the above grounds.”
3. Brief facts of the case are that in this case, the assessee has sold agricultural land wherein Long Term Capital Gain (LTCG) came to 12,78,456/-. Assessee claimed that he has purchased land and under section 54B, the Long Term Capital Gain is to be exempt. However, the AO denied the same as he noted that the said land is purchased in the wife’s name. Hence, the AO denied the claim of deduction under section 54B of the Act.
4. Against the above order, assessee appealed before the CIT(A). The learned CIT(A) referred to several case laws and confirmed the order of AO. Against this, assessee is in appeal before the ITAT.
5. At the outset, the learned Counsel for the assessee referred the decision of Ashok Kumar ITO in ITA No.7460/Del/2018 for A.Y. 2009-10 vide order dated 28.12.2022.
6. Learned DR on the other hand, referred to the dismissal of SLP by Hon’ble Supreme Court in the case of Bahadur Singh CIT(A)  154 taxmann.com 457 (SC) wherein the Supreme Court has dismissed the SLP against the order of Punjab and Haryana High Court, wherein purchase of agriculture land in the name of assessee’s wife was not to be allowed under section 54B relief to assessee.
7. We have heard both the parties and perused the material on record. We note that ITAT in the case of Ashok Kumar ITO (supra) has held as under:
“6. Before me, learned counsel appearing for the assessee submitted that investment in purchase of agricultural land in the name of wife would also be eligible for deduction under Section 54B of the Act. In support of such contention, learned counsel for the assessee relied upon the following decisions:
1. Laxmi Narayan CIT, (2018) 402 ITR 0117, High Court of Rajasthan;
2. CIT Kamal Wahal, (2013) 351 ITR 0004, High Court of Delhi;
3. CIT V. Natarajan, (2006) 287 ITR 0271m High Court of Madras; &
4. CIT Ravinder Kumar Arora, (2012) 342 ITR 0038, High Court of Delhi.
7. Learned Departmental Representative strongly relied upon the observations of the assessee.
8. I have considered rival submissions in the light of decisions relied upon and perused the material available on record.
9. The short issue arising for consideration before me is whether the assessee is eligible to claim deduction under Section 54B of the Act. The factual aspect relating to this issue remains undisputed. Therefore, there is no need to deliberate further on The only reason for which learned Commissioner (Appeals) has denied assessee’s claim of deduction under Section 54B of the Act is because the agricultural land in which the capital gain was invested was purchased in the name of assessee’s wife. This, in my view, is unsustainable. In the decisions cited before me, various Hon’ble High Courts including the Hon’ble Delhi High Court have clearly and categorically held that deduction under Section 54B/54F of the Act is available in cases where investments are made in property purchased in the name of wife. Therefore, following the ratio laid down in these decisions, I hold that the assessee is eligible for deduction under Section 54B of the Act. Accordingly, I direct the Assessing Officer to allow deduction under Section 54B of the Act.
10. In the result, the appeal is partly allowed.”
8. We further note that in the decision relied upon by the Learned Departmental Representative, it was a dismissal of SLP simpliciter by Hon’ble Apex Court against the decision of Hon’ble Punjab & Haryana High Court. We note that dismissal of SLP simpliciter by Hon’ble Supreme Court does not merge the order of Hon’ble High Court with that of Hon’ble Supreme Court. We note that there is no jurisdictional High Court decision on this Further, in case of conflicting, Hon’ble High Court decision one in favour of assessee has to be adopted as per Hon’ble Supreme Court decision in vegetable products. Accordingly, we follow the precedent relied upon by the assessee which also draws support from Hon’ble High Court decisions referred therein. Hence, we set aside the order of the Revenue authorities and decide the issue in favour of the assessee.
9. In the result, the appeal of the assessee stands allowed.
Order pronounced in the open court on 08.11.2023