Nitin R Shah Vs DCIT (ITAT Ahmedabad)
Contingent Sale Consideration & Escrow Arrangement – ITAT Ahmedabad Remands Asessee’s Claim of Deduction u/s 54B
Assessee filed his return of income at ₹28.18 lakh. Pursuant to a search u/s 132 on 09.01.2013 in the group cases of Shri Rashmikant Bhatt, he filed return u/s 153A declaring the same income but also disclosing ₹50 lakh as additional consideration for sale of land. Against this, he claimed deduction u/s 54B of ₹38.50 lakh for investment in agricultural land at Navapura (Banakhat dated 28.04.2012). AO denied deduction holding that the land was transferred on 21.01.2010 & hence investment made in April 2012 was beyond the 2-year limit prescribed u/s 54B.
CIT(A) confirmed AO’s view that capital gain arose in AY 2010-11 itself irrespective of deferred receipt of consideration. He held that- The 2-year clock runs from the date of transfer (21.01.2010). Even if additional ₹50 lakh was received in FY 2012-13, the new investment was belated. Further, the Navapura land purchase deed was not registered, creating doubt on acquisition. Accordingly, disallowance of deduction was upheld.
Before Tribunal, Assessee argued that THE ₹50 lakh was contingent consideration, payable only if title issues were cleared. An escrow arrangement was entered with Shri Pranav Trivedi on 04.04.2012, & payment was released to assessee only after encumbrances were removed. Assessee invested in new land within 2 years of actual receipt of contingent amount, hence eligible for 54B relief. Submitted supplementary agreement, escrow confirmation & purchaser’s statement, all evidencing conditional payment.
