Deduction u/s. 54B & Advance for purchase of agricultural land

IN THE ITAT HYDERABAD BENCH ‘A’

Smt. Gousia Begum

v/s.

Deputy Commissioner of Income-tax

IT APPEAL NOS. 1024 TO 1027 AND 1268 TO 1271 (HYD.) OF 2011

[ASSESSMENT YEARS 2002-03 TO 2004-05, 2006-07 AND 2008-09]

NOVEMBER 16, 2011

ORDER

Chandra Poojari, Accountant Member

This is a bunch of eight appeals. The appeals of the assessees for the assessment year 2008-09 are directed against similar but separate orders of the CIT(A) I, Hyderabad dated 16.3.2011, whereas the other appeals of the assessee, Shri Mirza Mustafa Baig for the assessment years 2002-03 to 2004-05 and 2006-07 are directed against a common order of the CIT(A)-I, Hyderabad dated 15.3.2011. Since common issues are involved, all these appeals are being disposed off with this consolidated order for the sake of convenience.

2. Facts in brief facts are that there was search action in the case of the assessee at her residential premises on 17-10-2007. The assessee filed her return of income for the assessment year under consideration at Rs. 30,98,620/-and agricultural income of Rs. 8,400/-. In the course of assessment proceedings, the assessing officer made disallowance of Rs. 8,400/- treating the agricultural income as non-agricultural income. He also made disallowance of Rs. 21,000/-claimed by the assessee under section 80C of the Income-tax Act. Further, the assessee along with three others, who are also appellants before us, had sold 5 acres 6 ghuntas of agricultural land situated in survey No. 218, 219 and 225 of Narsingi Village, Rajendra Nagar Mandal, Hyderabad to Sun Breeze Estates & Developers Ltd. and received consideration of Rs. 33,25,00,000. The assessee was having 1/4th share therein. The assessee claimed that no capital gains arose out of the said transaction, as the land sold was of agricultural nature, and hence not a capital asset in terms of S.2(14)(iii) of the Income-tax Act. However, the Assessing Officer rejecting the contention of the assessee, proceeded to bring to tax long term capital gains arising out of the sale of the said land.

3. The assessee also claimed exemption under S.54B of the Act on account of purchase of agricultural lands, which were registered at Yenkepally Village, Pudur Mandal, R.R. District of Rs. 1,05,08,220 from the amount received by way of capital gains. Similarly, assessee also claimed exemption under S.54B in respect of the advance paid for purchase of agricultural lands at Puppalaguda Village, Rajendra Nagar Mandal of Rs. 96,62,500. The assessing officer observed that mere payment of advance for purchase of agricultural lands without possession and without registration, does not entitle the assessee to exemption under S.54B. He noted that as per the provisions of S.54B of the Act, if the assessee has within a period of two years from the date of sale of agricultural land, purchases another agricultural land, exemption is available. He further noted that if the amount is not used for purchase of the agricultural lands before the due date of filing return of income, the same should be deposited in capital gain account. Relying on the decisions of Madras High Court in the case of CIT v. Smt. Jayalakshmi Rajendran [1985] 152 ITR 744; of the A.P. High Court in the case of CIT v. Mrs. Shahzada Begum [1988] 173 ITR 397  and of the Kerala High Court in the case of P.K. Kesavan Nair v. CIT [1988] 174 ITR 253  , and observing that a purchase is complete only when the property is conveyed by a registered deed, the assessing officer held that the assessee is not entitled for exemption under S.54B, in respect of purchase of agricultural lands for which neither there is a registration nor possession of the lands.

4. Without prejudice to the above finding, the assessing officer also rejected the claim of the assessee for relief under S.54B of the Act, on the ground that the land sold was not an agricultural land. In this behalf, it may be noted that in the absence of any evidence filed by the assessee in that behalf, to verify the claim of the assessee regarding the cultivation of the land and fulfillment of conditions mentioned in S.54B, the assessing officer obtained copies of Pahani Patrika from Dy. Collector and Tahsildar, who mentioned that there was no cultivation during the financial year 2005-06. During the assessment proceedings, the assessee had also filed affidavit form Village Revenue Officer who mentioned that due to pressure of work, he had not filled in the column of ‘cultivation’ in the Pahani Patrika. However, relying on the evidence collected by him, and taking note of the disputes that were existing with regard to the ownership of the land between the assessee and others, the assessing officer concluded that the land sold by the assessee was not agricultural use. Hence, for this reason also, the assessing officer rejected the claim of the assessee for relief under S.54B of the Act, observing it is not allowable unless the land sold was agricultural land.

5. Though the assessing officer raised no dispute with regard to the sale consideration received on the sale of land, which was adopted at Rs. 33,25,00,000, he disputed the cost of acquisition of land as on 1.4.1981 disclosed by the assessee at Rs. 7,21,000, i.e. Rs. 1,40,000 per acre, and called upon the assessee to furnish necessary evidence with regard to adoption of Rs. 1,40,000 per acre as on 1.4.1981. Since the assessee failed to furnish such evidence, the assessing officer adopted the rate per acre at Rs. 10,000 based on the rate adopted by other persons selling land to DLF group in the same area. The assessing officer also observed in this behalf that persons of Md. Kareemuddin group, Md. Khairuddin group and Md. Gayasuddin group who had sold land in the same area to the same group to whom assessee had sold land, had shown market value of the land as on 1.4.1981 at Rs. 10,000. The assessing officer also observed that as per the certificate obtained from the sub- registrar, the market value as on 1.4.1981 was about Rs.2 per sq. yard, which is even less than Rs. 10,000 per acre. Assessing officer, therefore, adopted the market value of Rs. 10,000 per acre to work out the indexed cost of acquisition and computed the long term capital gains as follows-