Case Law Details
Satyawan Vs ITO (ITAT Delhi)
ITAT Delhi held that post amendment by Finance Act, 2012 which is effective from 1st April 2013, the exemption u/s 54B of the Income Tax Act is also available to HUF.
Facts- The assessee sold agricultural land measuring 4 Kanals for a consideration of Rs.80,00,000/- and purchased another agricultural land in the name of the wife and claimed deduction u/s 54B of the Income Tax Act, 1961 which has been denied by the ld. CIT(A).
Being aggrieved, the present appeal is filed.
The issue examined is whether the agricultural land which is the ancestral property belonging to HUF and its subsequent sale and purchase of another agricultural land by the wife is eligible for deduction or not.
Conclusion- Held that the investment in new capital asset as agricultural land u/s 54B was made in the name of Smt. Geeta Rani, the wife of Karta as member of HUF, it is owned by the HUF and hence entitled to exemption u/s 54B of the Income Tax Act.
In this regards, Section 54B stand amended by Finance Act, 2012, having its effect from 01.04.2013, wherein, the HUF has specifically been incorporated by replacing the word “the assessee being an individual or a parents of his” with the words “the assessee being an individual or parents or Hindu Undivided Family” for agricultural purpose in the statue w.e.f. 01.04.2013, itself. Hence the amended provisions are applicable for the computation of Income for A.Y. 2013-2014. So the by implication of the said amended law, the assessee includes the HUF. Hence, the exemption u/s 54B after amendment is available to HUF also.
FULL TEXT OF THE ORDER OF ITAT DELHI
The present appeals have been filed by the assessee against the order of ld. CIT(A), Karnal dated 14.12.2019 and 15.02.2019.
2. Since, the issue involved in both the appeals are similar they were heard and being adjudicated by a common order.
3. In ITA No. 2806/Del/2019, following grounds have been raised by the assessee:
“1. That on the facts and circumstances of the case, the order under section 250 of the Act dated 15/02/2019 passed by the Commissioner of Income Tax (Appeals) (“Ld. CIT(A)”) (“Impugned Order”)confirming the order u/s 143 (3) of the Act by the Learned Assessing Officer (“Ld. AO”) dated 12/12/2017 (“Assessment Order”) is erroneous and bad in law.
2. That the Ld. CIT (A) erred in law and on facts of the case in confirming the Assessment Order treating an amount of Rs.39,62,133/- as capital gain assessed in the status of individual. Without appreciating the facts that the land in question was HUF Land and hence liable to be assessed in the hand of H.U.F. status only. Hence the assessment is not binding on assessee as individual and as such may not liable to be added in the hands of assessee as Individual. The case law has wrongly been made applicable to the facts of the case.
3. The observations of the AO are wrong to the extent “That the exemption U/s 54B is not available to HUF but is restricted to Individual only”. It is without going into statutory amendment of the Section 54B w.e.f. 01/04/2013, expressly including the HUF.
4. Without prejudice to the preceding grounds, the order of Ld. CIT (A) is wrong in denying the exemption U/s 54B of the Income Tax Act, failing to appreciates the facts, that the amount of sale of Agricultural Land was duly been invested in purchase of further Agricultural Land in the name of wife a member of the HUF, as the case may be.
5. Further in case impugned sale transaction is held to be that of individual, the order of A.O. denying the exemption U/s 54B and action of confirmation of the said order by the first appellate authority is wrong to the extent of amount invested in purchase of agricultural land by assessee in the name of his wife out of funds of the assessee himself.
6. That the assessing officer erred in assessing the capital gain at a higher amount without appreciating the facts, brought to the notice of AO and disregarding the valuation made by Registered Valuer and placed on record, and the 1st Appellate Authority was also wrong in confirming it.”
3. The undisputed fact of the case are as under:
4. The assessee sold agricultural land measuring 4 Kanals for a consideration of Rs.80,00,000/- and purchased another agricultural land in the name of the wife and claimed deduction u/s 54B of the Income Tax Act, 1961 which has been denied by the ld. CIT(A).
5. Aggrieved, the assessee filed appeal before us.
6. Heard the arguments of both the parties and perused the material available on record.
7. The issue examined is whether the agricultural land which is the ancestral property belonging to HUF and its subsequent sale and purchase of another agricultural land by the wife is eligible for deduction or not.
8. As stated under the facts, that the assessee has sold 4 Kanal of agricultural land, jointly for Rs.80,00,000/- assessee’s share was Rs.40,00,000/-. The appropriate amount has been invested, in the purchase of agricultural land in the name of wife Smt. Geeta Devi.
9. It was contended that, the land as sold was held by assessee in the status of HUF being devolve upon assessee as follows:
Sh. Shobha ⇒Sh. Rati Ram ⇒Death 1941 ⇒Sh. Dharam Singh ⇒Partition of land in 2008 ⇒Sh. Satyawan (Assessee) and Brothers.
10. The father of the assessee, Sh. Dharam Singh inherited the land from his father Sh. Rati Ram on his death, who hold it as ancestral asset and died on 29.07.1941 leaving behind 3 sons; Sh. Ramdhari, Sh. Mehar Singh and Sh. Dharam Singh. The share of said land, as above, left by Sh. Rati Ram (Grandfather of the assessee) was mutated in the name of Sh. Dharam Singh on 06.01.1942. The land in the hand of grandfather Sh. Rati Ram was ancestral m nature (well reflected in Cizra) and devolves upon the father of assessee Sh. Dharam Singh by natural succession before the passing of Hindu Succession Act, 1956.
11. So, the land in the hands of Dharam Singh, pertains to HUF which in turn now consisted of himself and his sons including Sh. Satyawan (Assessee) as co-parceners. As such the assessee Sh. Satyawan had an inherent interest in the said property as co-parcener.
12. Again during year 2008, Sh. Dharam Singh effected a virtual partition of the HUF consisting of himself and his 3 sons, wherein 1/3 share was given to each son. Hence as such 1/3 share of said HUF property was received by Sh. Satyawan the assessee, as his share in the said HUF agricultural land. There was a Hibbanama. The A.O. failed to acknowledge the Intkall dated 06.01.1942 and other documents placed on record evidencing the hierarchy of inheritance of land to Sh. Dharam Singh during 1941, much before the promulgation of Hindu Succession Act, 1956. As the land in question, was acquired by Sh. Dharam Singh much before 1956 it was an existing HUF.
13. The Assessing Officer relied on the judmgnet of CWT vs. Chander Sen (1986) 161 ITR 0370 which states as follows:
“HUF or individual property— Separate property of father— Assets inherited by son from his father separated by partition— Constitute his individual properties and not HUF properties consisting of himself and his sons.
The facts of the said Chander Sen case are:
One Sh. Rangi Lal and his son Sh. Chander Sen constituted an HUF. It had some immovable property and business in the name of Khushi Ram Rangi Lal. There was partial partition of HUF with regards to business and both Sh. Rangi Lal and his son Sh. Chander Sen constituted partnership firm.
Sh. Rangi Lal’s wife and in other predeceased him and hence at the time of death he had no other issue except Sh. Chander Sen and his sons. Hence his status at the time of death with regards to the business capital was individual.
Sh. Chander Sen inherited the credit balance of Rs. 1,85,043/- standing to the credit of Sh. Rangi Lal at the time of his death, which was regarded as the separate property of the deceased, inherited by his son as per the Sec. 8 of Hindu Succession Act, 1956 and hence held to the individual property of the son, not liable to be assessed along with HUF property under wealth tax.”
14. Hence, in the case of Chander Sen as above, it was a case wherein the separate property of father, when inherited by the son from his father, who (father) already separated by partition, when inherited by the son u/s 8 of Hindu Succession Act constitute the separate property of the son and not HUF consisting of himself and family.
15. Similarly, in the case of Yudhishter vs. Ashok Kumar relied upon by the revenue wherein the Hon’ble Supreme Court of India just made reference of WTO vs. Chander Sen and reiterated its position as taken under the Chander Sen (supra).
16. While in the case of the assessee the facts are different, the property was inherited by Sh. Dharam Singh, (the father of assessee) long before 1956, by natural inheritance of ancestral property and then by assessee by way of a partition in the life time of his father Sh. Dharam Singh, who own the said property as Karta of HUF consisting of himself (Sh. Dharam Singh) and his sons, including the assessee.
17. The judgment in the case of Sh. Surinder Kumar vs. Sh. Dhani Ram and others CS (OS) No. 1737/2012, dealt with the inheritance of ancestral properties for pre 1956 and post 1956 has properly been analysed it was held at para 7 (i) and 7 (iii) of the order.
“7……………..
(i) If a person dies after passing of the Hindu Succession Act, 1956 and there is no HUF existing at the time of the death of such a person, inheritance of an immovable property of such a person by his successors-in-interest is no doubt inheritance of an ‘ancestral’ property but the inheritance is as a self acquired property in the hands of the successor and not as an HUF property although the successor(s) indeed inherits ‘ancestral’ property i.e. a property CS(OS) No.1737/2012 Page 6 of 16 belonging to his paternal ancestor.
(iii) An HUF can also exist if paternal ancestral properties are inherited prior to 1956, and such status of parties qua the properties has continued after 1956 with respect to properties inherited prior to 1956 from paternal ancestors. Once that status and position continues even after 1956; of the HUF and of its properties existing; a coparcener etc will have a right to seek partition of the properties.”
18. Hence, under the circumstances the law laid down, in the case of Chander Sen case supra, has no application to the facts of the present case. While the case law of Sh. Surinder Kumar vs. Sh. Dhani Ram and others CS (OS) No.1737/2012, and its ratio of legal position for the pre 1956 HUF properties has directly applicable the facts of the case in hand and supports the contention of the assessee.
19. To sum up the following proposition evolved, in the case of the assessee:
i) The property the agricultural land inherited by the father of assessee under natural succession in 1941 before the promulgation of Hindu Succession Act, 1956. Hence it was held by him in the status of HUF consisting of himself and its three sons including Sh. Satyawan the assessee as co-parceners.
ii) The said HUF consisting of Sh. Dharam Singh and his sons including Sh. Satyawan, was further partitioned in the life time of the Karta and divided among the 3 sons. It being a HUF property in the hands of Sh. Dharam Singh, the father of assessee, the assessee Sh. Satyawan got right over the HUF properties as co-parcener and as such had right in the said property by birth. The land received under such partition again be held by the recipient as Karta Sh. Satyawan of smaller HUF consisting of assessee and his sons as co-parceners and the wife of the assessee Smt. Geeta Devi as member of HUF.
iii) The investment in new capital asset as agricultural land u/s 54B was made in the name of Smt. Geeta Rani, the wife of Karta as member of HUF, it is owned by the HUF and hence entitled to exemption u/s 54B of the Income Tax Act.
20. The 2nd part of the issue revolves around availability of exemption u/s 54B to HUF (the assessee being the co-parcener) or restricted to individual only.
21. In this regards, Section 54B stand amended by Finance Act, 2012, having its effect from 01.04.2013, wherein, the HUF has specifically been incorporated by replacing the word “the assessee being an individual or a parents of his” with the words “the assessee being an individual or parents or Hindu Undivided Family” for agricultural purpose in the statue w.e.f. 01.04.2013, itself. Hence the amended provisions are applicable for the computation of Income for A.Y. 2013-2014. So the by implication of the said amended law, the assessee includes the HUF.
22. Hence, the exemption u/s 54B after amendment is available to HUF also. Hence the objections by the A.O. in this regards, that the section is not applicable to HUF misconceived.
23. Under the circumstances, the agriculture land has been held by the assessee in the status of HUF and as the land was purchased in the name of wife of the Karta as one of the members is eligible for exemption u/s 54B of the Income Tax Act.
24. In the result, both the appeals of the assessee are allowed.
Order Pronounced in the Open Court on 23/05/2023.
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