Case Law Details

Case Name : Ashok Kisan Bahirat (HUF) & Anr Vs ITO (ITAT Pune)
Appeal Number : ITA Nos. 382, 383/PUN/2015
Date of Judgement/Order : 24/08/2017
Related Assessment Year :
Courts : All ITAT (7437) ITAT Pune (254)

Ashok Kisan Bahirat (HUF) & Anr Vs ITO (ITAT Pune)

The provisions of section 54B have been amended by the Finance Act, 2012 w.e.f. 01-04-2013. The relevant extract of the pre-amended and the amended provisions of section 54B are reproduced here-in-below :

Pre-amended:

“54B. Subject to the provisions of sub-section (2), where the capital gain arises from the transfer of a capital asset being land which, in the two years immediately preceding the date on which the transfer took place, was being used by the assessee or a parent of his for agricultural purposes [(hereinafter referred to as the original asset)], and the assessee has, within a period of two years after that date, purchased any other land for being used for agricultural purposes.”

Amended:

“54B. Subject to the provisions of sub-section (2), where the capital gain arises from the transfer of a capital asset being land which, in the two years immediately preceding the date on which the transfer took place, was being used by [the assessee being an individual or his parent, or a Hindu undivided family] for agricultural purposes [(hereinafter referred to as the original asset)], and the assessee has, within a period of two years after that date, purchased any other land for being used for agricultural purposes.”

After amendment to section 54B, along with individuals, HUF is also made eligible for the benefit of exemption under the provisions of said section with effect from 1-4-2013.

 If intention of  Parliament was to include HUF prior to the said date then the amendment would have been carried out in respect of section 54B as well along with section 54. Therefore, amended provisions of section 54B were not applicable retrospectively and assessee-HUF was not entitled to exemption for the year under consideration.

FULL TEXT OF THE ITAT ORDER IS AS FOLLOWS:-

These appeals by two assessees related to each other are directed against the order of Commissioner of Income Tax (Appeals)-7, Pune for the assessment year 2007-08 in their respective cases. Both the impugned orders are dated 31-12-2014. Since, the issues raised in present appeals are emanating from same set of facts and identical grounds have been raised in both the appeals, these appeals are taken up together for adjudication and are decided by this common order.

2. For the sake of convenience and brevity the facts are taken from ITA No. 382/PUN/2015. The assessee in its return of income for the assessment year 2007-08 disclosed income from Long Term Capital Gain on sale of agriculture land. The assessee had /2 share in the agriculture land comprising in S. No. 58/1/1-A & S. No. 58/1/2-A admeasuring 11782 sq. mtrs. at Mauje Manjari Budruk, Tal.-Haveli, Distt.-Pune. The assessee received Rs.1,09,21,914/- as his /2 share from the sale of agriculture land. The assessee after applying indexed cost of acquisition of land, determined Long Term Capital Gain of Rs.57, 14,934/-. The assessee claimed deduction u/s. 54B of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) in respect of Long Term Capital Gain and determined taxable income from Capital Gain as Rs.7,88,668/-. The same was assessed and accepted by Assessing Officer vide order dated 09-12- 2009 passed u/s. 143(3) of the Act. Thereafter, the Commissioner of Income Tax invoked the provisions of section 263 of the Act. The Commissioner of Income Tax observed that since the assessee is HUF, therefore, the assessee is not eligible to claim deduction u/s. 54B and restored the file back to Assessing Officer to re-examine the issue de novo. The Assessing Officer thereafter in proceedings giving effect to the order of Commissioner of Income Tax vide order dated 22-03-20 13 passed u/s. 143(3) r.w.s. 263 withdrew the claim of exemption u/s. 54B of the Act.

Aggrieved by the aforesaid assessment order, the assessee filed appeal before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) vide impugned order rejected the claim of assessee with regard to allowance of exemption claimed u/s. 54B of the Act. Now, the assessee is in second appeal before the Tribunal.

3. Shri P.I. Patwa appearing on behalf of the assessee fairly admitted that the assessee is an HUF. The ld. AR submitted that the provisions of section 54B were amended by the Finance Act, 2012 w.e.f. 01-04-2013 thereby making HUF eligible for claiming exemption u/s. 54B of the Act. The ld. AR submitted that since the provisions of section 54B of the Act are in the nature of beneficial legislation, the amendment made in the section is thus has to be read as effective retrospectively. In support of his submission the ld. AR placed reliance on the decision of Delhi Bench of the Tribunal in the case of K.S. Jain & Sons (HUF) Vs. Income Tax Officer in ITA No. 5323/Del/2004 for assessment year 1998-99 decided on 2 1-09-2007. The ld. AR submitted that the Delhi Bench of the Tribunal in the aforesaid case has granted benefit of exemption u/s. 54B to the assessee (HUF) by liberally interpreting the provisions of section 54B of the Act. The ld. AR further submitted that the Hon’ble Supreme Court of India in the case of Commissioner of Income Tax Vs. Alom Extrusions Ltd. reported as 319 ITR 306 and in the case of Commissioner of Income Tax  Vs. Podar Cement (P) Ltd. etc. reported as 226 ITR 625 has held that when a provision of section in inserted to remedy unintended consequences, the provision has to be read retrospectively.

4. On the other hand Shri Ajay Modi representing the Department vehemently defended the order of Commissioner of Income Tax (Appeals). The ld. DR submitted that the assessment year under appeal is 2007-08. The provisions of section 54B have been amended to include HUF w.e.f. 01-04-2013. Prior to aforesaid date, exemption u/s. 54B was available only to the individuals. The amendment which has been brought into by the Finance Act, 2012 is effective from 01-04-2013. The ld. DR submitted that since HUF was not included in the provisions of section 54B, benefit under the said section cannot be granted to any other person other than individuals prior to amendment. In support of his submissions, the ld. DR placed reliance on the decision of Hon’ble Madras High Court in the case of Commissioner of Income Tax Vs. G.K. Devarajulu reported as 191 ITR

211. The ld. DR submitted that the Hon’ble Madras High Court has categorically held that the provisions of section 54B would not apply to HUF. Similar amendment was made to the provisions of section 54 by the Finance Act, 1997 whereby HUF was included. The Hon’ble High Court held that if the intention of the Parliament was to include HUF in section 54B then the amendment would have been carried out in respect of section 54B as well along with section 54. The ld. DR prayed for rejecting the appeals of the assessee and upholding the order of Commissioner of Income Tax (Appeals).

5. We have heard the submissions made by the representatives of rival sides and have perused the orders of the authorities below. We have also considered the decisions on which the representative of rival sides have placed reliance. The provisions of section 54B have been amended by the Finance Act, 2012 w.e.f. 01-04-2013. The relevant extract of the pre-amended and the amended provisions of section 54B are reproduced here-in-below :

Pre-amended:

“54B. Subject to the provisions of sub-section (2), where the capital gain arises from the transfer of a capital asset being land which, in the two years immediately preceding the date on which the transfer took place, was being used by the assessee or a parent of his for agricultural purposes [(hereinafter referred to as the original asset)], and the assessee has, within a period of two years after that date, purchased any other land for being used for agricultural purposes.”

Amended:

“54B. Subject to the provisions of sub-section (2), where the capital gain arises from the transfer of a capital asset being land which, in the two years immediately preceding the date on which the transfer took place, was being used by [the assessee being an individual or his parent, or a Hindu undivided family] for agricultural purposes [(hereinafter referred to as the original asset)], and the assessee has, within a period of two years after that date, purchased any other land for being used for agricultural purposes.”

After amendment to section 54B, along with individuals, HUF is also made eligible for the benefit of exemption under the provisions of said section.

6. We find that the Hon’ble Madras High Court in the case of Commissioner of Income Tax Vs. G.K. Devarajulu (supra) had occasion to deal with eligibility of HUF for claiming exemption u/s. 54B of the Act in period prior to amendment. The assessment year under appeal was 1972-73. The question of law before the Hon’ble Court was :

“Whether, on the facts and in the circumstances of the case, the Tribunal’s view that the Hindu undivided family is entitled to exemption under section 54B(ii) of the IT Act, is sustainable in law ?”

The Hon’ble High Court answered the question in negative by holding as under :

5. The words “assessee or a parent of his” occurring in s. 54B of the Act, in the context in which the word “assessee” has been used and from the meaning of the words associated with it, would appear to us to clearly indicate that only an “individual assessee” has been contemplated and not any other entity of assessment. No doubt, under the provisions of the Act, an HUF is a distinct taxable entity for the purposes of the Act, apart from the individual members constituting it. Even so, if, in place of the word “assessee” occurring in s. 54B of the Act, the words “Hindu undivided family”are substituted and the section is read, it will lead to absurd results. On the other hand, if, for the word “assessee”, one class of assessees, viz., an individual, is substituted and the section is read, then, section 54B makes sensible reading. In the former case, the provision would read “used by an Hindu undivided family or a parent of his”, while, in the latter, it would read as “used by an individual or a parent of his”. It is difficult to conceive of a parent of or for a Hindu undivided family or the user by such a parent of a Hindu undivided family. Further, the use of the expression “by a parent of his” occurring in section 54B of the Act indicates that in order to claim benefit thereunder, the user must be an assessee, who has a parent, or a parent of his. That would mean user only by such an assessee, as has a parent, or, user by a parent of the assessee. The user “by his parent” contemplated and the word “his” employed, can have reference only to a living person like an individual and not to an entity or person like a Hindu undivided family. The user by the parent, which would also qualify for claiming the benefit of section 54B would be inapplicable to a case where the assessee is none other than an individual. In other words, when the meaning of the word “assessee” used is ascertained from the meaning of the words associated with it, it is clear from the company the word “assessee” keeps, that what had been contemplated is only an individual and not a Hindu undivided family.”

The Hon’ble High Court further held :

“6. Further, on the language employed in s. 54B of the Act, and looking at what is stated therein, it is difficult to apply this principle, for it is not possible in our view, for a proper, reasonable and intelligible interpretation giving effect to the words employed in the section, the context and their collocation, to construe the word “assessee” as applicable to all categories of assessees and the words “a parent of his” as confined in its applicability only to such assessees, as are capable of having a parent. We have earlier indicated the interpretation we are inclined to put on the words occurring in s. 54B and the section should be made workable with the words employed, viz., “the assessee or a parent of his’ and the section could be worked only by holding that the assessee contemplated therein is an individual or a parent of that individual and that cannot be interpreted as including all assessees, by the expression “assessee” and excluding all those other than an individual by the words “a parent of his”. To accept the contention of learned counsel for the assessee would be to interpret the provision in a manner which would be totally out of context and to destroy the very purpose for which the provision had been enacted and would also lead to incongruous results.”

7. The Hon’ble High Court further observed that the intention of the Parliament was not to grant benefit of exemption u/s. 54B to HUF as similar amendment was carried out by the Parliament in section 54 to include HUF. The relevant extract of the observations of the Hon’ble High Court in this regard reads as under :

“It would also be pertinent to point out that, by s. 19 of the Finance Act, 1987, in s. 54(1) of the Act, an HUF has also been included. The legislative change thus brought about is also an indication that what had been contemplated by “assessee” under s. 54(1) of the Act was not an HUF, but only an individual. While a change had been brought in in s. 54(1) of the Act, s. 54B of the Act had been left intact. This, in our view, also clearly indicates that though Parliament was fully alive to the need for including an HUF within the scope of s. 54(1) of the Act, for some reasons, it had not thought it fit to do so in a case falling under s. 54B of the Act. Thus, on a careful consideration of the words employed and interpreting the words in the context in which they have been used and their collocation, we hold that the word “assessee” used in s. 54B would be applicable only to the case of an “individual” and would not take in a Hindu undivided family.”

8. Thus, in view of the plain reading of section prior to amendment and in the light of ratio laid down in the case of Commissioner of Income Tax G.K. Devarajulu (supra) we hold that the assessee being HUF is not eligible for claiming exemption u/s. 54B of the Act during the assessment year under appeal. Accordingly, the appeal of the assessee is dismissed.

9. The issue raised in present appeal is identical to the one adjudicated by Hon’ble Madras High Court. There is no scope left for the Tribunal to further interpret the provisions of the section on this aspect or to deliberate on retrospective applicability of amendment to section 54B brought in by the Finance Act 2012. The ld. AR has not brought to our knowledge any judgment of Hon’ble Jurisdictional High Court or the Hon’ble Apex Court suggesting retrospective applicability of the amended provisions of section 54B of the Act.

10. The facts involved in ITA No. 383 / PUN/ 2015 are identical to the facts of the case decided in ITA No. 382/PUN/2015. The assessee in ITA No. 383/PUN/2015 is co-owner of land and is in the same status of HUF. Therefore, the findings given by us in ITA No. 382/PUN/20 15 would mutatis mutandis apply in the case of assessee in ITA No. 383/PUN/2015. Accordingly, the appeal of the assessee is dismissed for similar reasons.

11. In the result, the appeals of both the assessees are dismissed.

Order pronounced on Thursday, the 24th day of August, 2017.

Download Judgment/Order

More Under Income Tax

Leave a Comment

Your email address will not be published. Required fields are marked *

Search Posts by Date

November 2020
M T W T F S S
 1
2345678
9101112131415
16171819202122
23242526272829
30