Case Law Details
DCIT Vs Indranil Sanjaybhai Rajyaguru (ITAT Rjakot)
It is an undisputed fact that when the initial payment of Rs. 12.15 crores has been made for purchase of the new asset that too more than the amount of capital gain to the tune of Rs. 2.90 crores before the due date of filing of the return of income under Section 139(1) of the Act. Considering the CBDT’s Circular No. 471 dated 15.10.1986, Circular No. 672 dated 06.12.1993 the said to be treated as construction for the purpose of Section 54/54F. Further that considering the Circular No. 672 issued by the CBDT the said amount paid out of the net sale consideration in the original asset is required to be treated as purchase / construct. Further that though the above clarification is for Section 54F, the analogy in our considered opinion has been rightly applied by the CIT(A) in the case in hand considering the facts and circumstances therein. Hence, advance payment by the appellant to purchase agricultural land from the sale proceed of the land sold by him has been rightly found eligible for benefit under Section 54B of the Act by the Ld. CIT(A) without any ambiguity so as to warrant interference.
FULL TEXT OF THE ORDER OF ITAT RAJKOT
Both the appeals filed by the Revenue are directed against the separate orders dated 12.05.2015 & 28.07.2015 passed by the Commissioner of Income Tax (Appeals)-1, Rajkot arising out of the separate orders dated 12.03.2013 & 31.03.2014 passed by the DCIT, Circle – 1, Rajkot & ACIT, Circle-1, Rajkot under Section 143(3) of the Income Tax Act, 1961 (hereinafter referred as to “the Act”) for the Assessment Year (A.Y.) 2010-11 & 2011-12 respectively.
ITA No. 358/Rjt/2015 (A.Y. 2010-11):-
2. The grounds of appeal raised by the Revenue are as under:
“1. The ld. CIT(A) has erred on fact and in law in appreciating the factual and legal matrix for the addition made of Rs. 2,90,08,640/- on account of long term capital gain.
2. The ld. CIT (A) has erred on facts and in law in holding that agricultural activities were carried out on the impugned sold land, whereas, it is seen from the form No. 12 issued by the Deputy Mamlatdar that no agricultural activities were carried out.
3. The ld. CIT(A) has ignored the evidence highlighted in the assessment order to the effect that no crops were cultivated on the impugned land and therefore the order of the CIT(A) is perverse.
4. The ld. CIT(A) has erred on facts and in law in holding that advance given to purchase new land is treated as purchase within the meaning of section 54B, which is contrary to the provisions of the Act, which clearly mandates purchase of new land or investment in accordance with the provisions of law.
5. The applicant craves for leave to alter, amend and/or add any ground or appeal subsequently.”
3. Deletion of addition of Rs. 2,90,08,640/- on account of long term capital gain is the subject matter of the appeal before us.
4. The brief facts leading to the case is this that the assessee engaged in the business of construction of residential units/flats and transportation filed its return of income on 15.10.2010 showing income at Rs. 73,25,860/-. Upon selection of the matter through CASS notice under Section 143(2) dated 26.08.2011 was issued followed by notice under Section 142(1) dated 23.10.2012 calling for various details relating to the assessment in the case of the assessee.
5. During the previous year 2009-10 the assessee sold a plot an agricultural urban land lying and situated at Survey No. 140P at village Ghanteshwar, admeasuring about 13 acres for a consideration of Rs. 3,00,00,000/-. Within a period of two years therefrom the assessee further purchased an agricultural land at Vejagam, District Rajkot for a consideration of Rs. 20,90,00,000/-. Out of which an amount of Rs. 12.15 crores were paid before the filing of return on 15.10.2010. While filing of return the assessee declared total income of Rs. 73,25,860/- including the claim of exemption of Rs. 2,90,08,646/- under Section 54B of the Act in respect to long term capital gain derived on sale of the aforesaid agricultural land. The Ld. AO finalized the proceeding rejecting such claim made by the assessee under Section 54B which was, in turn, allowed by the Ld. CIT(A). Hence, the instant appeal before us.
6. We have heard the relevant submissions made by the respective parties, we have also carefully considered the materials available on record before us.
7. Upon perusal of the order passed by the Ld. AO it appears that the assessee’s claim was rejected mainly on three counts:
(i) The original asset is not an agricultural land as it was not utilized for the purpose of agricultural activities either by the appellant or by his parents in the immediately preceding two years from the date of sale of land.
(ii) The appellant had not purchased the new asset before the due date of filing of return within the time prescribed under Section 139(1) of the Act i.e. on 15.10.2010; on that premise the amount of Rs. 12.15 crores paid for the purpose of purchase of new asset was only an advance.
(iii) The capital gain amount was not deposited by the assessee in any bank or institution specified in this regard before the due date of return under Section 139(1) of the Act.
8. So far as the first point is concerned as regards rejection of the claim of the appellant the abstracts of 7×12 issued by the E-dhara Mamlatdar showing the position as on 12.10.2009 was filed. The Ld. AO considered the abstracts of 7×12 issued by the E-dhara Mamlatdar on 15.02.2013 wherein as on 07.02.2013 the name of Shri Lakkirajsingh Kishorsingh Jadeja and Chandrikanben Rajnikant Patel was reflecting.
9. It is the case of the assessee that the name of the new purchaser was rightly mentioned in the said abstracts instead in the name of the assessee. In regard to the information relating to cultivation in the earlier years, during further enquiry the Talati has also opined that the land is a wasted land and no agricultural activity was carried out. The abstract produced by the Talati shows “no information in the earlier years”. However the Talati further admitted that way back on 19.08.2004 and 09.08.2004 the Collector of Rajkot has classified the said land as agricultural land and the same is also made available in the Revenue records. Needless to mention that we have further verified the relevant document mention above as annexed to the Paper Book. It is found that the Talati has given a statement based on incorrect and incomplete information available with him. In fact, statement has given by the Talati based on his personal visit during the assessment proceeding i.e. after 3 years from the end of the Assessment Year when the land was sold out. In this regard, the Ld. CIT(A) observed the following:
“…Now, the AO during the course of assessment proceedings had recorded the statement of one of the Mamlatdar, which is mentioned in the assessment order. However, it is also a fact that, during the course of assessment proceedings, the appellant had sought cross examination which was granted to the appellant. During the course of cross examination, various flaws were noticed. Incidentally, the opportunity of cross examination and the findings therein and the objections raised by the appellant, has not- been dealt with by the AO. To cite an instance, the Talati had given a statement that the impugned land was a barren land. He did not know that the change of character of land was made by virtue of Collector’s order way back in 2004 and the land has been classified as “agricultural land’ and not vidi as alleged. Secondly, it also transpires from the cross examination that, he has given the statement based on his personal visit during the course of assessment proceedings only i.e. after the lapse of more than 3 years from the end of the accounting year when the land was sold out. The AO ought to have dealt with these facts in the assessment order, which has not been done so.
Therefore, in light of the above, it is held that the evidence on record outweighs far more than the only finding in the assessment order, which is the statement of the Talati, which too, has been rebutted by the appellant by way of cross examination and whose findings are not mentioned in the assessment order. Hence, it is held that the land in question was put to agricultural use.”
10. The further question cropped up before the Ld. AO was as to whether the advance payment made by the assessee which is more than the capital gain tantamount to purchase of the property.
According to the Ld. AO the appellant must either purchase the new asset before the due date of filing of return or shall deposit the amount of the capital gain in any bank or institution. Against the said contention of the Ld. AO the assessee submitted that since the assessee opted for purchase of new asset and he was entitled to purchase the new asset within a period of two years after the date of transfer of the original assessed as contemplated in sub-Section (1) of Section 54 of the Act and therefore, the contention of the Ld. AO that the payment of Rs. 12.15 crores made for the purchase of the new asset by the assessee before the due date of filing of return is an advance is not on the correct perspective. Upon making payment of balance amount of Rs. 8.75 crores finally the deed was executed on 19.03.2011 i.e. much earlier than the limitation date of 22.12.2011. In that view of the matter the condition laid down in Section 54B(1) of the Act was duly fulfilled as the case made out by the assessee before the authorities below. While dealing with this issue the Ld. CIT(A) observed as follows:
“…I find substantial force in the above argument of the ld. AR. The question here is, whether payment of advance shall tantamount to purchase to fulfill the conditions of section 54B(2). The plain reading of the provisions clearly spells out that, the language used is purchase and not registration of property in the name of the assessee. The very payment of advance spells out the intention of the appellant. In fact, the intention of the legislation is also to ensure subsequent investment of the capital gain in a new land. An analogy can be taken from Board’s Circular No. 471 dated 15.10.1986, Circular No. 672 dated 06.12.1993 which clarify that the amount paid towards booking has to be treated towards construction for the purpose of section 54/54F. Since in modern days properties are booked first and then purchased, the above Circular No. 672 of the CBDT clarifies that, if any amount out of net sale consideration of the original asset is paid, this should be considered under the terms ‘purchase / construct’. It is not disputed that the appellant had not made payment towards advance for purchase of the property for the purpose of section 54B. Although the above clarification is for section 54F, but the analogy of the same can be used here in the instant case. Besides, the decisions relied upon by the ld. AR has also substantial force and the facts therein are similar to the facts and circumstances of the present case. Hence, the advance payment made by the appellant to purchase agricultural land from the sale proceeds of the land sold by him, is eligible for benefit u/s. 54B. Therefore, the AO is factually wrong in not allowing this benefit to the appellant.”
11. We have considered both the contention made by the assessee and the Revenue and the observation made by the Ld. CIT(A). Regarding the first contention after considering the statement of the Talati and the cross-examination made by the assessee it was found that the land was not agricultural one as stated by the Talati is not borne by any record rather the collectors order way back in 2004 already classified the land in question as agricultural land. We, therefore, agree with the decision taken by the Ld. CIT(A).
12. It is an undisputed fact that when the initial payment of Rs. 12.15 crores has been made for purchase of the new asset that too more than the amount of capital gain to the tune of Rs. 2.90 crores before the due date of filing of the return of income under Section 139(1) of the Act. Considering the CBDT’s Circular No. 471 dated 15.10.1986, Circular No. 672 dated 06.12.1993 the said to be treated as construction for the purpose of Section 54/54F. Further that considering the Circular No. 672 issued by the CBDT the said amount paid out of the net sale consideration in the original asset is required to be treated as purchase / construct. Further that though the above clarification is for Section 54F, the analogy in our considered opinion has been rightly applied by the CIT(A) in the case in hand considering the facts and circumstances therein. Hence, advance payment by the appellant to purchase agricultural land from the sale proceed of the land sold by him has been rightly found eligible for benefit under Section 54B of the Act by the Ld. CIT(A) without any ambiguity so as to warrant interference.
Once the main issue is decided in favour of the assessee consideration of the third limb relating to deposit of capital gain amount has become nugatory. The Revenue’s appeal is, therefore, dismissed.
ITA No. 497/Rjt/2015 (A.Y. 2011-12):-
13. The identical issue involved in the case has already been dealt with by us in ITA No. 358/Rjt/2015 for A.Y. 2010-1 and in the absence of any changed circumstances the same shall apply mutatis mutandis. Hence, the appeal preferred by the Revenue is dismissed.
14. In the combined result, the appeals preferred by the Revenue are dismissed.
