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2015 (7) TMI 486 - PUNJAB & HARYANA HIGH COURT

2015 (7) TMI 486 - PUNJAB & HARYANA HIGH COURT - TMI - Entitlement to the claim exemption u/s 54B - the asset sold was not a long term capital asset but a short term capital asset that is not eligible for exemption under section 54B, 54D and 54F as is clear from CBDT Circular No.495 dated 22.09.1987 as per AO - ITAT allowed claim - Held that:- All the ingredients of Section 54B exist in the present case. Firstly, the land sold by the assessee was a capital asset. Secondly, this capital asset was .....

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ingredient is established by the evidence on record. The respondent had tendered a compilation of documents before the CIT(A). A copy thereof was tendered before us by Mr. Jain, the learned senior counsel appearing on behalf of the respondent. Page-44 of this compilation is a record/statement of the “Patwari” which confirms that the respondent had utilized the land sold by him for agricultural purposes during the period 03.07.2003 to 27.01.2006. There is nothing on record that suggests the contr .....

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t indicates that the land should have been used continuously only in the second of the two years and only for a few days in the first of the two years. Nor are we able to infer such a limitation from the plain language of this section on principle. - Decided in favour of assessee.

Failure to furnish evidence to show that the land was being used for agricultural purpose for two year immediately preceding the date on which transfer took place? - ITAT allowed claim - Held that:- The Trib .....

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roperty purchased from the sale proceeds in the name of wife - Held that:- Section 54B requires the assessee to purchase the property from out of the sale consideration of the capital asset. It does not entitle the assessee to the benefit conferred therein if the subsequent property is purchased by a person other than the assessee including a close relative even such as his wife or children. If the legislature intended conferring such a benefit, it would have provided for the same expressly. Ind .....

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basis that he invested only a sum of ₹ 44,76,000/- in the agricultural property purchased by him after the sale of the agricultural property earlier owned by him - Decided against assessee.

Addition on account of law house hold withdrawals - addition deleted by the Ld. CIT(A) - Held that:- The CIT(A) found that the Assessing Officer had made the estimate out of the household expenses of ₹ 60,000/- on a vague and arbitrary basis unsupported by any evidence or material on r .....

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late Tribunal in respect of the assessment year 2006-07. 2. The appellant contends that the following substantial questions of law arise in this appeal:- 1. Whether on the facts and in the circumstances of the case, the Hon ble ITAT was right in law in upholding the order of Ld. CIT(A) in allowing the exemption u/s 54B of the I.T Act even though the assessee was not entitled to the claim of exemption u/s 54B as the asset sold was not a long term capital asset but a short term capital asset that .....

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cts and in the circumstances of the case, the Hon ble ITAT was right in law in upholding the order of Ld. CIT(A) that the agricultural income of previous year 2004-05 related to and was derived from that particular land for which exemption u/s 54B of the Act has been claimed by the assessee, when assessee has not been able to show any correlation between the said land and agricultural income. 4. Whether on the facts and in the circumstances of the case, the Hon ble ITAT was right in law in uphol .....

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ital gain as Long Term Capital Gain whereas calculation of tax by the assessee shows that the said gain was only short term capital gain. 6. Whether on the facts and in the circumstances of the case, the Hon ble ITAT was right in law in dismissing the Revenue s appeal without deciding the grounds taken by the Revenue on the issue of addition of ₹ 60,000/- which was made by the AO for on account of law house hold withdrawals and deleted by the Ld. CIT(A)? By our order dated 02.03.2015, we i .....

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appeal is dismissed as regards Question Nos.2,3 and 6 as they do not raise a substantial question of law. 4. Section 54B reads as under:- 54-B. Capital gain on transfer of land used for agricultural purposes not to be charged in certain cases.-(1) 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 .....

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the amount of the capital gain is greater than the cost of the land so purchased (hereinafter referred to as the new asset), the difference between the amount of the capital gain and the cost of the new asset shall be charged under Section 45 as the income of the previous year; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase, the cost shall be nil; or (ii) if the amount of the capital gain is .....

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be deposited by him before furnishing such return [such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under subsection (1) of Section 139] in an account in any such bank or institution as may be specified in, and utilised in accordance with, any scheme which the Central Government may, by notification in the Official Gazette, frame in this behalf and such return shall be accompanied by proof of such deposit; .....

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n which the period of two years from the date of the transfer of the original asset expires; and (ii) the assessee shall be entitled to withdraw such amount in accordance with the scheme aforesaid. FACTS 5. There were two transactions of sale of land by the assessee. This appeal concerns only one of them. For the purpose of this appeal, it is sufficient only to note that the respondent sold the land in question by an agreement dated 26.09.2005. The Assessing Officer in fact took this to be the r .....

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plot of ₹ 16,84,000/- was paid by his wife. 6. The Assessing Officer held the gain to be a short-term capital gain. The CIT(A) and the Tribunal have held in favour of the respondent on the grounds we will shortly refer to. Re: Questions No.1 and 5: 7. It was submitted before us that the difference between the sale price of the first property and the expenditure of ₹ 44,76,000/- for the purchase of the second property ought to be taxed as a short-term capital gain as the property sold .....

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ituate- (a) in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population of not less than 10,000 according to the last preceding census of which the relevant figures have been published before the 1st day of the previous year; or (b) in any area within such distance, not being more than eight kilo .....

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rty-six months immediately preceding the date of its transfer: 9. Section 54B does not refer to a short-term capital asset or a long-term capital asset. It merely refers to a capital asset. Where the ingredients of Section 54B exist, the computation of capital gain is to be in accordance with that section. Admittedly, the land that was sold by the respondent was a capital asset within the meaning of Section 2(14)(iii) being in an area which is comprised within the jurisdiction of a municipality. .....

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s case as, admittedly, the assessee had within a period of two years after the sale purchased another land for being used for agricultural purposes. 11. The third ingredient is established by the evidence on record. The respondent had tendered a compilation of documents before the CIT(A). A copy thereof was tendered before us by Mr. Jain, the learned senior counsel appearing on behalf of the respondent. Page-44 of this compilation is a record/statement of the Patwari which confirms that the resp .....

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cultural purposes for full two years immediately preceding the date of transfer and that it is sufficient if it was so used in the whole of the preceding year and for some days in the year earlier to the preceding year. We are unable to agree. There is nothing in Section 54B that supports such an inference. The plain language of Section 54B requires the land sold to have been in use by the assessee or by his parents or the HUF for agricultural purposes for a period of two years immediately prece .....

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ase. We express no opinion in that regard. However, on facts, the respondent has established that he had been using the said land for a period of two years immediately preceding the date on which he transferred the same. 14. In the circumstances, questions No.1 and 5 are answered in favour of the respondent but subject to what we have said. Re: Question Nos.2 and 3 15. Question No.3 requires only a consideration of the facts. The Tribunal, after considering the facts, came to the conclusion that .....

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. Question No.4 must be answered in favour of the appellant. As we mentioned earlier, the respondent sold his agricultural land for a sum of ₹ 60,00,000/-. Out of the sale proceeds he invested only a sum of ₹ 44,76,000/- towards the purchase of another agricultural plot. The balance consideration of ₹ 16,84,000/- in respect of that plot was paid by the respondent s wife. It is not the respondent s case that it is actually he who paid the amount of ₹ 16,84,700/- and that h .....

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siderations, security for ladies. The Tribunal noted that as long as the funds are invested the respondent s exemption cannot be denied. 18. It is difficult to accept this view. Section 54B requires the assessee to purchase the property from out of the sale consideration of the capital asset. It does not entitle the assessee to the benefit conferred therein if the subsequent property is purchased by a person other than the assessee including a close relative even such as his wife or children. If .....

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vs. Income-Tax Officer, [2008] 306 ITR 335 (P&H) held: 10. In interpreting the words contained in a statute, the court has not only to look at the words but also to look at the context and the object of such words relating to such matter and interpret the meaning intended to be conveyed by the use of the words under the circumstances. The word assessee occurring in section 54B must be interpreted in such a manner as to accord with the context and subject of its usage. A reading of section 5 .....

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ssee himself for seeking exemption under section 54B of the Act. The purchase of agricultural land by the assessee in his son or grandson s name, therefore, cannot be held entitled to exemption under section 54B of the Act. 11. We may make a brief reference to the decision relied upon by counsel for the assessee. Learned counsel mainly relied upon the decision in V. Natarajan [2006] 287 ITR 271 (Mad), with reference to section 54 of the Act. 12. The Madras High Court in V. Natarajan s case [2006 .....

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