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Smt. N. Lakshmi Devi, (W/o. Late Damodhar Rao) Versus The Income Tax Officer, Ward-1, Nalgonda

2017 (1) TMI 1054 - ITAT HYDERABAD

Claim of development expenditure and claim of deduction u/s. 54B - Held that:- What is required to be considered is the ‘capital asset being land’ in the immediately two preceding years has been used for agricultural purposes. If assessee has transferred an agricultural land as such, there is no need of computation of capital gain as the same was exempt from taxation. Therefore, the provisions of Section 54B are applicable on a land which was used for agricultural purposes earlier but sold subse .....

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g the legal claim, allowance of the same is directed to be verified. In the result, ground is considered allowed for statistical purposes. - Reference to claim of development expenditure in this year - Held that:- We are of the opinion that the action of the AO in restricting the amount to 25% of the claim is excessive, therefore, we restrict the amount to 10% of the claim. However, there seems to be lot of confusion with reference to the amount claimed. Assessee in the grounds claimed devel .....

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m made and work out the capital gains. With these directions, the ground is considered partly allowed, accordingly this appeal is partly allowed. - I.T.A. Nos. 344 & 345/HYD/2016 - Dated:- 6-1-2017 - Shri D. Manmohan, Vice President Shri B. Ramakotaiah, Accountant Member For Assessee : Shri S. Rama Rao, AR For Revenue : Smt. Suman Malik, DR ORDER Per B. Ramakotaiah, A. M. These two appeals are by assessee against the order(s) of the Commissioner of Income Tax (Appeals)-3, Hyderabad for AYs. 2008 .....

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.31 Guntas. Assessee was undertaking agricultural operations and due to the proximity to the road, converted into plots and sold them after making certain development work. In the bargain, assessee claimed she has spent an amount of ₹ 14,25,508/- in AY. 2008- 09 and balance in AY. 2009-10. Assessee sold the said land and stated to have re-invested the amount to an extent of ₹ 14,06,465/- by purchasing agricultural lands, but in the name of her son Mr. N. Narasimha Rao and claimed ded .....

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al gains was worked out at ₹ 17,49,541/-. Assessee claimed deduction u/s. 54B to an extent of ₹ 14,06,465/- and net capital gains admitted was at ₹ 3,43,076/-. AO as stated above, disallowed 25% of the above expenditure and restricted the claim to 75% of the total amount on the reason that the claim is excessive. It was submitted before the Ld. CIT(A) that assessee has contacted in the market and found that the expenditure was around ₹ 150 per sq. yd., and with the help o .....

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hat action of the AO in disallowing to the extent of 25% is not justifed. While allowing 75% of the expenditure, no reason was given by the AO except that assessee did not furnish necessary details to expenditure and the same is also excessive. Considering that assessee could not furnish complete details of expenditure, keeping in mind of the reasonableness of the claim and also the fact that AO has accepted 75% of expenditure, we are of the opinion that the disallowance can be restricted to 10% .....

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n if the property in the name of wife. Hon ble Punjab & Haryana High Court in the case of CIT Vs. Gurnam Singh [327 ITR 278] held that exemption u/s. 54B is allowable in the case when the land was purchased in the name of assessee and his son. What is important to be examined is whether the proceeds of the capital gain have been invested in agricultural land or not? Therefore, investing in the name of the son by assessee may not be a disqualification. The section specifies that if assessee h .....

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upported by the provisions of the Act. Section 54B(1) is as under: Sec.54B. [(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 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 .....

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f 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 equal to or less than the cost of the new asset, the capital gain shall not be charged under section 45; and for the purpose of computing in respect of the new a .....

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re, the provisions of Section 54B are applicable on a land which was used for agricultural purposes earlier but sold subsequently and became a capital asset, as per the provisions. In this case what assessee transferred is a land, even though converted to plots but was used for agricultural purposes on which there was no dispute. Therefore, the deduction u/s. 54B is allowable to assessee. However, the conditions for deduction U/s. 54B has to be examined, so we direct the AO to examine whether sa .....

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