CHOWARAM BAGHEL V. THE PRINCIPAL COMMISSIONER OF INCOM TAX

TAXC/47/2018

AI Insights

The case revolves around the denial of deduction under Section 54B of the Income Tax Act, 1961, to Chowaram Baghel, who had purchased agricultural land in the name of his wife after selling his own agricultural land. The ITAT had earlier disallowed the deduction, leading to the present appeal. The main legal contention was whether the deduction under Section 54B could be claimed when the investment in new agricultural land was made in the name of the assessee's wife rather than in the assessee's own name. The court examined various precedents and interpretations of the term 'assessee' under the IT Act, ultimately deciding that the exemption could not be claimed as the investment was not made in the assessee's own name.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 726625 (HC-CHHATTISGARH)
• Appeal Type: Others
• Pronouncement Date: 15-12-2023
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income Tax- XII v Shri Kamal Wahal, The Commissioner of Income Tax, West Bengal I, Calcutta v M/s Vegetables Products Ltd., Mrs. Kamal Murlidhar Mokashi v The Income Tax Officer, Ward-8(3), Pune, Dy. Director of Income Tax International Taxation v Jennifer Bhide, Commissioner of Customs (Import), Mumbai v Dilip Kumar and Company and Others, Commissioner of Income Tax, Faridabad v Shri Dinesh Verma, Shri Kalya v The Commissioner of Income Tax & Others, Mangalore Chemicals and Fertilisers Limited v Deputy Commissioner of Commercial Tax and Others, Petron Engineering Construction Pvt. Ltd. and Another v Central Board of Direct Taxes and Others
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: NAUSHINA ALI; AJAY KUMRANI
• Assessee Lawyers: M C JAIN; V S MISHRA
• Keywords: Agricultural Land; Capital Gains; Deduction; Exemption; Income Tax
• Section: 54B; 54F; 2(7); 54-A

Judgement Text

"1 TAXC No.47 of 2018 AFR HIGH COURT OF CHHATTISGARH, BILASPUR Judgment reserved on 11-12-2023 Judgment delivered on 15-12 - 2023 TAXC No. 47 of 2018 1. Chowaram Baghel, 37, C.G. Batallion N.C.C., Ravishanker Stadium, Durg Chhattisgarh. ---- Appellant Versus 1. The Principal Commissioner Of Income Tax Range-2 Raipur Chhattisgarh. 2. The Income Tax Officer, 2(1), Bhilai, Chhattisgarh ---- Respondent For Appellant Mr. M.C. Jain & Mr. V.S. Mishra, Advocate For Respondent Ms Naushina Ali & Mr. Ajay Kumrani, Advocate Hon'ble Mr. Justice Goutam Bhaduri & Hon'ble Mr. Justice Deepak Kumar Tiwari CAV Judgment Per Goutam Bhaduri, J. 1. The appeal was admitted on the following substantial question of law : Whether the Income Tax Appellate Tribunal (ITAT) was justified in holding that the deduction under Section 54B (sic 54-A) of the Act of 1961 cannot be allowed to the assessee/appellant since the investment in purchase of new agricultural land was made by the assessee not in his own name, but in the name of his wife? 2 TAXC No.47 of 2018 2. Facts of the case, in brief, are that the appellant sold agricultural land to M/s Golden Bricks Infrastructure Pvt. Ltd., on which long term capital gains was assessed at ₹ 66,66,284/- and which was finally determined at ₹ 36,66,284/- by the CIT (Appeals), Raipur, deleting addition of ₹ 30,00,000/-. The ITAT, Raipur Bench has upheld the determination of long term capital gains at ₹ 36,66,284/-. According to the appellant, out of the sale proceeds of the assessee purchased agricultural lands as under : ₹ 5,52,000/- 27-7-2011 Own name ₹ 9,90,300/- 01-8-2011 in the name of wife-Amt. ₹ 8,62,000/- 01-8-2011 includes stamp duty ₹ 24,04,300/- 3. Since the Assessing Officer determined the long term capital gains arising out of sale proceeds of urban agricultural land at ₹ 66,66,284/- and did not allow deduction under Section 54B of the Income Tax Act, 1961 (for short ‘the IT Act’) in respect of investments made in purchase of agricultural lands in the name of his wife. The assessee filed an appeal before the CIT (A) and the CIT (A), after perusal of the evidence, accepted the contention that the land was sold for ₹ 45,80,000/- and ₹ 30,00,000/- was received as gift from father-in-law Sant Ram Chaturvedani in cash, which was deposited in the bank account. The CIT (A) allowed exemption under Section 54B for an amount of ₹ 9,90,300/- and ₹ 8,62,600/- invested in the name of wife. The same was subject of challenge before the ITAT by Revenue. The ITAT annulled the deduction under Section 54B of the IT Act on the ground that the 3 TAXC No.47 of 2018 exemption could have been allowed only if the investment is made by the assessee in his own name and since the investment was made in the name of wife, son, father, etc. did not allow the deduction of ₹ 9,90,300/- and ₹ 8,62,600/- under Section 54B and set aside the order of the CIT (A) and restored back the order of the Assessing Officer on this point. The same was subject of challenge before this Court. This Court admitted the appeal on the substantial question of law, as quoted supra. 4. Learned counsel appearing for the appellant would submit that the ITAT misdirected itself to interpret Section 54B of the IT Act. He would further submit that language of Sections 54, 54B and 54F of the IT Act are pari materia and as per the law laid down by the Delhi High Court in the matter of Commissioner of Income Tax- XII v Shri Kamal Wahal1 when the property was purchased in the name of wife the deduction was allowed. He would also submit that since the Supreme Court in the matter of The Commissioner of Income Tax, West Bengal I, Calcutta v M/s Vegetables Products Ltd.2 has laid down that when there is more than one view, then the view which is favourable to the tax payer should be preferred. According to the learned counsel, taking lead of it when the word to Section 54F are pari materia the provisions of Section 54B for deduction should have been interpreted as per the dictum laid down by the Delhi High Court. 1 ITA-4/2013 (dated 11-1-2013) 2 88-ITR-192 (SC) 4 TAXC No.47 of 2018 5. Learned counsel would submit that the ITAT, Pune Bench ‘A’, Pune in its decision rendered in the matter of Mrs. Kamal Murlidhar Mokashi v The Income Tax Officer, Ward-8(3), Pune3, has similarly held that while interpreting the provisions of Section 54F which in alternate to facilitate the housing scheme and accordingly interpreted the Section in favour of assessee. He would next submit that as per the provisions of Section 45 of the Transfer of Property Act, the concept of constructive ownership should be played into motion and the facts would suggest that entire amount for purchase of property was made available by the assessee not by his wife, therefore, though certain agricultural property was purchased in the name of wife taking dictum laid down by the Delhi High Court the deduction should have been allowed and interpretation should be in favour of the assessee. He also placed reliance upon the decision rendered by the High Court of Karnataka in the matter of Dy. Director of Income Tax International Taxation v Jennifer Bhide4. 6. Learned counsel appearing for the respondents, per contra, would submit that the word ‘assessee’ has been defined under Section 2(7) of the IT Act. She would further submit that while interpreting the word ‘assessee’ the same cannot be interpreted while interpreting Section 54B & 54F and the entire income tax the word ‘assessee’ has been used. She would also submit that 3 ITA No.939/PUN/2016 AY 2011-12 (decided on 19-8-2019) 4 (2012) 349 ITR 0080 (ITA No.169 of 2011 decided on 26-9-2011) 5 TAXC No.47 of 2018 strict interpretation of taxing statute is required. To buttress her contention, learned counsel would place reliance upon the decision rendered by the Supreme Court in the matter of Commissioner of Customs (Import), Mumbai v Dilip Kumar and Company and Others5. She would submit that when the property has not been purchased by the assessee in his own name then the property purchased in the name of wife cannot be taken into account to enlarge the scope of assessee. She also placed reliance upon the decision rendered by the High Court of Punjab and Haryana at Chandigarh in the matter of Commissioner of Income Tax, Faridabad v Shri Dinesh Verma6 and the decision rendered by the High Court of Judicature for Rajasthan at Jaipur Bench, Jaipur, in the matter of Shri Kalya v The Commissioner of Income Tax & Others7. 7. We have heard learned counsel appearing for the parties and perused the documents. 8. The relevant facts are that the appellant sold his agricultural land on 2-7-2010 to M/s Golden Bricks Infrastructure Pvt. Ltd. The sale consideration was shown as ₹ 45.80 lacs and the cash amounting to ₹ 30.00 lacs deposited in the bank account of the appellant, therefore, initially the Long Term Capital Gain was assessed for a consideration of ₹ 75.80 lacs, however, 5 (2018) 9 SCC 1 6 ITA No.381 of 2014 (O&M) (decided on 6-7-2015) 7 ITA No.112 of 2012 (decided on 19-5-2012) 6 TAXC No.47 of 2018 subsequently, the assessee made a statement that due to improper state of mind being brain tumor patient, he ended up giving incorrect statement inadvertently and ₹ 30.00 lacs was received as cash gift from his father-in-law. This statement led to enquiry and on enquiry it was found that the father-in-law of the appellant namely; Sant Ram Chaturvedani has given an amount of ₹ 30.00 lacs by way of gift, which he received from one Ganga Ram Sahu, who received the same by way of compensation in lieu of land acquisition. Ganga Ram Sahu also affirmed the said fact, therefore, after due enquiry it was found that Ganga Ram Sahu had sufficient cash in hand to make payment of ₹ 30.00 lacs to the father-in-law of the appellant, who, in turn, gifted the said amount to the appellant. Therefore, the said amount being given to a relative as defined under Section 56 of the IT Act, it was not included in the total income being a gift received from the relative. 9. As regards reinvestment of sale proceeds of agricultural land in purchase of agricultural lands in the name of spouse is concerned, the contention of the appellant is that he purchased two agricultural lands for an amount ₹ 9,90,300/- and ₹ 8,62,600/- in the name of his wife namely; Lalita Baghel on 1-8-2011 after the initial sale consideration was received prior to the date i.e. on 2-7- 2010, therefore, the exemption in respect of Section 54B of the IT Act was claimed for. The same was allowed by the CIT (A) 7 TAXC No.47 of 2018 whereby the exemption under Section 54B for an amount of ₹ 9,90,300/- and ₹ 8,62,600/- was allowed. Against the said order, the revenue preferred an appeal before the ITAT. The ITAT vide its order dated 17-1-2018 disallowed the exemption in view of law laid down by the Punjab & Haryana High Court in the matter of CIT v Shri Dinesh Verma8. 10. In the case of M/s Vegetables Products Ltd. (supra), it has been laid down that if two reasonable constructions of a taxing provision are possible that construction which favours the assessee must be adopted. It is also submitted that in the pari materia provisions of Sections 54, 54B and 54F when the exemption is claimed it should be interpreted in favour of the assessee. 11. For ready reference the provisions of Section 54B of the IT Act are quoted below : 54B. 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 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, then, instead of the capital gain being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that 8 ITA No.381 of 2014 (O&M) (order dated 6-7-2015) 8 TAXC No.47 of 2018 is to say,— (i) if 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 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 asset any capital gain arising from its transfer within a period of three years of its purchase, the cost shall be reduced, by the amount of the capital gain. (2) The amount of the capital gain which is not utilised by the assessee for the purchase of the new asset before the date of furnishing the return of income under section 139, shall 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 sub-section (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; and, for the purposes of sub-section (1), the amount, if any, already utilised by the assessee for the purchase of the new asset together with the amount so deposited shall be deemed to be the cost of the new asset : Provided that if the amount deposited under this sub-section is not utilised wholly or partly for the purchase of the new asset within the period specified in sub-section (1), then,— 9 TAXC No.47 of 2018 (i) the amount not so utilised shall be charged under section 45 as the income of the previous year in 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. 12. Primary reading of aforesdaid provison would shows that in the Section the word ‘assessee’ has been used and the claim of the appelalnt to be covered under exemption. 13. The word ‘assessee’ has been defined under Section 2(7) of the IT Act, which reads as under : 2(7) “assessee\" means a person by whom any tax or any other sum of money is payable under this Act, and includes— (a) every person in respect of whom any proceeding under this Act has been taken for the assessment of his income or assessment of fringe benefits or of the income of any other person in respect of which he is assessable, or of the loss sustained by him or by such other person, or of the amount of refund due to him or to such other person; (b) every person who is deemed to be an assessee under any provision of this Act; (c) every person who is deemed to be an assessee in default under any provision of this Act; 14. In order to interpret whether the reinvestment made by the assessee i.e. two properties purchased by him in the name of his wife he would be entitled to exemption, it will be apt to refer the 10 TAXC No.47 of 2018 decision rendered by the Supreme Court in the matter of Mangalore Chemicals and Fertilisers Limited v Deputy Commissioner of Commercial Tax and Others9 wherein it has been observed that the choice between a strict and a liberal construction arises only in case of doubt in regard to the intention of the legislature manifest on the statutory language. The Supreme Court held that as para 24 : 24…...The choice between a strict and a liberal construction arises only in case of doubt in regard to the intention of the Legislature manifest on the statutory language. Indeed, the need to resort to any interpretative process arises only where the meaning is not manifest on the plain words of the statute. If the words are plain and clear and directly convey the meaning, there is no need for any interpretation. It appears to us the true rule of construction of a provision as to exemption is the one stated by this Court in Union of India v. Wood Papers Ltd. ...... Truly speaking liberal and strict construction of an exemption provision are to be invoked at different stages of interpreting it. When the question is whether a subject falls in the notification or in the exemption clause then it being in nature of exception is to be construed strictly and against the subject but once ambiguity or doubt about applicability is lifted and the subject falls in the notification then full play should be given to it and it calls for a wider and liberal construction .... (emphasis supplied) 15. The Supreme Court in the matter of Petron Engineering Construction Pvt. Ltd. and Another v Central Board of Direct 9 1992 Supp (1) SCC 21 11 TAXC No.47 of 2018 Taxes and Others10 held that it is true that a taxing provision should be liberally construed but this does not mean that such liberal construction should be made doing violence to the plain meaning of such “exemption” provision. Liberal construction will be made whenever it is possible to be made without impairing the legislative requirement and the spirit of the provision. This dictum was laid down after placing reliance upon the decision rendered in the matter of Vegetables Products Ltd. (supra). Therefore, prima facie, reading of provisions and the decisions of the Supreme Court, the wife of the appellant cannot be termed as an ‘assessee’ as per Section 2 (7) of the IT Act. So enlarging the scope of the assessee as defined under Section 2(7) to envelope the wife of the appellant to envelop the transaction to “exemption” would amount to superseed the legislative requirement and the spirit of the provision. 16. The Constitution (Five Judges) Bench of the Supreme Court in the matter of Commissioner of Customs (Import), Mumbai v Dilip Kumar and Company and Others11 held thus at paras 34 & 35 : 34. The passages extracted above, were quoted with approval by this Court in at least two decisions being Commissioner of Income Tax vs. Kasturi Sons Ltd., and State of West Bengal vs. Kesoram Industries Limited, [hereinafter referred as ‘Kesoram Industries Case’ for brevity]. In the later decision, a Bench of five Judges, after citing the above passage from Justice G.P. Singh’s treatise, summed up the following principles 10 1989 Supp (2) SCC 7 11 (2018) 9 SCC 1 12 TAXC No.47 of 2018 applicable to the interpretation of a taxing statute: “(i) In interpreting a taxing statute, equitable considerations are entirely out of place. A taxing statute cannot be interpreted on any presumption or assumption. A taxing statute has to be interpreted in the light of what is clearly expressed; it cannot imply anything which is not expressed; it cannot import provisions in the statute so as to supply any deficiency; (ii) Before taxing any person, it must be shown that he falls within the ambit of the charging section by clear words used in the section; and (iii) If the words are ambiguous and open to two interpretations, the benefit of interpretation is given to the subject and there is nothing unjust in a taxpayer escaping if the letter of the law fails to catch him on account of Legislature’s failure to express itself clearly”. 35. Now coming to the other aspect, as we presently discuss, even with regard to exemption clauses or exemption notifications issued under a taxing statute, this Court in some cases has taken the view that the ambiguity in an exemption notification should be construed in favour of the subject. In subsequent cases, this Court diluted the principle saying that mandatory requirements of exemption clause should be interpreted strictly and the directory conditions of such exemption notification can be condoned if there is sufficient compliance with the main requirements. This, however, did not in any manner tinker with the view that an ambiguous exemption clause should be interpreted favouring the revenue. Here again this Court applied different tests when considering the ambiguity of the exemption notification which requires strict construction and after doing so at the stage of applying the notification, it came to the conclusion that one has to consider liberally. 13 TAXC No.47 of 2018 17. In Dilip Kumar and Company (supra) the Supreme Court followed the ratio laid down in the matter of Hansraj Gordhandas v H.H. Dave, Assistant Controller of Central Excise and Customs, Surat and Others12 and in the matter of Commissioner of Central Excise, New Delhi v Hari Chand Shri Gopal and Others13 to reiterate the law on the aspect of interpretation of “exemption clause”. In Hari Chand Shri Gopal (supra) the Supreme Court held thus at para 29 : 29. The law is well settled that a person who claims exemption or concession has to establish that he is entitled to that exemption or concession. A provision providing for an exemption, concession or exception, as the case may be, has to be construed strictly with certain exceptions depending upon the settings on which the provision has been placed in the Statute and the object and purpose to be achieved. If exemption is available on complying with certain conditions, the conditions have to be complied with. The mandatory requirements of those conditions must be obeyed or fulfilled exactly, though at times, some latitude can be shown, if there is a failure to comply with some requirements which are directory in nature, the non-compliance of which would not affect the essence or substance of the notification granting exemption. (emphasis supplied) 18. Reading of the aforesaid judgment would show that when the person who claimed “exemption or concession” he has to establish that he is entitled to that exemption or concession. A provision providing for an exemption, concession or exception, as the case may be, has to be construed strictly with certain exceptions 12 AIR 1970 SC 755 13 (2011) 1 SCC 236 14 TAXC No.47 of 2018 depending upon the settings on which the provision has been placed in the Statute and the object and purpose to be achieved. Plain reading of Section 54B would show that the benefit is available to the assesee and when the exemption is demanded. In absence of any ambiguity the scope of definition of ‘assessee’ cannot be enlarged so as to include the wife of the assessee. In other words, the exemption clause has to be construed strictly. 19. Applying the well settled principles of law and for the reasons mentioned hereinabove, the question of law is answered in favour of the Revenue that ITAT was justified in holding that the deduction under Section 54B of the IT Act cannot be allowed to the assessee as the land was not purchased in his own name. 20. As a sequel, the appeal is dismissed. There shall be no order as to cost(s). Sd/- Sd/- (Goutam Bhaduri) (Deepak Kumar Tiwari) Judge Judge Gowri 15 TAXC No.47 of 2018 HEAD NOTE ‘Exemption’ under Section 54B of the Income Tax Act, 1961 cannot be allowed to ‘assessee’, if land is purchased in the name of spouse. ;fn Hkwfe dk dz; ifr ;k ifRu ds uke ij fd;k x;k gks rks *fu/kkZfjrh* dks vk;dj vf/kfu;e] 1961 dh /kkjk 54 [k ds varxZr *NwV* iznku ugha fd;k tk ldrkA "