Shri Matrabhai Revabhai Bharvad, Ahmedabad V. The Income tax Officer,Ward-7(2), Ahmedabad

ITA 1479/AHD/2012

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8033 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-12-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 17-08-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 05-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANUPAMA SINGLA
• Assessee Lawyers: M K PATEL
• Keywords: Capital asset
• Section: 143(3); 54B; 139

Judgement Text

ITA NO. 1479/AHD/2012 MATRABHAI REVABHAI BHARWAD VS. ITO A.Y. 2009-10 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH, AHMEDABAD [CORAM: PRAMOD KUMAR AM AND MAHAVIR PRASAD JM] I.T.A. NO.1479/AHD/2012 ASSESSMENT YEAR : 2009-10 MATRABHAI REVABHAI BHARWAD .....APPELLANT 408, ARTH COMPLEX, OPP. KANAK KALA, SATELLITE AHMEDABAD - 380015 [PAN : AEEPB 7842 M] VS. INCOME TAX OFFICER .RESPONDENT WARD-7(2), AHMEDABAD APPEARANCES BY: MK PATEL FOR THE APPELLANT ANUPAMA SINGLA FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : 07.12.2017 DATE OF PRONOUNCING THE ORDER : 08.12.2017 O R D E R PER PRAMOD KUMAR, AM: 1. BY WAY OF THIS APPEAL, THE ASSESSEE APPELLANT HA S CHALLENGED CORRECTNESS OF THE ORDER DATED 13 TH APRIL 2012 PASSED BY THE CIT(A)-XIV, AHMEDABAD IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME-TAX A CT, 1961, FOR THE ASSESSMENT YEAR 2009-10. 2. GRIEVANCES RAISED BY THE ASSESSEE ARE AS FOLLOWS : 1. THAT ON FACTS, AND IN LAW, THE LEARNED CIT(A) H AS GRIEVOUSLY ERRED IN CONFIRMING THE ACTION OF LEARNED AO IN DISALLOWING THE CLAIM OF DEDUCTION U/S 54B OF THE ACT OF 12,82,955/- 2. THAT, ON FACTS AND IN LAW, AND ON EVIDENCE ON R ECORD, THE CLAIM OF DEDUCTION U/S 54B OF THE ACT OUT TO HAVE BEEN ALLOW ED, AS PRAYED FOR. 3. THE ISSUE IN APPEAL LIES IN A NARROW COMPASS OF MATERIAL FACTS. THE ASSESSEE WAS OWNER OF CERTAIN AGRICULTURAL LANDS, WHICH, DUR ING THE RELEVANT PREVIOUS YEAR, WERE CONVERTED INTO STOCK IN TRADE. THE ASSESSEE ALSO P URCHASED SOME AGRICULTURAL LAND, AFTER THE DATE OF AFORESAID CONVERSION. IT WAS IN THIS BACKDROP THAT THE ASSESSEE ITA NO. 1479/AHD/2012 MATRABHAI REVABHAI BHARWAD VS. ITO A.Y. 2009-10 PAGE 2 OF 4 CLAIMED DEDUCTION UNDER SECTION 54B, IN THE COMPUTA TION OF CAPITAL GAIN, IN RESPECT OF INVESTMENT IN PURCHASE OF AGRICULTURAL LAND. THE C LAIM WAS DECLINED BY THE ASSESSING OFFICER ON THE GROUND THAT, THE DEDUCTION UNDER SECTION 54B IS ALLOWABLE FOR PR OPERTY PURCHASED FOR AGRICULTURAL PURPOSES AND NOT FOR BUS INESS AND AS ASSESSEE HAS PURCHASED THE AGRICULTURAL LAND AS STOCK IN TRADE O F BUSINESS, DEDUCTION U/S 54B ON STOCK IN TRADE PROPERTY IS NOT ADMISSIBLE. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) BUT WITHOUT ANY SUCCESS. LEARNED CIT(A) CONFIRMED THE STAND OF THE ASSESSING OFFICER AND OBSERVED AS FOLLOWS:- I HAVE CAREFULLY PERUSED THE ASSESSMENT ORDER AND THE SUBMISSIONS GIVEN BY THE APPELLANT. THE APPELLANT IS DERIVING INCOME FROM TR ADING OF PLOTS OF LAND. DURING THE YEAR, THE APPELLANT HAS CONVERTED HIS INVESTMEN T IN LAND TO STOCK IN TRADE ON WHICH THE CAPITAL GAIN HAS ARISEN. THE APPELLANT AG REED FOR COMPUTATION OF CAPITAL GAIN BUT HE CLAIMED THE DEDUCTION U/S. 54B STATING THAT HE HAS PURCHASED AGRICULTURE LAND OUT OF THE CAPITAL GAIN WHICH IS A RISING FROM CONVERSION OF LAND IN STOCK IN TRADE. THE A.O. DISALLOWED THE CLAIM AND H ELD THAT THE AGRICULTURE LAND PURCHASED WAS FOR THE PURPOSE OF BUSINESS. THE APPE LLANT HAS SUBMITTED THAT THE LAND SOLD WAS USED FOR AGRICULTURE PURPOSE AND AGRI CULTURE CROP WAS TAKEN FROM THE LAND FOR MORE THAN TWO YEARS AS REQUIRED IN THE PROVISIONS OF SECTION 54B. IT HAS FURTHER BEEN SUBMITTED THAT OUT OF THE SALE PRO CEEDS, AGRICULTURE LAND HAS BEEN PURCHASED. AFTER FACTUAL EXAMINATION OF THE IS SUE, THE CLAIM OF THE APPELLANT IS NOT ACCEPTABLE. THE APPELLANT HAS INITIALLY HELD THE LAND AS INVESTMENT AND ON CONVERSION OF THE SAME AS STOCK IN TRADE, THE LIABI LITY OF CAPITAL GAIN HAS ARISEN WHICH HAS CORRECTLY BEEN TAXED BY THE A.O. HOWEVER, THE CLAIM OF THE APPELLANT THAT HE HAS PURCHASED AGRICULTURE LAND AGAINST THAT SALE IS NOT ACCEPTABLE AS THE LAND THAT HAS BEEN CLAIMED TO HAVE BEEN PURCHASED B Y THE APPELLANT IS FOR THE PURPOSE OF BUSINESS. ONCE THE APPELLANT HAS CONVERT ED HIS INVESTMENT IN THE STOCK IN TRADE, THE APPLICABILITY OF PROVISIONS OF CAPITAL GAIN WILL CEASE. THE LAND THAT HAS BEEN PURCHASED BY THE APPELLANT FOR BUSINE SS IS NOT A CAPITAL ASSET AND ACCORDINGLY THE DEDUCTION U/S. 54B CANNOT BE ALLOWE D. HAD THE LAND THAT HAS BEEN PURCHASED BY THE APPELLANT AS PERSONAL INVESTM ENT, THE CLAIM WOULD HAVE BEEN ALLOWABLE. HOWEVER, THE FACTS DO NOT SUPPORT T HE CLAIM OF THE APPELLANT. THE A.O. HAS RIGHTLY DISALLOWED THE CLAIM OF THE APPELL ANT U/S. 54B OF THE ACT. THE ACTION OF THE A.O. IS ACCORDINGLY UPHELD AND THE GR OUNDS OF APPEAL ARE ACCORDINGLY DISMISSED. 4. THE ASSESSEE IS NOT SATISFIED AND IS IN FURTHER APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE AP PLICABLE LEGAL POSITION. 6. WE FIND THAT SECTION 54B OF THE INCOME-TAX ACT P ROVIDES AS FOLLOWS:- 54B. (1) SUBJECT TO THE PROVISIONS OF SUB-SECTION (2), WHERE THE CAPITAL GAIN ARISES FROM THE TRANSFER OF A CAPITAL ASSET BEING L AND WHICH, IN THE TWO YEARS IMMEDIATELY PRECEDING THE DATE ON WHICH THE TRANSFE R 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 T HE ORIGINAL ASSET), AND THE ITA NO. 1479/AHD/2012 MATRABHAI REVABHAI BHARWAD VS. ITO A.Y. 2009-10 PAGE 3 OF 4 ASSESSEE HAS, WITHIN A PERIOD OF TWO YEARS AFTER TH AT 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 PREVIO US YEAR IN WHICH THE TRANSFER TOOK PLACE, IT SHALL BE DEALT WITH IN ACCORDANCE WI TH THE FOLLOWING PROVISIONS OF THIS SECTION, THAT 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 T HREE 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 UN DER SECTION 45 ; AND FOR THE PURPOSE OF COMPUTING IN RESPECT OF THE NEW ASSE T 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 UTI LISED BY THE ASSESSEE FOR THE PURCHASE OF THE NEW ASSET BEFORE THE DATE OF FURNIS HING 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 D UE 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 WHI CH 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 B Y THE ASSESSEE FOR THE PURCHASE OF THE NEW ASSET TOGETHER WITH THE AMOUNT SO DEPOSI TED SHALL BE DEEMED TO BE THE COST OF THE NEW ASSET : PROVIDED THAT IF THE AMOUNT DEPOSITED UNDER THIS SU B-SECTION IS NOT UTILISED WHOLLY OR PARTLY FOR THE PURCHASE OF THE NEW ASSET WITHIN THE PERIOD SPECIFIED IN SUB- SECTION (1), THEN, (I) THE AMOUNT NOT SO UTILISED SHALL BE CHARGED U NDER 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 SU CH AMOUNT IN ACCORDANCE WITH THE SCHEME AFORESAID. 7. CLEARLY, THE DEDUCTION UNDER SECTION 54B COMES I NTO PLAY WHEN, INTER ALIA, WITHIN TWO YEARS FROM THE DATE OF TRANSFER OF AGRICULTURAL LAND, AN ASSESSEE PURCHASES ANY OTHER LAND BEING USED FOR AGRICULTURAL PURPOSES . 8. AS EVIDENT FROM THE ORDERS OF THE AUTHORITIES BE LOW, SECTION 54B BENEFIT HAS BEEN DECLINED TO THE ASSESSEE ON THE GROUND THAT THE LAN D PURCHASED WAS FOR THE PURPOSES OF BUSINESS AND FOR BEING HELD AS STOCK IN TRADE OF BU SINESS, WHICH IS A USE OTHER THAN AGRICULTURAL PURPOSES. ITA NO. 1479/AHD/2012 MATRABHAI REVABHAI BHARWAD VS. ITO A.Y. 2009-10 PAGE 4 OF 4 9. WE ARE, HOWEVER, NOT PERSUADED BY THE LINE OF RE ASONING ADOPTED BY THE AUTHORITIES BELOW. THE TRUE TEST FOR QUALIFYING PU RCHASE OF LAND, BEING COVERED BY SECTION 54B, IS WHAT OPERATIONS ARE CARRIED OUT ON THE LAND. IF THE LAND IS INDEED USED FOR AGRICULTURAL PURPOSES, EVEN IF LAND IS HELD AS STOC K IN TRADE OR IN THE COURSE OF BUSINESS, THAT SATISFIES THE ELIGIBILITY REQUIREMENT UNDER SE CTION 54B. IN OTHER WORDS, LAND BEING USED FOR AGRICULTURAL PURPOSES CANNOT BE DECLINED 5 4B BENEFIT MERELY BECAUSE THE LAND IS HELD AS STOCK IN TRADE OR AS BUSINESS ASSET. TH ERE IS NO CONFLICT IN THE LAND BEING USED FOR AGRICULTURAL PURPOSES AND THE LAND BEING H ELD IN THE COURSE OF BUSINESS AS STOCK IN TRADE. LEARNED DEPARTMENTAL REPRESENTATIV E, HOWEVER, POINTS OUT THAT THERE IS NO EVIDENCE ABOUT THE FACT THAT THE LAND WAS BEING USED FOR AGRICULTURAL PURPOSES. LEARNED COUNSEL FAIRLY ACCEPTS THAT THIS ASPECT OF THE MATTER HAS NOT BEEN EXAMINED BY THE AUTHORITIES BELOW, AND PRAYS FOR THE MATTER BEI NG RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR THIS LIMITED PURPOSE. 10. IN VIEW OF THE ABOVE DISCUSSIONS, AS ALSO ENTIR ETY OF THE CASE, WE REMIT THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJU DICATION, IN THE LIGHT OF OUR ABOVE OBSERVATIONS, AND FOR THE LIMITED PURPOSES OF EXAMI NING THE NATURE OF LAND IN WHICH INVESTMENT, IN RESPECT OF WHICH 54B CLAIM IS MADE, AND GIVING RELIEF ACCORDINGLY, IF ADMISSIBLE. 11. IN THE RESULT, APPEAL IS ALLOWED FOR STATISTICA L PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 8 TH DAY OF DECEMBER, 2017. SD/- SD/- MAHAVIR PRASAD PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) AHMEDABAD, THE 8 TH DAY OF DECEMBER, 2017 **BT* COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER TRUE COPY ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD 1. DATE OF TAKING DICTATION: .. .4 PAGE MANUSCRIPTS OF HONBLE AM ARE ATTACHED ...08.12.2017.. 2. DATE OF TYPING & DRAFT ORDER PLACED BEFORE THE DI CTATING MEMBER: ... 08.12.2017.................... ..... 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S.: ... 08.12.2017..... 4. DT. ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT: ... . 08.12.20 17. 5. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: . .... 08.12.2017................. 6. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: ..... 7. THE DT. ON WHICH THE FILE GOES TO THE ASTT. REGISTR AR FOR SIGNATURE ON THE ORDER: .................. ....... 8. DATE OF DESPATCH OF THE ORDER: ................. ........