The ITO, Ward-1(3)(7), Surat V. Smt. Jashuben Rameshbhai Patel, Surat

ITA 2941/AHD/2015

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 2208 (ITAT-SURAT)
• Duration Of Justice: 2 year(s) 10 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 21-10-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SRINIVAS T BIDARI
• Assessee Lawyers: RASESH SHAH
• Keywords: Capital asset; Earning of tax free income; Cost of acquisition; Competent authority
• Section: 54B; 2(14)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT , , BEFORE SHRI C.M.GARG, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER . / ITA NO.2941/AHD/2015/SRT / ASSESSMENT YEAR: 2012-13 THE INCOME TAX OFFICER, WARD-1(3)(7), SURAT 395001. VS. SMT. JASHUBEN RAMESHBHAI PATEL, 169, DEVASHISH SOCIETY, MORA BHAGAL, SURAT. [PAN: BIWPP 8635 H] ( / APPELLANT) ( !' /RESPONDENT) / ASSESSEE BY : SHRI RASESH SHAH CA /REVENUE BY : SHRI SRINIVAS T. BIDARI - CIT-DR /DATE OF HEARING : 05-07-2018 / DATE OF PRONOUNCEMENT : 04-09-2018 / ORDER PER C.M.GARG, JUDICIAL MEMBER: THIS APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-II, SURAT (CIT (A) FOR SHORT) DATED 06.08.2015 FOR THE ASSESSMENT YEAR 2012-13. 2. THE GROUNDS RAISED BY THE REVENUE READ AS FOLLOW S : 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 4,03,73,945/- MADE U/S.54B OF THE ACT. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW WHETHER LD.CIT(A) WAS CORRECT IN HOLDING THAT THE ASSESSEE FULFILLS ALL THE CONDITIONS FOR CLAIM OF DEDUCTION U/S.54B OF THE I. T. ACT THOUGH THE 2 ITA NO.2941/AHD/2015/SRT (A.Y: 2012-13) JASHUBEN RAMESHBHAI PATEL STATUS OF THE LAND IN ISSUE WAS NOT AGRICULTURAL LA ND ON THE DATE OF TRANSFER OF THE CAPITAL ASSET. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD.CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFF ICER. 4. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE L D.CIT(A) MAY BE SET- ASIDE AND THAT OF ASSESSING OFFICER MAY BE RESTORED TO THE ABOVE EXTENT. 3. WE HAVE HEARD THE ARGUMENTS OF BOTH SIDES AND CA REFULLY PERUSED THE RELEVANT MATERIAL PLACED ON THE RECORD OF THE T RIBUNAL. THE LD. DEPARTMENTAL REPRESENTATIVE (DR) SUBMITTED THAT THE ASSESSING OFFICER (AO) RIGHTLY OBSERVED THAT THE LAND WAS DECLARED NO N-AGRICULTURE (NA) 23.11.2011 I.E., AROUND 3 AND HALF MONTHS BEFORE TH E DATE OF TRANSFER. THIS FACTUAL POSITION IS CATEGORICALLY MENTIONED UN DER PAGE 4 OF THE SALE DEED OF THE PROPERTY BEARING NO.SRT/1/STC/3013/2012 REGISTERED ON 06.03.2012. THE LD. DR FURTHER SUBMITTED THAT ONCE THE LAND HAS BEEN DECLARED NON-AGRICULTURE, THE STATUS OF THE LAND IS CHANGED AUTOMATICALLY. THE MAIN SIGNIFICANT ELEMENT WITH RESPECT TO CLAIMI NG DEDUCTION U/S. 54B OF THE INCOME TAX ACT, 1961 (IN SHORT 'THE ACT') IS THE STATUS AND PRACTICAL USE OF LAND FOR AGRICULTURAL PURPOSE IMMEDIATELY PR ECEDING THE DATE OF SALE/TRANSFER. THE LD. DR VEHEMENTLY POINTED OUT T HAT SINCE THE LAND HAS LOST BOTH THE ELEMENT, I.E., STATUS OF LAND AND PRA CTICAL USE FOR AGRICULTURE IMMEDIATELY PRECEDING THE DATE OF TRANSFER, DEDUCTI ON CLAIMED AGAINST THE CAPITAL GAIN ARISES ON SALE OF THIS LAND U/S. 54B O F THE ACT IS NOT ALLOWABLE. THE LD. DR SUBMITTED THAT THE LD. CIT(A) HAS GRANTE D RELIEF TO THE 3 ITA NO.2941/AHD/2015/SRT (A.Y: 2012-13) JASHUBEN RAMESHBHAI PATEL ASSESSEE WITHOUT ANY JUSTIFIED REASON AND BASIS THE REFORE, IMPUGNED ORDER MAY KINDLY BE SET ASIDE BY RESTORING THAT OF THE AO. 4. REPLYING TO THE ABOVE, THE LD. ASSESSEES REPRES ENTATIVE (AR) REITERATING THE WRITTEN SUBMISSIONS DATED 30.07.201 5 SUBMITTED BEFORE THE LD. CIT(A) CONTENDED THAT THE ASSESSEE SOLD AGRICUL TURAL LAND WHICH WAS BEING USED FOR AGRICULTURAL PURPOSES ONLY IMMEDIATE LY PRIOR TO ITS SALE AND BY USING THE SALE PROCEED OF SOLD AGRICULTURAL LAND THE ASSESSEE FURTHER PURCHASED AGRICULTURAL LAND THEREFORE, ASSESSEE IS VERY WELL ENTITLED TO CLAIM DEDUCTION U/S. 54B OF THE ACT ON SALE OF AGRI CULTURAL LAND. THE LD. AR SUBMITTED THAT THE LD. AO HAS TAKEN A VERY HYPER TECHNICAL APPROACH BY CONSIDERING THE IRRELEVANT FACT THAT PRIOR TO 3 MONTHS OF SALE OF LAND THE LAND USE OF HER AGRICULTURAL LAND, WHICH WAS SO LD, HAD BEEN CHANGED THEREFORE, ASSESSEE IS NOT ENTITLED FOR DEDUCTION U /S. 54B OF THE ACT AS THE REVENUE RECORD MAY SHOW SOME PERIOD WHEN THE LAND W AS RECORDED AS LAND OF NON-AGRICULTURAL PURPOSE, BUT FOR CLAIMING DEDUCTION U/S. 54B OF THE ACT, THE ASSESSEE HAS TO SHOW THAT IMMEDIATELY BEFO RE SALE THE LAND WAS BEING USED FOR THE PURPOSE OF AGRICULTURAL. 5. THE LD. AR ALSO SUBMITTED THAT FROM REVENUE RECO RD NUMBER 7/12, IT IS CLEAR THAT THE UP TO FINANCIAL YEAR 2011-12 PERT AINING TO AY 2012-13, THE LAND WAS BEING USED FOR AGRICULTURAL PURPOSES AND T HE ASSESSEE HAS ALSO SHOWN EXEMPT AGRICULTURAL INCOME OF RS. 80,000/- FO R THE SAME FINANCIAL 4 ITA NO.2941/AHD/2015/SRT (A.Y: 2012-13) JASHUBEN RAMESHBHAI PATEL PERIOD 2011-12 PERTAINING TO AY 2012-13, WHICH HAS BEEN ACCEPTED BY THE AO WITHOUT ANY DISPUTE THEREFORE, IN THIS SITUA TION, THE AO CANNOT DENY BENEFIT OF S. 54B OF THE ACT ON BALLED ALLEGAT ION THAT THE STATUS AND PRACTICAL USE OF LAND FOR AGRICULTURAL PURPOSES IMM EDIATELY PRECEDING THE DATE OF TRANSFER WAS CHANGED. SUPPORTING THE FIRST APPELLATE ORDER, THE AR SUBMITTED THAT EVEN IN THE SALE DEED EXECUTED ON 03 .03.2012 IN PARA 3 AT PAGE 3, THE DESCRIPTION OF LAND HAS BEEN GIVEN AS A GRICULTURAL LAND AND REGISTRATION OF SALE DEED HAS BEEN MADE BY THE SUB- REGISTRAR IN THE STATUS OF AGRICULTURAL LAND ONLY THUS, BOTH THE BAS IC REQUIREMENTS I.E., STATUS OF LAND AS AGRICULTURE LAND AND ITS USE IMME DIATELY PRIOR TO ITS SALE FOR AGRICULTURE PURPOSES HAVE BEEN ESTABLISHED BY T HE ASSESSEE THEREFORE, THE LD. FIRST APPELLATE AUTHORITY HAS GR ANTED RELIEF TO THE ASSESSEE BY PASSING A DETAILED AND WELL-REASONED OR DER THEREFORE, THE SAME MAY KINDLY BE UPHELD BY DISMISSING APPEAL OF T HE REVENUE. THE LD. AR HAS ALSO RELIED ON THE PROPOSITION LAID DOWN BY HONBLE HIGH COURT OF PUNJAB & HARYANA IN THE CASE OF SMT. SAVITA RANI REPORTED IN 270 ITR 40 (P&H) AND SUBMITTED THAT THE CLAIM OF THE ASSESSEE U/S. 54B OF THE ACT IS ALLOWABLE AS PER RATIO OF THIS DECISION. 6. ON CAREFUL CONSIDERATION OF ABOVE RIVAL SUBMISSI ONS, FIRST OF ALL, WE MAY POINT OUT THAT THE LD. CIT(A) HAS GRANTED RELIE F TO THE ASSESSEE WITH FOLLOWING AND OBSERVATIONS AND CONCLUSION: 5 ITA NO.2941/AHD/2015/SRT (A.Y: 2012-13) JASHUBEN RAMESHBHAI PATEL 6.1.1 I HAVE CONSIDERED THE ASSESSMENT ORDER AS WE LL AS THE SUBMISSIONS OF THE APPELLANT. THE GROUNDS OF APPEAL GROUND NO. 1 PERTAINS TO DISALLOWING THE CLAIM OF THE ASSESSEE U /S 54B OF THE IT ACT ON ACCOUNT OF PURCHASE OF AGRICULTURAL LAND AGA INST THE CAPITAL GAIN ARISING ON SALE OF LAND USED FOR AGRICULTURAL PURPOSE. THE AO FOUND THAT DURING THE YEAR THE APPELLANT HAS SHOWN AN IMMOVABLE PROPERTY ON 06.03.2012 FOR RS. 5,75,05,000/- (APPEL LANT'S SHARE) AND HAD CLAIMED DEDUCTION U/S 54B BY WAY OF INVESTM ENT MADE IN AGRICULTURE LANDS. THE AO FOUND THAT THE APPELLANT HAD SOLD A NON AGRICULTURE LAND AND HAD CLAIMED DEDUCTION U/S 54B OF THE ACT BY WAY OF INVESTMENT IN THE AGRICULTURE LAND AMOUNTING TO RS. 4,40,01,570/-. THE AO HELD THAT THE DEDUCTION U/S 5 4B OF THE ACT CAN BE CLAIMED AGAINST THE SALE OF AGRICULTURE LAND WHICH IS UTILIZED FOR AGRICULTURE PURPOSES IN THE IMMEDIATELY PRECEDI NG 2 YEARS FROM THE DATE OF TRANSFER OF THE SAID PROPERTY. IN VIEW OF THE PROVISIONS OF SECTION 54B OF THE ACT, THE AO WAS OF THE VIEW, THA T THE DEDUCTION AGAINST CAPITAL GAIN ARISING ON THE SALE OF NON AGR ICULTURE LAND IS NOT ALLOWABLE U/S 54B OF THE ACT. THE AO HELD THAT THE SECTION 54B CLEARLY PROVIDES DEDUCTION AGAINST THE CAPITAL GAIN ARISING ON THE SALE OF AGRICULTURE LAND WHICH IS USED FOR AGRICULT URE PURPOSE IN THE TWO YEARS IMMEDIATELY PRECEDING THE DATE OF TRANSFE R. THE AO FOUND THAT IN THE INSTANT CASE THE LAND WAS DECLARE D NON AGRICULTURE (NA) BY THE COMPETENT AUTHORITY ON 23.11.2011 I.E. AROUND 3 % MONTHS BEFORE THE DATE OF TRANSFER. THIS FACT IS ME NTIONED ON PAGE 4 OF THE SALE DEED REGISTERED ON 06.03.2012. ONCE T HE LAND HAD BEEN DECLARED NON AGRICULTURE, THE STATUS OF THE LA ND CHANGED AUTOMATICALLY. SINCE THE LAND HAD LOST BOTH THE ASP ECTS I.E. STATUS OF LAND AND THE PRACTICAL USE OF AGRICULTURE IMMEDIATE LY PRECEDING THE DATE OF TRANSFER THE DEDUCTION CLAIMED BY THE APPEL LANT U/S 54B OF RS. 4,03,73,945/- WAS DISALLOWED BY THE AO. THE APP ELLANT SUBMITTED THAT IT HAD RIGHTLY CLAIMED EXEMPTION U/S 54B OF THE ACT AS HE HAD COMPLIED WITH THE CONDITIONS LAID DOWN U/ S 54B(1) OF THE ACT. IT WAS SUBMITTED AS PER SECTION 54B OF THE ACT THE WORDINGS 'CAPITAL ASSETS BEING LAND' CLEARLY SUGGESTED THAT IT WAS NOT NECESSARY THAT SAME SHOULD BE IN THE STATUS OF AGRI CULTURE LAND AS THE TIME OF TRANSFER OF LAND. THERE IS A DIFFERENCE BETWEEN THE LAND USED FOR AGRICULTURAL PURPOSE AND THE 'AGRICULTURE LAND' AS DEFINED IN SECTION 2(14) OF THE ACT. IT WAS SUBMITTED THAT THE EXEMPTION U/S 54B IS AVAILABLE TO THE SELLER OF A CAPITAL ASSET B EING LAND AND IT DOES NOT RESTRICT THE BENEFIT TO AGRICULTURE LAND O NLY. THE APPELLANT WAS CARRYING ON AGRICULTURE ACTIVITIES ON THE SAID LAND FOR SO MANY YEARS AS PER THE COPIES OF FORM NO. 7/12 OR 8A AND JUST BEFORE THE TRANSFER OF LAND IT WAS CONVERTED TO INTO NON AGRIC ULTURE LAND ON 23.11.2011. THE APPELLANT WAS HAVING ONLY SOURCE OF INCOME FROM AGRICULTURE AND THEREFORE NO RETURNS HAVE BEEN FILE D IN EARLIER YEARS. THE APPELLANT HAD FULFILLED ALL THE CONDITIONS TO C LAIM EXEMPTION U/S 54B OF THE ACT. THE APPELLANT RELIED ON THE JUDGMEN T IN THE CASE OF SMT. SAVITA RANI 270ITR 40 (P&H) . 6 ITA NO.2941/AHD/2015/SRT (A.Y: 2012-13) JASHUBEN RAMESHBHAI PATEL 6.1.2 ON THE PERUSAL OF THE DETAILS, IT IS OBSERVED THAT THE TITLE OF SECTION 54B OF THE ACT READS AS 'CAPITAL GAIN ON TR ANSFER OF LAND USED FOR AGRICULTURE PURPOSE NOT TO BE CHARGED IN C ERTAIN CASES'. THE TITLE SIGNIFIES THE WORDS TRANSFER OF LAND USED FOR AGRICULTURE PURPOSE' AND IT IS NOT MENTIONED AS 'AGRICULTURE LA ND'. THE OBSERVATION OF THE AO THAT ONCE THE LAND HAS BEEN D ECLARED NON AGRICULTURE THE STATUS OF THE LAND IS CHANGED AUTOM ATICALLY IS ERRONEOUS. THE STATUS OF THE LAND IS CHANGED IN REV ENUE RECORDS ONLY FOR THE PURPOSE OF GIVING AND EASY PASSAGE FOR TRANSFERRING THE SAME TO THE NON AGRICULTURISTS. SUCH PERMISSION DOE S NOT DEBAR AND PROHIBITS AND AGRICULTURIST TO CONTINUE TO USE IT FOR AGRICULTURE P URPOSES. THE CHARACTER OF THE LAND DOES NOT CHANGE WITH THE CHAIN OF STATUS OF REVENUE RECORDS. THE COPY OF THE FORM 7/12 OR 8A FILED BY THE APPELLANT SHOWS THAT THE AGRICULTURE ACTIVIT IES HAVE BEEN CARRIED OUT BY THE APPELLANT AND HIS FAMILY ON THE SAID LAND. THE LAND HAS BEEN USED FOR PURPOSE OF CULTIVATION OF VE GETABLES ETC. WHICH IS REFLECTED IN THE REVENUE RECORDS ALSO. THE PERUSAL OF THE SECTION 54B OF THE ACT ALSO REFLECTS THAT THE PROVI SION STATES THAT THE TRANSFER OF A CAPITAL ASSETS BEING LAND WHICH IN TH E TWO YEARS IMMEDIATELY PRECEDING THE DATE ON WHICH TRANSFER LO OK PLACE,, WAS BEING USED-FOR AGRICULTURE PURPOSE A ND THEREFORE T H E REFERENCE IS TO THE YEARS AND NOT DURING THE WHOLE PERIOD OF TWO YE ARS. THE SAID LAND WAS CONVERTED TO NA LAND ON 23.11.2011 AND THE SAME LAND WAS SOLD IMMEDIATELY THEREAFTER ON 06.03.2012 I.E. WITHIN THE PERIOD OF LESS THAN 4 MONTHS. THESE DATES CLEARLY SHOW THA T THE APPELLANT HAD USED THE LAND FOR AGRICULTURE PURPOSE FOR ALMOS T THE WHOLE OF THE PERIOD OF IMMEDIATELY PRECEDING 2 YEARS. THE AO HAS NOT BROUGHT ANY FACT ON RECORD TO THE CONTRARY. 6.1.3 GENERALLY, ON AGRICULTURAL LAND ANY RESIDENTIAL OR COMMERCIAL DEVELOPMENT IS NOT PERMISSIBLE. BUT IN VIEW OF URBA NIZATION AND COMMERCIAL/INDUSTRIAL DEVELOPMENT OF CERTAIN AREAS, THE GOVERNMENT DECLARES CERTAIN ZONES AS 'PERMISSIBLE F OR CONVERSION INTO NON-AGRICULTURE LAND'. THESE ARE SUCH AREAS WH ERE DUE TO URBANIZATION AND OTHER DEVELOPMENTS, AGRICULTURAL A CTIVITIES BECOME DIFFICULT TO BE FUNCTIONAL AND THEREFORE, THE GOVER NMENT GRANTS PERMISSION TO CONVERT THE SAME INTO NON AGRICULTURA L LAND SO THAT IT CAN BE SOLD TO A PERSON WHO IS A NON AGRICULTURIST. THE INTENTION OF THE LEGISLATURE IS VERY CLEAR TO GRANT BENEFIT TO T HE AGRICULTURISTS HAVING URBAN AGRICULTURE LAND TO CONTINUE THEIR AGR ICULTURAL ACTIVITIES BY PURCHASING OTHER AGRICULTURAL LAND IN DIFFERENT AREA. IN THIS CASE THE APPELLANT HAD TRANSFERRED A CAPITAL ASSET BEING LAND; THE SAID LAND WAS BEING USED BY THE APPELLANT FOR AGRICULTUR E PURPOSE IN THE TWO YEARS IMMEDIATELY PRECEDING THE DATE OF TRANSFE R; AND THE NET SALE CONSIDERATION RECEIVED ON TRANSFER OF LAND WAS INVESTED FOR PURCHASE OF AGRICULTURE LAND. FROM A PLAIN READING OF SECTION 54B, IT IS CLEAR THAT TO CLAIM THE BENEFIT OF THIS PROVISIO N, THE FOLLOWING CONDITIONS ARE REQUIRED TO BE SATISFIED: 7 ITA NO.2941/AHD/2015/SRT (A.Y: 2012-13) JASHUBEN RAMESHBHAI PATEL (I ) THE CAPITAL GAINS ARISE FROM THE TRANSFER OF L AND, WHICH, IN THE TWO YEARS IMMEDIATELY PRECEDING THE DATE ON WHICH T HE TRANSFER TOOK PLACE, WAS BEING USED BY THE ASSESSEE OR HIS P ARENT FOR AGRICULTURAL PURPOSES; AND (II ) THE ASSESSEE HAS PURCHASED THE LAND WITHIN A PERIOD OF TWO YEARS AFTER THE SALE OF THE ABOVE LAND FOR BEING US ED FOR AGRICULTURAL PURPOSES. THE DISPUTE IS REGARDING CONDITION NO. (I). THE EXE MPTION IS AVAILABLE TO THE SELLER OF 'A CAPITAL ASSET BEING L AND'. IT DOES NOT RESTRICT THE BENEFIT TO THE AGRICULTURAL LAND ONLY. HOWEVER, THE LAND AGAINST WHICH THE BENEFIT IS SOUGHT MUST HAVE BEEN USED BY THE ASSESSEE OR HIS PARENT FOR AGRICULTURAL PURPOSES IN THE TWO YEARS IMMEDIATELY PRECEDING THE DATE OF SALE. IN THE JUDG MENT IN THE CASE OF SMT. SAVITA RANI 270 ITR 40 (P&H), THE COURT HEL D THAT THE EXEMPTION IS AVAILABLE TO THE SELLER OF A CAPITAL A SSET BEING LAND AND IT DOES NOT RESTRICT THE BENEFIT TO THE AGRICULTURE LAND ONLY. THE ONLY CONDITION NEEDS TO BE FULFILLED IS THAT THE LAND SH OULD HAVE BEEN USED FOR AGRICULTURE PURPOSE IN THE 2 YEARS IMMEDIA TELY PRECEDING THE DATE OF SALE. IN THE CASE OF RADHESHYAM P TRIVE DI (27 TTJ 92) THE HON'BLE ITAT AHMEDABAD HELD THAT' THE NEXT QUESTION IS REGARDING THE CLAIM UNDER S. 54B. HERE IT IS NECESS ARY THAT THE LAND SHOULD HAVE BEEN 'USED FOR AGRICULTURAL PURPOSE'. I N THIS CONNECTION THE DISTINCTION BETWEEN THIS EXPRESSION AND THE EXP RESSION 'AGRICULTURAL LAND' IN S. 2(14) DRAWN BY THE ASSESS EE'S COUNSEL IS QUITE VALID. THE CIT(A) HAS FAILED TO NOTICE THIS D ISTINCTION.....' 6.1.4 THE WORD 'HELD' IS SIGNIFICANT AND COMPREHENS IVE AND COMPRISES PHYSICAL DOMAIN AND CONTROL OF THE PROPER TY WHICH IS OBTAINED BY WAY OF POSSESSION. EVEN SECTION 54B IS CONCERNED WITH TRANSFER OF CAPITAL ASSET BEING LAND WHICH WAS BEIN G USED FOR AGRICULTURAL PURPOSES IN THE TWO YEARS PRECEDING TH E DATE OF TRANSFER. SECTION 54B CONTEMPLATES USER OF AGRICULT URAL LAND IN THE TWO YEARS IMMEDIATELY PRECEDING THE DATE OF TRANSFE R AND, THEREFORE, THE REFERENCE IS TO THE YEARS AND NOT DU RING THE WHOLE PERIOD OF TWO YEARS. IN OTHER WORDS, IF THE ASSET H AS BEEN USED FOR THE WHOLE OF THE IMMEDIATELY PRECEDING YEAR AND SOM E DAYS OF THE YEAR EARLIER TO THE PRECEDING YEAR, STILL THE REQUI REMENT OF SECTION 54B WOULD BE SATISFIED. THE HON'BLE ITAT, PUNE BENC H IN THE CASE OF RAMESH NARHARI JAKHADI VS, ITO (41 ITD 0368) HEL D THAT' ANOTHER ASPECT THAT IS REQUIRED TO BE CONSIDERED IS THAT THE SECTION CONTEMPLATES USER OF AGRICULTURAL LAND IN THE TWO Y EARS IMMEDIATELY PRECEDING THE DATE OF TRANSFER AND THEREFORE, THE R EFERENCE IS TO THE YEARS AND NOT DURING THE WHOLE PERIOD OF TWO YEARS AS VIEWED BY THE AUTHORITIES. IN OTHER WORDS, IF THE ASSET HAS B EEN USED FOR THE WHOLE OF THE IMMEDIATELY PRECEDING YEAR AND SOME DA YS OF THE YEAR EARLIER TO THE PRECEDING YEAR, STILL THE REQUIREMEN T OF S. 54B WOULD BE SATISFIED'... 8 ITA NO.2941/AHD/2015/SRT (A.Y: 2012-13) JASHUBEN RAMESHBHAI PATEL 6.1.5 IN VIEW OF THE ABOVE FACTS AND DISCUSSIONS, I T IS CLEAR AND EVIDENT THAT THE APPELLANT HAD CLAIM DEDUCTION U/S 54B OF THE ACT AFTER FULFILLING THE CONDITIONS AS LAID DOWN:- THE APPELLANT HAD TRANSFERRED A CAPITAL ASSET BEING LAND; THE SAID LA ND WAS BEING USED BY THE APPELLANT FOR AGRICULTURE PURPOSE IN THE TWO YEARS IMMEDIATELY PRECEDING THE DATE OF TRANSFER AND; THE NET SALE CONSIDERATION RECEIVED ON TRANSFER OF LAND WAS INVE STED FOR PURCHASE OF AGRICULTURE LAND. HENCE THE ADDITION MA DE BY THE AO BY DISALLOWANCE OF THE CLAIM OF RS. 4,03,73,945/- U /S 54B OF THE ACT IS DELETED AND THE GROUND OF APPEAL IS ALLOWED. 7. FOR THE SAKE OF COMPLETENESS IN OUR FINDINGS, WE FIND IT PROFITABLE TO REPRODUCE RELEVANT PROVISION OF S. 54B(1) OF THE AC T, WHICH READS AS FOLLOWS: CAPITAL GAIN ON TRANSFER OF LAND USED FOR AGRICULT URAL PURPOSES NOT TO BE CHARGED IN CERTAIN CASES. 54B. (1) SUBJECT TO THE PROVISIONS OF SUB-SECTION (2), WHERE THE CAPITAL GAIN ARISES FROM THE TRANSFER OF A CAPITAL ASSET BE ING LAND WHICH, IN THE TWO YEARS IMMEDIATELY PRECEDING THE DATE ON WHICH T HE TRANSFER TOOK PLACE, WAS BEING USED BY THE ASSESSEE OR A PARENT O F HIS FOR AGRICULTURAL PURPOSES (HEREINAFTER REFERRED TO AS THE ORIGINAL A SSET), AND THE ASSESSEE HAS, WITHIN A PERIOD OF TWO YEARS AFTER TH AT DATE, PURCHASED ANY OTHER LAND FOR BEING USED FOR AGRICULTURAL PURP OSES, THEN, INSTEAD OF THE CAPITAL GAIN BEING CHARGED TO INCOME TAX AS INC OME 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 IS TO SAY, (I) IF THE AMOUNT OF THE CAPITAL GAIN IS GREATER TH AN THE COST OF THE LAND SO PURCHASED (HEREINAFTER REFERRED TO AS THE N EW ASSET), THE DIFFERENCE BETWEEN THE AMOUNT OF THE CAPITAL GAIN A ND THE COST OF THE NEW ASSET SHALL BE CHARGED UNDER SECTION 45 AS THE INCOME OF THE PREVIOUS YEAR; AND FOR THE PURPOSE OF COMPUT ING IN RESPECT OF THE NEW ASSET ANY CAPITAL GAIN ARISING FROM ITS TRANSFER WITHIN A PERIOD OF THREE YEARS OF ITS PURCHASE, THE COST SHA LL BE NIL; OR (II) IF THE AMOUNT OF THE CAPITAL GAIN IS EQUAL TO OR LE SS THAN THE COST OF THE NEW ASSET, THE CAPITAL GAIN SHALL NOT BE CHA RGED UNDER SECTION 45; AND FOR THE PURPOSE OF COMPUTING IN RES PECT OF THE NEW ASSET ANY CAPITAL GAIN ARISING FROM ITS TRANSFE R WITHIN A PERIOD OF THREE YEARS OF ITS PURCHASE, THE COST SHALL BE R EDUCED, BY THE AMOUNT OF THE CAPITAL GAIN. 8. IN VIEW OF ABOVE, THE TITLE SIGNIFIES THAT THE D EDUCTION SHALL BE ALLOWABLE TO THE SELLER ON TRANSFER OF LAND USED F OR AGRICULTURAL PURPOSE 9 ITA NO.2941/AHD/2015/SRT (A.Y: 2012-13) JASHUBEN RAMESHBHAI PATEL AND THERE IS NO MENTIONING OF AGRICULTURE LAND. THE LEGISLATIVE INTENTION IS CLEAR THAT IF THE ASSESSEE SALES LAND WHICH WAS BEING USED FOR THE AGRICULTURE PURPOSES IN THE TWO YEARS IMMEDIATELY P RECEDING THE DATE ON WHICH THE TRANSFER TOOK PLACE THEN, ON PURCHASE OF OTHER LAND WHICH WAS BEING USED FOR AGRICULTURE PURPOSES THEN, INSTEAD O F CAPITAL GAIN BEING CHARGED TO THE INCOME TAX AS INCOME OF THE ASSESSEE FOR THE PREVIOUS YEAR IN WHICH THE TRANSFER TOOK PLACE, THEN, IF THE AMOUNT OF CAPITAL GAIN IS EQUAL TO OR LESS THAN THE COST OF THE NEW ASSET, TH E CAPITAL GAIN SHALL NOT BE CHARGED U/S. 45 OF THE ACT. 9. IN THE PRESENT CASE, THE AO HAS NOT DISPUTED THA T THE ASSESSEE RECEIVED SALE CONSIDERATION OF ORIGINAL ASSET OF RS . 5,75,05,000/- AND AFTER DEDUCTING THE INDEXED COST OF ACQUISITION OF RS. 1, 71,31,055/- THE ASSESSEE ON LONG TERM CAPITAL GAIN OF RS. 4,03,73,9 45/- AND THE ASSESSEE ALSO PURCHASED NEW AGRICULTURAL LAND BY PAYING SALE CONSIDERATION OF RS. 4,40,01,570/-. ON THESE FACTS, THE ASSESSEE CLAIME D ENTIRE AMOUNT OF CAPITAL GAIN AS EXEMPT U/S. 54B OF THE ACT, WHICH W AS DENIED BY THE AO BY OBSERVING THAT THE LAND HAS LOST BOTH THE REQUIR ED ELEMENTS FOR CLAIMING DEDUCTION U/S. 54B OF THE ACT I.E., STATUS OF LAND AND PRACTICAL USE FOR AGRICULTURAL PURPOSES IMMEDIATELY PRECEDING THE DAT E OF TRANSFER. THE MAIN REASON FOR HOLDING ABOVE CONCLUSION BY THE AO WAS THAT THE LAND WAS DECLARED NON AGRICULTURE BY THE COMPETENT AUTHO RITY ON 23.11.2011 10 ITA NO.2941/AHD/2015/SRT (A.Y: 2012-13) JASHUBEN RAMESHBHAI PATEL I.E., PRIOR TO 3 MONTHS BEFORE THE DATE OF TRANSF ER. IT IS ALSO PERTINENT TO MENTION THAT THE ASSESSEE HAS SHOWN AGRICULTURE INC OME OF RS. 80,000/- IN THE RETURN OF INCOME AS EXEMPT WHICH HAS BEEN AC CEPTED BY THE AO WITHOUT ANY DISPUTE. 10. THE MOOT QUESTION FOR OUR ADJUDICATION IS THAT WHETHER THE LD. CIT(A) WAS RIGHT IN HOLDING THAT THE ASSESSEE IS ENTITLED FOR DEDUCTION U/S. 54B OF THE ACT AS THE LAND WAS BEING USED FOR AGRICULTURE PURPOSE IMMEDIATELY BEFORE TWO YEARS FROM THE DATE OF TRANSFER OF LAND. FROM THE RELEVANT PART OF FIRST APPELLATE ORDER WHICH HAS BEEN REPRODUCED IN THE EARLIER PART OF THIS ORDER, WE OBSERVE THAT IT WAS NOTED BY THE LD. CIT(A) THAT THE APPELLANT WAS CARRYING ON AGRICULTURE ACTIVITIES ON THE SAID LAND FOR SO MANY YEARS AS PER COPIES OF THE FORM 7/12 AND 8A AN D IMMEDIATELY BEFORE THE TRANSFER OF LAND IT WAS CONVERTED INTO N ON-AGRICULTURE LAND ON 23.11.2011. 11. ON CAREFUL CONSIDERATION OF ENTIRE FACTS AND CI RCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED VIEW THAT THE STATUS OF LAND WAS CHANGED PRIOR TO 3 MONTHS ON 23.11.2011 FROM AGRICULTURE TO NON-AGRICULTURE IN THE REVENUE RECORDS ONLY PERHAPS FOR THE PURPOSE OF TRANSFERRING THE LAND TO THE NON-AGRICULTURIST PURCHASE AND SUCH PERMISSI ON DOES NOT FORBIDS OR PROHIBITS THE ASSESSEE TO USE THE LAND FOR AGRICULT URE PURPOSES. IF THE LAND WAS BEING USED FOR AGRICULTURE PURPOSES IMMEDIATELY PRIOR TO THE ITS 11 ITA NO.2941/AHD/2015/SRT (A.Y: 2012-13) JASHUBEN RAMESHBHAI PATEL TRANSFER TO THE PURCHASER AND AGRICULTURE ACTIVITIE S HAVE BEEN CARRIED OUT BY THE APPELLANT ON THE SAID LAND THEN, MERELY BECA USE IN THE REVENUE RECORD THE STATUS OF LAND WAS CHANGED FOR NON-AGRIC ULTURE PURPOSES FOR SOME MONTHS THEN, ALSO THE ASSESSEE CANNOT BE DENIE D DEDUCTION U/S. 54B OF THE ACT ON THIS TECHNICAL GROUND. WE CANNOT FORGET OR IGNORE ANOTHER IMPORTANT FACT THAT THE ASSESSEE HAS SHOWN EXEMPT AGRICULTURE INCOME DURING THE PERIOD WHICH HAS BEEN ACCEPTED BY THE AO AND IT IS NOT A CASE OF THE AO THAT THE ASSESSEE DECLARED AGRICUL TURE INCOME FROM SOME OTHER LAND WHICH WAS OWNED BY HER DURING THE R ELEVANT FINANCIAL PERIOD. LOOKING INTO THE COPIES OF THE REVENUE REC ORD PLACED BEFORE THE AUTHORITIES BELOW AS WELL AS BEFORE THE BENCH, WE A RE SATISFIED THAT THE ASSESSEE WAS CARRYING ON AGRICULTURE ACTIVITY ON TH E LAND SOLD SINCE SO MANY YEARS AND EARNING AGRICULTURE INCOME THEREFROM WHICH WAS EXEMPT AND THESE REVENUE RECORD AND EXEMPT INCOME SUPPORTS THE FACT THAT THE ASSESSEE WAS CARRYING OUT AGRICULTURE ACTIVITIES ON THE LAND SOLD IMMEDIATELY PRIOR TO ITS SALE TO A NON-AGRICULTURIS T. OUT CONCLUSION ALSO GETS SUPPORT FROM THE DECISION OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF SAVITA RANI (SUPRA). THEIR LORDSHIP CA TEGORICALLY HELD THAT THE ONLY CONDITION NEEDS TO BE FULFILLED IS THAT THE LA ND SOLD SHOULD HAVE BEEN USED FOR AGRICULTURE PURPOSES DURING THE IMMEDIATEL Y PRECEDING TWO YEARS FROM THE DATE OF SALE. IN OUR HUMBLE UNDERSTANDING , ANOTHER ASPECT THAT IS REQUIRED TO BE CONSIDERED IS THAT THE SECTION CO NTEMPLATES USER OF 12 ITA NO.2941/AHD/2015/SRT (A.Y: 2012-13) JASHUBEN RAMESHBHAI PATEL AGRICULTURAL LAND IN THE TWO YEARS IMMEDIATELY PREC EDING THE DATE OF TRANSFER AND THEREFORE, THE REFERENCE IS TO THE YEA RS AND NOT DURING THE WHOLE PERIOD OF TWO YEARS AS VIEWED BY THE AUTHORIT IES. IN OTHER WORDS, IF THE ASSET HAS BEEN USED FOR THE WHOLE OF THE IMMEDI ATELY PRECEDING YEAR AND SOME DAYS OF THE YEAR EARLIER TO THE PRECEDING YEAR, STILL THE REQUIREMENT OF S. 54B OF THE ACT WOULD BE SATISFIED . 12. IN VIEW OF FOREGOING DISCUSSION, WE REACH TO A LOGICAL CONCLUSION THAT THE AO DENIED BENEFIT OF S. 54B OF THE ACT BY TAKING A VERY HYPER TECHNICAL APPROACH. THE LD. FIRST APPELLATE AUTHOR ITY AFTER CONSIDERING THE ENTIRE FACTS AND CIRCUMSTANCES OF THE CASE ALONG WI TH EXPLANATION OF THE ASSESSEE RIGHTLY HELD THAT THE APPELLANTS CLAIM FO R DEDUCTION U/S. 54B OF THE ACT IS ALLOWABLE AS THE APPELLANT HAD TRANSFERR ED A CAPITAL ASSET BEING LENT WHICH WAS BEING USED BY THE APPELLANT FOR AGRI CULTURE PURPOSES DURING THE IMMEDIATELY PRECEDING TWO YEARS FROM THE DATE OF TRANSFER. AS WE HAVE ALREADY NOTED ABOVE, UNDISPUTEDLY THE ASSES SEE EARNED LONG TERM CAPITAL GAIN ON SALE OF LAND WHICH WAS USED FO R THE PURPOSE OF PURCHASE OF AGRICULTURE LAND WITHIN THE PRESCRIBED PERIOD THEREFORE, THE ASSESSEE WAS ENTITLED FOR BENEFIT/DEDUCTION U/S 54B OF THE ACT AND CONCLUSION OF LD. CIT(A) IS QUITE CORRECT AND JUSTI FIED. HENCE, WE ARE UNABLE TO SEE ANY VALID REASON TO INTERFERE WITH TH E SAME AND THUS, WE 13 ITA NO.2941/AHD/2015/SRT (A.Y: 2012-13) JASHUBEN RAMESHBHAI PATEL UPHOLD THE SAME. CONSEQUENTLY, GROUNDS OF REVENUE BEING DEVOID OF MERITS ARE DISMISSED. 13. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 0 4 TH SEPTEMBER, 2018. / SURAT; DATED : 04 TH SEPTEMBER, 2018. ! $ / COPY OF THE ORDER IS FORWARDED TO : 1. /THE APPELLANT; 2. /THE RESPONDENT; 3. # ( ) /THE CIT(A)-II, SURAT; 4. PRL. CIT-I, SURAT; 5. , , / DR, ITAT, SURAT; 6. / GUARD FILE. / BY ORDER , // TRUE COPY // ) / ASSISTANT REGISTRAR , / ITAT, SURAT SD/- SD/- ( ) ( O.P.MEENA ) / ACCOUNTANT MEMBER ( ) (C.M.GARG) /JUDICIAL MEMBER