Smt. Poonam Hitesh Bagdai, RAJKOT-GUJARAT V. The Assistant Commr. Income Tax,Cen. Cir-1, RAJKOT-GUJARAT

ITSSA 40/RJT/2013

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0357 (ITAT-RAJKOT)
• Duration Of Justice: 4 year(s) 10 month(s) 30 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 20-11-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2004-2005
• Appeal Filed On: 21-12-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Deduction for capital gain; Capital asset
• Section: 54B; 54F; 2(14); 153A

Judgement Text

SMT.POONAM M.BAGDAI VS. ACIT, CEN. CIRLCE -1, RAJKOT /ITA NO.40/RJT/2013/A.Y.2004- 05 PAGE 1 OF 9 , , IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT . . , . . , BEFORE SHRI C.M.GARG, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER . . ./I.T(SS)A. NO.40/RJT/2013 /ASSESSMENT YEAR : 2004-05 SMT.POONAM HITESH BAGDAI, MARUTI SHOPPING CENTRE, 1 ST FLOOR, ASTRON CINEMA CHOWK, RAJKOT. [PAN: ABZPB 0359 F] VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1, RAJKOT. APPELLANT /RESPONDENT /ASSESSEE BY SHRI VIMAL DESAI A.R. /REVENUE BY SHRI JITENDRA KUMAR D.R. / DATE OF HEARING: 20.11.2018 /PRONOUNCEMENT ON: 11 .12.2018 /O R D E R PER O. P. MEENA, ACCOUTANT MEMBER: 1. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-IV, AHMEDABAD(IN SHORT THE CIT (A)) DATED 23.09.2013 PERTAINING TO ASSESSMENT YEAR 2004-05 WHICH IN TURN HAS ARISEN FROM THE ORDER PASSED BY THE ASSISTANT COMMISSIONER OF INCOME TAX, SMT.POONAM M.BAGDAI VS. ACIT, CEN. CIRLCE -1, RAJKOT /ITA NO.40/RJT/2013/A.Y.2004- 05 PAGE 2 OF 9 CENTRAL CIRCLE-1, RAJKOT(IN SHORT THE AO) DATED 28.12.2011 UNDER SECTION 153A OF INCOME TAX ACT,1961 (IN SHORT THE ACT). 2. GROUNDS RAISED BY THE ASSESSEE READ AS UNDER: 1. THE ORDER PASSED BY THE LEARNED CIT(A) IS BAD IN LAW AND CONTRARY TO THE PROVISION OF LAW & FACTS. 2. THE LEARNED CIT(A) ERRED IN LAW AS WELL AS ON FACTS IN CONFIRMING THE ORDER OF AO FOR WITHDRAWING EXEMPTION U/S 54B OF THE ACT AMOUNTING TO RS.14,81,072/-. 3. THE LEARNED CIT(A) ERRED IN LAW IN INTERPRETING THE LEGISLATURE PROVIDING EXEMPTION U/S 54B. 4. THE LEARNED CIT(A) FAILED TO UNDERSTAND THAT DISPUTE IS NOT IN RESPECT OF ORIGINAL ASSET, BUT IN RESPECT OF NEW ASSET. 5. THE LEARNED CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS IN CONFIRMING THE VIEW OF THE AO THAT EXEMPTION U/S.54B IS ALLOWABLE ONLY IF THE NEW ASSET PURCHASED IS CAPITAL ASSET. 3. GROUND N.1 TO 5 RELATES TO WITHDRAWING THE EXEMPTION U/S.54B OF THE ACT AMOUNTING TO RS.14,81,072/-. 4. BRIEF FACTS ARE THAT THE ASSESSEE HAS SOLD HER AGRICULTURAL LAND (BEING A CAPITAL ASSET) SITUATED AT RAIYA, SURVEY NO.312 ON 01.12.2003 FOR A CONSIDERATION OF RS.20 LAKHS AND ACCORDINGLY LONG TERM CAPITAL GAIN ARISING ON SALE THEREOF WAS CHARGEABLE TO TAX. HOWEVER, THE ASSESSEE HAS CLAIMED EXEMPTION U/S.54B FROM THE LONG TERM CAPITAL GAIN ARISING OF AFORESAID CAPITAL ASSET AS HE PURCHASED A NEW AGRICULTURAL LAND (NOT BEING CAPITAL ASSET) SITUATED AT SURVEY 412 KISARA ON 04.10.2004 FOR A CONSIDERATION OF SMT.POONAM M.BAGDAI VS. ACIT, CEN. CIRLCE -1, RAJKOT /ITA NO.40/RJT/2013/A.Y.2004- 05 PAGE 3 OF 9 RS.15 LAKHS. HOWEVER, THE AO NOTICED THAT THE ASSESSEE HAS SUBSEQUENTLY SOLD THE NEW ASSET ON 27.05.2005 I.E. WITHIN THE PERIOD OF 3 YEARS FROM THIS PURCHASE, ACCORDINGLY THE ASSESSEE WAS ASKED TO SHOW CAUSE AS TO WHY EXEMPTION OF CAPITAL GAIN SHOULD NOT BE DISALLOWED U/S.54B(II) OF THE ACT. IT WAS EXPLAINED THAT THE ASSESSEE HAS SOLD AN OLD ASSET WHICH WAS A CAPITAL ASSET AND NEW LAND WAS ACQUIRED WITHIN A PERIOD OF SALE ON LAND THE SECTION 54B DOES NOT ENVISAGE THAT THE NEW ASSET SHOULD BE A CAPITAL ASSET IN NATURE, THEREFORE THERE WOULD BE NO CAPITAL GAIN ON TRANSFER OF NON-CAPITAL ASSETS IN VIEW OF THE PROVISIONS OF SECTION 2(14) OF THE ACT. THEREFORE, EXEMPTION CLAIMED U/S.54B ON SALE OF NEW ASSET WHICH IS NOT A CAPITAL ASSET CANNOT BE WITHDRAWN. HOWEVER, THE AO WAS OF THE VIEW THAT THE ASSESSEE HAS TRANSFERRED THE NEW ASSET BEFORE COMPLETION OF 3 YEARS FROM THE DATE OF ITS PURCHASE, HENCE, THE BASIC CONDITION TO AVAIL THE EXEMPTION HAS NOT BEEN FULFILLED BY THE ASSESSEE. THERE SHOULD BE CAPITAL GAIN N TRANSFER OF SUCH LAND, HENCE, THE ASSESSEE HAS INVESTED IN A LAND WHICH WILL NOT BE FURTHER TAXABLE TO CAPITAL GAIN AS THE LAND IS RURAL AGRICULTURAL LAND, WHICH IS NOT A CAPITAL ASSET. THEREFORE, THE NEW ASSET HAS TO BE ELIGIBLE ASSET TRANSFER OF WHICH COULD BE SUBJECTED TO CHARGING OF CAPITAL GAIN. THE SMT.POONAM M.BAGDAI VS. ACIT, CEN. CIRLCE -1, RAJKOT /ITA NO.40/RJT/2013/A.Y.2004- 05 PAGE 4 OF 9 ASSESSEES INTERPRETATION WOULD LEAD TO MISUSE OF SECTION 54B, WHICH PROVIDES THAT THE BENEFIT OF THIS SECTION WOULD BE AVAILABLE IF THE ASSESSEE HOLDS THE NEW ASSET FOR A PERIOD OF 3 YEARS. THIS REQUIREMENT CAN BE BY PASSED WHEN THE NEW ASSET IS AN ASSET NOT CHARGEABLE TO CAPITAL GAIN TAX. SINCE THE ASSESSEE HAS NOT SATISFIED THE BASIC CONDITION TO AVAIL EXEMPTION, HENCE, THE AO DISALLOWED THE CLAIM OF RS.14,81,072/- MADE U/S.54B OF THE ACT. 5. BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A). THE CIT(A) REFERRED THE PROVISIONS OF SECTION 54B OF THE ACT AND OBSERVED THAT THE CAPITAL GAIN ARISING TO THE APPELLANT ON ACCOUNT OF SALE OF ORIGINAL ASSET CONSTITUTE TAXABLE INCOME. NORMALLY, THE ASSESSEE IS REQUIRED TO HAVE CAPITAL GAIN TAX ON SUCH CAPITAL GAINS EARNED ON SALE OF CAPITAL ASSET, HENCE FOR AGRICULTURAL PURPOSES. THE AO HAS RIGHTLY NOTED THAT IF THE ASSESSEE HAS SOLD THE NEW ASSET WITHIN THE 3 YEARS OF THE DATE OF PURCHASE, THEN HE IS REQUIRED TO PAY THE TAX ON THE GAINS ARISING FROM TRANSFER THEREOF. IF THE ASSESSEES ARE GIVEN LIBERTY TO INVEST IN AGRICULTURAL LAND, WHICH IS NOT A CAPITAL ASSET, THE GAIN ARISING FROM TRANSFER OF CHARGEABLE CAPITAL ASSET, THEN IF THE ESTIMATION OF THE APPELLANT IS ACCEPTED, THIS WOULD MAKE THE PROVISION REDUNDANT OF ALL THE ASSESSEES WOULD CONVERT THEIR SMT.POONAM M.BAGDAI VS. ACIT, CEN. CIRLCE -1, RAJKOT /ITA NO.40/RJT/2013/A.Y.2004- 05 PAGE 5 OF 9 TAXABLE GAIN INTO NON-TAXABLE CAPITAL GAIN BY MISUSING THE PROVISIONS OF SECTION 54B OF THE ACT. CLEARLY THIS INTERPRETATION IS AGAINST THE LEGISLATURE INTENT. AS PER THE PROVISIONS, IF THE NEW ASSET IS TRANSFERRED WITHIN 3 YEARS OF ITS PURCHASE, THEN THE ASSESSEE IS PLACED TO DISCLOSE CAPITAL GAIN ON THIS TRANSACTION BY TAKING COST OF NEW ASSET AT NIL. THE CLAIM OF THE APPELLANT THAT THE CAPITAL GAIN, IF ANY, ON TRANSFER OF NEW ASSET SHOULD BE TAXED IN THE YEAR OF TRANSFER OF NEW ASSET I.E. AY2006-07 IS IN LINE WITH THE PROVISIONS, BUT CANNOT BE ACCEPTED AS APPELLANT HIMSELF AS NOT DISCLOSED ANY CAPITAL GAIN IN THE A.Y. 2006-07. THE DECISION OF ITAT CHANDIGARH BENCH IN THE CASE OF DCIT VS KAUSHALYA DEVI IN ITA NO.1300/CHD/2010 WAS DISTINGUISHED ON THE GROUND THAT IN THAT CASE AGRICULTURAL LAND WAS SOLD BY THE ASSESSEE AND ANOTHER AGRICULTURAL LAND WAS PURCHASED AND SUBSEQUENTLY SOLD. IN THE CASE OF THE APPELLANT, THE APPELLANT HAS NOT SOLD ANY AGRICULTURAL LAND AND THE ORIGINAL ASSET IN THE CASE OF THE APPELLANT WAS A CAPITAL ASSET, THEREFORE, THE FACTS OF THE CASE ARE DISTINGUISHABLE. 6. BEING AGGRIEVED, THE ASSESSEE HAS FILED THIS APPEAL BEFORE THE TRIBUNAL. THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE CONTENTION OF THE AO THAT THE ASSESSEE HAS INVESTED IN A LAND WHICH WILL NOT BE FURTHER TAXABLE TO CAPITAL BEING RURAL SMT.POONAM M.BAGDAI VS. ACIT, CEN. CIRLCE -1, RAJKOT /ITA NO.40/RJT/2013/A.Y.2004- 05 PAGE 6 OF 9 AGRICULTURAL LAND WHICH IS NOT CAPITAL ASSET IS NOT TENABLE IN LAW TO AVAIL THE BENEFIT OF SECTION 54B IT IS NOWHERE MENTIONED THAT THE NEW ASSET SHOULD BE CAPITAL ASSET HAS DEFINED IN SECTION 2(14) WHICH CLEARLY STATES THAT NEW ASSET SHOULD PURCHASE OF ANY OFFERED LAND FOR BEING USED FOR AGRICULTURAL PURPOSES. THEREFORE, AT THIS POINT OF TIME WHILE GIVING EXEMPTION U/S.54B, IT IS NOT REQUIRED TO LOOK WHETHER NEW ASSET IS CAPITAL ASSET OR NOT WITHIN THE MEANING OF SECTION 2(14) OF THE ACT. FURTHER, NEW ASSET HAS BEEN TRANSFERRED ON 27.05.2015. THEREFORE, IF AT ALL THE GAIN IS TO BE TAXED ON TRANSFER OF NEW ASSET, THE SAME HAS TO BE TAXED IN THE A.Y. 2006-07. THEREFORE, IT IS NOT TAXABLE IN THE YEAR UNDER CONSIDERATION, HENCE, THE AO CANNOT WITHDRAW THE EXEMPTION U/S.54B (1)(2) OF THE ACT. IT WAS ALSO SUBMITTED THAT SECTION 54F (3) PROVIDES THAT IF THE NEW ASSET IS TRANSFERRED WITHIN 3 YEARS THE CAPITAL GAIN AVAILED ON OLD ASSET WOULD BE TAXABLE IN THE PREVIOUS YEAR RELEVANT TO WHICH NEW ASST IS TRANSFERRED. THEREFORE, ON THE SAME ANALOGY THE NEW CAPITAL GAIN TAXABLE NEW ASSET WOULD BE TAXABLE IN THE A.Y. 2006-07. THE LD.COUNSEL FOR THE ASSESSEE HAS PLACED RELIANCE ON THE DECISION OF KAUSALYA DEVI(SUPRA). 7. PER CONTRA , THE LD.CIT-DR SUBMITTED THAT THE AO HAS RIGHTLY WITHDRAWN THE EXEMPTION CLAIMED BY THE ASSESSEE AS THE NEW SMT.POONAM M.BAGDAI VS. ACIT, CEN. CIRLCE -1, RAJKOT /ITA NO.40/RJT/2013/A.Y.2004- 05 PAGE 7 OF 9 ASSET WAS SOLD BEFORE 3 YEARS FROM THE DATE OF ITS PURCHASE. THEREFORE, BASIC CONDITIONS OF SECTION 54B IS NOT SATISFIED. THE LD.CIT-DR FURTHER REFERRED THE PROVISIONS OF SECTION 54B(3) WHEREIN THE SPECIFIC PROVISIONS ARE GIVEN THAT IF NEW ASSET IS TRANSFERRED WITHIN 3 YEARS THEN THE CAPITAL GAIN CHARGEABLE TO TAX IN THE PREVIOUS YEAR IN WHICH THE NEW ASSET HAS BEEN TRANSFERRED. HOWEVER, THERE IS NOT SPECIFIC PROVISION IN RESPECT OF SECTION 54B OF THE ACT, HENCE IF THE NEW ASSET IS TRANSFERRED WITHIN THE PERIOD OF 3 YEARS FROM THE DATE OF PURCHASE THEN THE CAPITAL GAIN EXEMPTION CLAIMED IN RESPECT OF OLD ASSET WOULD BE CHARGEABLE TO TAX FOR THAT YEAR IN WHICH THE OLD ASSET WAS TRANSFERRED. THE RELIANCE IN THE CASE OF DCIT VS KAUSHALYA DEVI (SUPRA) IS DISTINGUISHABLE ON FACTS AND THE CIT(A) HAS RIGHTLY DISTINGUISHED THE SAME. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS SEEN THAT THE ASSESSEE HAS TRANSFERRED AGRICULTURAL LAND AND RESULTANT CAPITAL GAIN THEREON HAS BEEN CLAIMED EXEMPTION ON ACCOUNT OF PURCHASE OF NEW ASSET. HOWEVER, THE NEW ASSET BEING A NON CAPITAL ASSET HAS BEEN TRANSFERRED WITHIN THE PERIOD OF 3 YEARS I.E. 25.07.2005. THEREFORE, THE COST OF NEW ASSET FOR COMPUTING THE CAPITAL GAIN SMT.POONAM M.BAGDAI VS. ACIT, CEN. CIRLCE -1, RAJKOT /ITA NO.40/RJT/2013/A.Y.2004- 05 PAGE 8 OF 9 U/S.45 OF THE ACT WOULD BE CONSIDERED AS NIL AS PER PROVISIONS OF SECTION 54B(1)(2) OF THE ACT. SINCE THE ASSESSEE HAS NOT SATISFIED THE BASIC CONDITION TO AVAIL THE EXEMPTION U/S.54B(1) OF THE ACT AS THE NEW ASSET IS TRANSFERRED BEFORE 3 YEARS OF ITS PURCHASE, THE CAPITAL GAIN IS WORKED OUT AFTER DEDUCTING THE EXEMPTION OUT OF SUCH GAINS SO BENEFITED ON THE TRANSFER OF OLD ASSET. THIS, FURTHER STIPULATES THAT THERE SHOULD BE A CAPITAL GAIN OF TRANSFER OF SUCH LAND, HENCE THE ASSESSEE HAS INVESTED IN HER LAND IT WILL NOT BE FURTHER TAXABLE TO CAPITAL GAIN AS THE LAND IS RURAL AGRICULTURAL LAND, IT IS NOT A CAPITAL ASSET. WE ALSO FIND THAT THE BASIC CONDITION TO AVAIL THE EXEMPTION HAS NOT BEEN FULFILLED BY THE ASSESSEE, THEREFORE THERE IS NO RELEVANCE OF THE FACT THAT NEW ASSET WAS CAPITAL ASSET OR NON-CAPITAL ASSET. FURTHER, THERE IS NO SPECIFIC PROVISION IN SECTION 54B OF THE ACT AS MENTIONED IN SECTION 54F(3) OF THE ACT. THEREFORE, THE WITHDRAWAL OF EXEMPTION WOULD BE MADE IN RESPECT OF LONG TERM CAPITAL GAIN CHARGEABLE ON OLD ASSETS SOLD DURING THE RELEVANT ASSESSMENT YEAR. THE DECISION IN THE CASE OF DCIT VS KAUSHALYA DEVI (SUPRA) HAS ALREADY BEEN DISTINGUISHED BY THE CIT(A) AS IN THAT CASE THE AO SOUGHT TO TAX THE CAPITAL GAIN ARISING ON TRANSFER OF NEW ASSET IN THE YEAR IN WHICH THE NEW ASSET WAS TRANSFERRED. THEREFORE, SMT.POONAM M.BAGDAI VS. ACIT, CEN. CIRLCE -1, RAJKOT /ITA NO.40/RJT/2013/A.Y.2004- 05 PAGE 9 OF 9 THE TRIBUNAL HAS COME TO A FINDING THAT NEW ASSET SO TRANSFERRED IS NOT A CAPITAL ASSET, HENCE NO CAPITAL GAIN CHARGEABLE ON THE SAME. IN VIEW OF THESE FACTS, WE ARE OF THE CONSIDERED OPINION THAT THE LOWER AUTHORITIES HAVE JUSTIFIED IN WITHDRAWING THE EXEMPTION CLAIM U/S.54B OF THE ACT AS BASIC CONDITIONS STIPULATED U/S.54B(1)(2) HAS NOT BEEN SATISFIED. THEREFORE, THIS GROUNDS OF APPEAL OF THE ASSESSEE ARE DISMISSED. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISSED. 10. THE ORDER PRONOUNCED IN THE OPEN COURT ON 11.12.2018. SD/- SD/- ( .. /C.M. GARG) ( .. / O.P.MEENA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER / RAJKOT, DATED : 11 TH DECEMBER , 2018/ S.GANGADHARA RAO, SR.PS COPY OF ORDER SENT TO- ASSESSEE/AO/PR. CIT/ CIT (A)/ ITAT (DR)/GUARD FILE OF ITAT. BY ORDER / / TRUE COPY / / ASSISTANT REGISTRAR, RAJKOT