Capital Gain Exemption u/s 54B investment in wife name allowed but disallowed in bhabhi name
ABCAUS Citation:
910 (2016) (03) 2016
Date/Month of Order: March, 2016
ORDER
This is an appeal filed by Revenue against the order of learned CIT(A), Ludhiana, dated 17.10.2014, for the Asst. Year 2009-10.
2. The following grounds of appeal has been taken by the Revenue.
“(i) Whether the decision of the Ld. CIT(A) is right in allowing the exemption u/s 54B to the extent of Rs.59.50 lacs where investment is made in the name of Smt. Kashmir Kaur (Wife) and Smt. Balwinder Kaur W/o Sh. Dalbir Singh & not in the name of the assessee Sh. Jit Singh.
(ii) The appellant craves leave to add or amend the grounds of appeal on or before the appeal is heard and disposed of.
(iii) It is prayed that the order of Ld. CIT(A) be set aside.”
3. The learned DR, at the outset, filed adjournment letter and requested for adjournment of the case. However, on going through the file we observed that matter can be disposed off with the assistance of learned AR, therefore, learned AR was directed to explain the facts of the case and adjournment letter filed by Revenue was rejected.
4. The learned AR submitted that it was a case of denial of exemption of claim made by assessee u/s 54B of the Act. He explained that assessee had earned a capital gain on sale of agricultural land and out of sale proceeds investment was made for purchase of another agricultural land, but, investment was made in the name of assessee, assessee’s wife and assessee’s Bhabhi. The Assessing Officer had not granted the exemption u/s 54B for the investment made by Assessee in the name of his wife and Bhabhi however, learned CIT(A) allowed the relief to the assessee and in this respect our attention was invited to para 7 of learned CIT(A)’s order. The learned AR further invited our attention to paper book page 14 & 15 where a copy of remand report was placed which was issued by Assessing Officer in view of additional evidence filed by assessee. The learned AR invited our attention to paper book page 1 where working of capital gains earned by assessee was placed and he submitted that if the investment made by assessee in the name of his wife and Bhabhi are considered the figure of capital gain will be in negative and even if the investment in the name of his Bhabhi is not considered even then taxable capital gain will work out to be Rs.2,02,955/- and he stated that assessee will not have any objection if the addition to this extent is confirmed. The learned AR in this respect relied upon the case law of CIT vs. Kamal Wahal, 351 ITR 0004 decided by Hon’ble Delhi High Court, for the proposition that investment of capital gains in the name of wife of an assessee is an allowable exemption. The learned AR further relied upon the order of Hon’ble Punjab & Haryana High Court in the case of CIT vs. Gurnam Singh 327 ITR 0278, for the proposition that investment of capital gains was eligible for exemption u/s 54B if the investment was made in the joint names of the assessee and his son. In view of the ratio of these judicial precedents, the learned AR argued that learned CIT(A) has rightly allowed the exemption.
5. The learned DR, on the other hand, heavily placed her reliance on the orders of Assessing Officer.
6. We have heard the rival parties and have gone through the material placed on record. We find that assessment in this case was completed u/s 144 of the Act as assessee did not attend the assessment proceedings. The Assessing Officer on the basis of an information that assessee had earned capital gains had reopened the case of the assessee and in the absence of cooperation from the assessee had made an addition of Rs.2,40,83,353/- as capital gains on sale of land. Aggrieved with the order the assessee filed appeal before learned CIT(A) and argued that the land in question which was sold was an agricultural land and before making the sale the assessee had to incur certain expenditure for eviction of persons who were occupying the land. It was further submitted that assessee had made much more investment than the capital gains in the purchase of agricultural land and therefore, the case of the assessee was fully covered by provisions of section 54B and no taxable income on account of capital gain arose. It was submitted that though the assessee as per agreement to sale had purchased agricultural land much more than sale consideration but even if registered value after taking into account the indexed cost is considered the taxable capital gain is negative. The learned CIT(A) has admitted the additional evidence and after obtaining remand report from the Assessing Officer allowed relief to the assessee. In the remand report at paper book page 14 & 15 the Assessing Officer has accepted that the land which was sold and which was purchased was an agricultural land and further he has accepted that assessee had paid an amount of Rs.78,36,115/- for the eviction of land and has further verified that the assessee had made investment in the purchase of agricultural land to the tune of Rs.1,00,35,000/-. We find that out of the investment of Rs.1,00,35,000/-, the investment of Rs.59,50,000/- is in the name of wife of assessee and his Bhabhi as is apparent from copy of sale deed placed at paper book page 2 to 13. As per working sheet of capital gain and its exemption u/s 54B as placed in paper book page 1, we find that after taking into account the eviction charges paid by assessee and after taking into account the indexed cost of land the capital gain works out to be Rs.84,72,570/- out of which investment was made in the name of assessee to the tune of Rs.40,85,000/- and in the name of his wife to the tune of Rs.41,84,615/-. Therefore, even if we ignore the investment made in the name of his Bhabhi the taxable capital gain works out to be Rs.2,02,955/-. The investment made in the name of wife is eligible for exemption u/s 54B as is held in the case of CIT vs. Gurnam Singh 327 ITR 0278 decided by Hon’ble Punjab & Haryana High Court where in the assessee sold agricultural land and had purchased agricultural land in the name of his son and Hon’ble Court has decided the issue in faour of assessee by holding as under:
“We have heard the counsel for the Revenue and gone through the aforesaid impugned order. In our opinion, from the impugned order, no substantial question of law is arising for consideration of this Court as the Tribunal while recording a pure finding of fact has dismissed the appeal of the Revenue. Undisputedly, in this case the assessee had sold the agricultural land which was being used by him for agricultural purposes. Out of sale proceeds of the said sale, the assessee has purchased other piece of land (land in question) in his name and in the name of his only son, who was bachelor and dependent upon him, for being used for agricultural purposes within the stipulated time. Further, it is not the case of the Revenue that from the sale proceeds of the agricultural land earlier owned by the assessee, the land in question was purchased for any other purpose than the agricultural purpose. Undisputedly, the purchased land is being used by the assessee only for agricultural purpose and merely because in the sale deed his only son was also shown as co-owner, the Tribunal has rightly come to the conclusion that it does not make any difference because the purchased land is being used by the assessee for agricultural purposes. It is not the case of the Revenue that the said land is being used exclusively by his son. In our view, a pure finding of fact has been recorded by the Tribunal which does not require any interference in this appeal.”
We find that in the present case, the instead of son the part investment has been made in the name of his wife, therefore, respectfully following the ratio of the case laws relied upon by learned AR we agree with the contention of learned AR that investment in the name of wife was eligible u/s 54B of the Act. However, the investment in the name of his Bhabhi is not eligible for exemption u/s 54B, therefore, taxable capital gain in the case of the assessee is restricted to Rs.2,02,955/-.
7. In view of the above, the appeal filed by the Revenue is partly allowed.
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