Deduction u/s 54B allowed for purchase of agricultural land in the name of son to avoid future family disputes relating to the inheritance of the property
ABCAUS Case Law Citation:
ABCAUS 2538 (2018) 09 ITAT
The appellant assessee was aggrieved by the order of the CIT(A) for the denial of deduction claimed by the assessee u/s 54B of the Income-tax Act, 1961 (the Act)
The assessee was an agriculturist owning ancestral agricultural land in his village where he resided.
The assessee, for the relevant assessment year, had not filed any return of income as the only taxable income he earned was bank interest which was below the taxable limit.
During the year under consideration, the assessee made sale of agricultural land jointly with other farmers and received his share in sale as per circle rate.
The proceedings u/s 147 of the Act were initiated by the Assessing Officer after recording the reasons that the assessee had sold agricultural land alongwith other co-owners and received his share of sale consideration which was chargeable to capital gain as the land sold by the assessee was situated within the municipal limit, but the assessee had not filed income tax return showing the said income.
In response to notice u/s 147, the assessee filed income tax return declaring bank interest (income from other sources) apart from agricultural income. Against sale consideration received by assessee from sale of land, the assessee claimed exemption u/s 54B of the Act in respect of agricultural land purchased in the name of his sons.
The AO, however, completed assessment in this case u/s 143(3) r.w.s.147 of the Act after making addition on account of long term capital gains. The exemption claimed by the assessee u/s 54B in respect of agricultural land purchased in the name of assessee’s sons was not allowed by the Assessing officer.
The CIT(A) confirmed the order of the Assessing officer denying deduction to the assessee u/s 54B of the Act.
Before the Tribunal the assessee submitted that he was a rural agriculturist and resided in joint family with his two sons and grandsons and the agricultural land sold by the assessee was ancestral land.
It was stated that all the members of the assessee family had been cultivating agricultural land jointly and having a common kitchen. Since the age of the assessee was progressing, as he was already a senior citizen and was not keeping good health, he thought it proper to purchase the agricultural land out of sale proceeds in the name of his two sons to avoid future family disputes relating to the inheritance of the property of the assessee after his death.
It was further submitted that the money invested in the new capital asset i.e agricultural land was out of sale proceeds of the agricultural land sold, therefore, the lower authorities were not justified in denial of deduction u/s 54B of the Act.
The Tribunal expressed agreement with the submissions of the appellant assessee and set aside the order of the lower authorities. The Assessing officer was directed to allow deduction to the assessee u/s 54B of the Act in respect of the investment made in the purchase of the agricultural land in the name of his sons.