Deduction 54B for agricultural land purchased prior to sale deed allowed. Date of actual transfer or even purchase of new land not always relevant – ITAT
ABCAUS Case Law Citation:
ABCAUS 2551 (2018) (10) ITAT
Important Case Laws Cited/relied upon by the parties:
CIT Vs. Janardhan Dass 299 ITR 210
M/s Rajasthan Agencies Pvt. Ltd. Vs ITO
The assessee was individual and filed her return of income through e-filing after calming deduction U/s 54B of the Income Tax Act, 1961 (the Act).
Exemption u/s 54B for agricultural land purchased prior to sale deed
During the year under consideration, the assessee sold an agricultural land at his village. The agricultural land in question was sold vide agreement to sell and subsequently a sale deed was executed after three months which was followed by a correction deed.
Subsequently, the assessee purchased four pieces of agricultural lands vide separate sale deeds.
The Assessing Officer while framing the assessment U/s 143(3) of the Act denied the claim of deduction U/s 54B of the Act in respect of one agricultural land whose purchase date was, though after the date of the agreement to sell but was prior to the sale deed executed for the land sold.
The claim of deduction in respect of other three agricultural lands purchased by the assessee was allowed by the Assessing Officer. The AO denied the claim of deduction U/s 54B on the ground that the agricultural land was sold after purchase of new agricultural land and therefore, the agricultural land purchased prior to the sale was not eligible for deduction U/s 54B of the Act.
The CIT(A) did not accept the contention of the assessee and upheld the order of the Assessing Officer on the ground that the transaction of sale of existing land took place only when the sale deed was executed and registered with the Sub Registrar.
The Tribunal noted that the Assessing Officer and the CIT(A) had doubted the existence of the agreement to sell. However, the details of cheques received for consideration as mentioned in the agreement to sell as well as subsequent sale deed were same.
Some of these cheques were dated prior to the sale deed and some of the cheques are post dated. It was established from the bank statement of the assessee that he received part sale consideration prior to the execution of the sale deed.
The Tribunal opined that fact showed that prior to the sale deed, the assessee and the purchaser had agreed for the purchase and sale consideration and the cheques were also handed over to the assessee by the purchaser much prior to the date of sale deed.
The Tribunal was of the view that once the parties had the prior agreement regarding the sale consideration of the existing agricultural land then, the agreement to sell could not be an afterthought self serving document.
The Tribunal expressed that the provisions of Section 54B are beneficial provision and relieving the genuine assessee from the tax burden on transfer of agricultural land subject to the condition that such agricultural land was being used by the assessee or parents for agricultural purposes and the assessee has, within a period of two years after the date of sale, has acquired new agricultural land.
The Tribunal opined that the objection and scheme of granting the benefit U/s 54B is to relieve the genuine assessee from the burden of capital gain tax on transfer of agricultural land if the assessee has purchased new agricultural asset by investing the capital gain and as such the purpose was to substitute the existing agricultural land by new agricultural land.
The Tribunal clarified that the date of actual transfer of existing land or even the purchase of new agricultural land may not be always relevant for the purpose of Section 54B of the Act. For instance, in case of acquisition of land by the government, until and unless, the assessee received compensation/consideration, the acquisition of new agricultural land is not possible, hence the relevant date is the receipt of compensation or consideration and not the date of execution of document as held by the Hon’ble High Court.
The Tribunal observed that in the instant case, when the assessee had received the compensation prior to the payment of the purchase consideration for acquisition of new agricultural land then the transaction had to be looked into in the overall facts and surrounding circumstances in which the assessee sold existing agricultural land and purchased new agricultural land. If the intent of the assessee was manifest from the facts and circumstances that the assessee purchased the fresh agricultural land in lieu of the existing agricultural land then the conditions as envisaged in Section 54B of the Act are satisfied.
The Tribunal observed that the facts clearly established that the receipt as well as payment were through post dated cheques and therefore, the assessee established the existence of the agreement to sell under which the purchase consideration was received by the assessee. The subsequent documents consisted of correction deed as well as the affidavit of the purchaser supported the fact that the consideration for sale of the existing land was received at the time of the agreement to sell and possession was also handed over on the said date of agreement. Hence when the agreement was subsequently acted upon and in performance of the said agreement, the parties finally executed the sale deed then the transaction will be considered as transferred as on the date of the agreement.
The Tribunal held that the assessee satisfied the conditions of acquiring new agricultural land against the sale of existing agricultural land and therefore, it was a case of substitution of existing agricultural land by new agricultural land and consequently the assessee was eligible for deduction U/s 54B of the Act.