Exemption u/s 54B denied for investment made in the name of wife

Exemption u/s 54B denied for investment in agricultural land made in the name of wife. ITAT followed decision of jurisdictional High Court

ABCAUS Case Law Citation:
ABCAUS 3748 (2023) (05) ITAT

Important Case Laws relied upon
CIT vs Dinesh Verma 60 taxmann.com 461 (P&H)
Commissioner of Income Tax Vs Vegetable Products Ltd 88 ITR 192 (SC)
CIT Vs Podar Cement (P) Ltd [1997] 92 Taxman 541/226 ITR 625 (SC)
Gulam AN Khan Vs CIT [1987] 165 ITR 228
Jai Narain Vs Income Tax Officer

Jagpal Singh Vs ITO [2010] 186 Taxman 26 (Delhi)
CIT vs Kamal Wahal [2013] 351 ITR 4/214
CIT Vs Ravinder Kumar Arora [2012] 342 ITR 38/ [2011] 203
CIT Vs Natarajan [2006] 287 ITR 271 /154 Taxman 399 (Mad)
Grandhi Kamaraj Mangaraj
N. Ram Kumar Vs Asst CIT [2012] 138 ITD 317/25 Taxman.com 337
Jt. CIT Vs Smt Armeda K Bhaya [2005] 95 ITD 313 (Mum)

In the instant case, the assessee had challenged the order passed by the CIT(A) in dismissing the appeal of the assessee and thereby denying the exemption u/s 54B of the Income Tax Act, 1961 (the Act).

During the year under consideration, the assessee sold urban agricultural land earning a Long Term Capital Gain. The Long Term Capital Gain was invested by the assessee in the purchase of another agricultural land including Stamp Duty and Registration Charges, in the name of his wife.

The assessee claimed exemption u/s 54B of the Act. The Assessing Officer (AO), however, refused to allow the claim made.  The AO relied on the decision of the Hon’ble High Court wherein, it was held that if the subsequent property is purchased by a person other than the assessee, including his close relative, even his wife and children, the assessee would not be entitled to the benefit conferred by the provisions of Section 54B of the Act.   

Accordingly, following the law laid by the jurisdictional High Court, the AO made addition to the income of the assessee

Before the ITAT, the Revenue placed reliance on the decisions of the Hon’ble jurisdictional High Court and contented that it has not successfully been rebutted on behalf of the assessee.

The Tribunal observed that the Hon’ble jurisdictional High Court had held that Section 54B of the Income Tax Act nowhere suggests that the legislature intended to advance the benefit of the said Section to an assessee who purchases agricultural land in the name of a third person.

It was held that the term “assessee” is qualified by the expression “purchased any other land for being used for agricultural purposes”, which necessarily means that the new asset has to be in the name of the assessee himself. Therefore, purchase of agricultural land by the assessee in the name of his son or grandson etc. does not qualify for exemption u/s 54B of the Act.

The Tribunal also observed that in one of the case it has been held by the Non Jurisdictional High Court that for the purpose of claiming deduction u/s 54F of the Act, the new residential house need not be purchased by the assessee in his own name, nor is it necessary that it should be purchased exclusively in his name. It was held that a purposive construction is to be preferred as against a literal construction.

The Tribunal also observed that as per the decision of Hon’ble Supreme Court, if two reasonable constructions of a taxing provision are possible, then the construction which favours the assessee must be adopted.

The Tribunal distinguished the decision of the Hon’ble Supreme Court being was in a case in respect of Section 271(1)(a)(i) of the Act and the principle of law enunciated therein.

The Tribunal opined that in view of the decision of the jurisdictional High Court, the views of other High Courts could not be subscribed to. The issue stands already concluded against the assessee by the Jurisdictional High Court and the Tribunal had also followed the said judgement, the applicability of the said decision has not been controverted, nor had any error been shown in the finding recorded by the Tribunal.

In view of the above the appeal of the assessee was rejected.

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