No Capital gain deduction u/s 54B for agricultural land purchased in the name of wife – High Court
Exemption under Section 54B of the Income Tax Act, 1961 cannot be allowed to assessee if land is purchased in the name of spouse
ABCAUS Case Law Citation:
ABCAUS 3829 (2023) (12) HC
Important Case Laws relied upon by parties:
Commissioner of Income Tax vs Shri Kamal Wahal
Commissioner of Income Tax vs M/s Vegetables Products Ltd
Mrs. Kamal Murlidhar Mokashi vs The Income Tax Officer
Dy. Director of Income Tax International Taxation vs Jennifer Bhide
Commissioner of Customs vs Dilip Kumar and Company and Others
Commissioner of Income Tax vs Shri Dinesh Verma
Shri Kalya vs The Commissioner of Income Tax & Others
CIT vs Shri Dinesh Verma
Mangalore Chemicals and Fertilisers Limited vs Deputy Commissioner of Commercial Tax and Others
Petron Engineering Construction Pvt. Ltd. and Another vs Central Board of Direct Taxes and Others
Commissioner of Central Excise vs Hari Chand Shri Gopal and Others
In the instant case, the appeal was admitted by the Hon’ble High Court on the following substantial question of law :
Whether the Income Tax Appellate Tribunal (ITAT) was justified in holding that the deduction under Section 54B of the Income Tax Act, 1961 (the Act) cannot be allowed to the assessee/appellant since the investment in purchase of new agricultural land was made by the assessee not in his own name, but in the name of his wife?
The appellant assessee sold agricultural land to a company on which long term capital gains deduction/exemption under section 54B was claimed claimed by the assessee towards agricultural land purchased in the name of his wife.
The Assessing Officer (AO) did not allow deduction under Section 54B of the Act in respect of investments made in purchase of agricultural lands in the name of his wife.
However, the CIT (A) allowed exemption under Section 54B for amount invested in purchase of land in the name of wife. The same was subject of challenge before the ITAT by Revenue. The ITAT annulled the deduction under Section 54B of the IT Act on the ground that the exemption could have been allowed only if the investment was made by the assessee in his own name.
The ITAT in view of the law laid down by the Punjab & Haryana High Court, set aside the order of the CIT (A) and restored back the order of the Assessing Officer.
Before the Hon’ble High Court, the assessee contended that language of Sections 54, 54B and 54F of the Act are pari materia and as per the law laid down by the Delhi High Court when the property was purchased in the name of wife the deduction was allowed.
It was submitted that as laid down by the Hon’ble Supreme Court when there is more than one view, then the view which is favourable to the tax payer should be preferred. Accordingly taking lead of it when the word to Section 54F are pari materia the provisions of Section 54B for deduction should have been interpreted as per the dictum laid down by the Delhi High Court.
On the contrary, the Revenue contended that the word ‘assessee’ has been defined under Section 2(7) of the Act. While interpreting the word ‘assessee’ the same cannot be interpreted while interpreting Section 54B & 54F and the entire income tax
the word ‘assessee’ has been used. It was submitted that as per law laid down by Hon’ble Supreme Court strict interpretation of taxing statute is required.
The Hon’ble High Court observed that as per the decision of the Hon’ble Supreme Court, the choice between a strict and a liberal construction arises only in case of doubt in regard to the intention of the legislature manifest on the statutory language.
The Hon’ble High Court further observed that the Hon’ble Supreme Court has held that it is true that a taxing provision should be liberally construed but this does not mean that such liberal construction should be made doing violence to the plain meaning of such “exemption” provision. Liberal construction will be made whenever it is possible to be made without impairing the legislative requirement and the spirit of the provision.
In view of the above, the Hon’ble High Court opined that prima facie, reading of provisions and the decisions of the Supreme Court, the wife of the appellant cannot be termed as an ‘assessee’ as per Section 2(7) of the Act. So enlarging the scope of the assessee as defined under Section 2(7) to envelope the wife of the appellant to envelop the transaction to “exemption” would amount to superseed the legislative requirement and the spirit of the provision.
The Hon’ble High Court observed that Constitution (Five Judges) Bench of Hon’ble Supreme Court has laid down the principles applicable to the interpretation of a taxing statute.
The Hon’ble High Court opined that hat when the person who claimed “exemption or concession” he has to establish that he is entitled to that exemption or concession. A provision providing for an exemption, concession or exception, as the case may be, has to be construed strictly with certain exceptions depending upon the settings on which the provision has been placed in the Statute and the object and purpose to be achieved. Plain reading of Section 54B would show that the benefit is available to the assesee and when the exemption is demanded. In absence of any ambiguity the scope of definition of ‘assessee’ cannot be enlarged so as to include the wife of the assessee. In other words, the exemption clause has to be construed strictly.
Applying the above mentioned settled principles of law the question of law was answered in favour of the Revenue that ITAT was justified in holding that the deduction under Section 54B of the Act cannot be allowed to the assessee as the land was not purchased in his own name.
Accordingly, the appeal was dismissed.
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