2021 (6) TMI 346 - AT - Income Tax

HUF entitled to Section 54B exemption before amendment

Shri Sitaram Pahariya (HUF) Versus I.T.O – Ward 6 (3) Agra

The Tribunal held that the Hindu Undivided Family (HUF) was entitled to the benefit of exemption under Section 54B for the assessment year in question. It ... Entitlement u/s 54B - Benefit of exemption in the hands of HUF - purchase of agriculture land - Deduction is not admissible for assessment year 2012-13 in the case of an assessee being an HUF - HELD THAT:- Hindu undivided family, entitled to the benefit of 54B, even prior to insertion of “the assessee being an individual or his parent, or a Hindu undivided family” by the finance act 2013. The assessee is a person subjected to tax under the income tax act. And the person includes even the individual as well as the Hindu undivided family. Benefit of provisions of 54B, cannot be restricted to only individual assessee - The revenue is duty-bound to make out a clear case of debarring the HUF from availing the benefit of section 54F/54B, and the assessee cannot be denied the benefit merely based on the interpretation. If the revenue wanted to tax, the assessee(HUF), then the statute should have provided specifically that the assessee used in 54B, is only restricted to living individual and is not applicable to Hindu undivided family. Further the High Court had not considered that the individual assessee and HUF, can both be used as and when context so desires and it will not lead to any absurdity. In case the assessee is Hindu undivided family, the second part of section 54B i.e “of parents of his”, would not applicable. In the case of individual assessee, the parents of the assessee fulfill criteria, then the benefit can be given. In our considered opinion harmonious interpretation is required to invoked so that the word used in the provisions would not become redundant or otiose . In our view , in case of doubt or confusion ,the benefit of any doubt in respect to taxability or exemption should be given to the assessee rather than to revenue. On facts of the present case , we find that the assessee within two years of sale of agricultural land, had invested the amount and purchase of land in accordance with the requirement of section 54B and is entitle to the benefit of 54B of the ACT. The assessee HUF, is entitled to the benefit of section 54B, of the act for the assessment year under consideration, as we are of the opinion that the word assessee used in 54B, had always included HUF and further the amendment brought on by the finance act 2013, in section 54 by inserting “the assessee being an individual or his parent, or a Hindu undivided family]” was classificatory in nature and was introduced by the Ministry with a view to extend the benefit to the Hindu undivided family. The Hindu undivided family,(HUF) has been the recognized as separate tax entity, therefore, before and after amendment , if the agricultural land, which was being used by HUF for two years prior to transfer, has been transferred by the HUF and HUF purchases any other agricultural land within two years of such transfer then it shall be entitled to the benefit of 54B / 54F. Issues Involved:1. Denial of exemption under Section 54B.2. Partial relief under Section 54F.3. Determination of capital gains.4. Applicability of Section 54B to Hindu Undivided Family (HUF).Detailed Analysis:1. Denial of Exemption under Section 54B:The primary issue was the denial of exemption under Section 54B to the assessee, a Hindu Undivided Family (HUF). The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the Assessing Officer's (AO) decision, stating that Section 54B, as it stood before the amendment effective from April 1, 2013, did not apply to HUFs. The CIT(A) relied on the Madras High Court's decision in CIT vs. G.K. Deverajulu, which interpreted that the term 'assessee' in Section 54B referred only to individuals and not to HUFs. The CIT(A) also noted that the amendment to include HUFs in Section 54B was prospective and applicable from the assessment year 2013-14 onwards.2. Partial Relief under Section 54F:The CIT(A) granted partial relief to the assessee regarding the exemption under Section 54F. The AO had disallowed the exemption on the grounds that the investment in the construction of a house was made after the due date for filing the return under Section 139(1) and that the amount was not deposited in a capital gain account scheme. The CIT(A) found that the assessee had indeed made the investment within the period allowed by Section 139(4) and thus was entitled to the exemption under Section 54F. The CIT(A) cited several judicial precedents to support this view, including the decisions in Ni pun Mehrotra vs. ACIT and CIT vs. Rajesh Kumar Jalan.3. Determination of Capital Gains:The AO determined that there was a positive capital gain of Rs. 54,92,652/- instead of the NIL capital gain declared by the assessee. The AO computed the capital gains by considering the sale consideration as per the circle rates and the indexed cost of acquisition. The AO also denied the exemption claimed under Sections 54B and 54F, resulting in the computation of taxable income under the head 'Capital gains' at Rs. 54,92,652/-. The CIT(A) provided partial relief by allowing the exemption under Section 54F but upheld the AO's denial of the exemption under Section 54B.4. Applicability of Section 54B to HUF:The Tribunal examined whether the term 'assessee' in Section 54B included HUFs before the amendment effective from April 1, 2013. The Tribunal noted that the term 'assessee' as defined under Section 2(7) of the Income Tax Act includes any person, and 'person' under Section 2(31) includes HUFs. The Tribunal observed that the amendment to Section 54B by the Finance Act, 2013, which explicitly included HUFs, was clarificatory in nature and intended to extend the benefit to HUFs. The Tribunal also referred to contrary views from various authorities and recent decisions, including the case of Sandeep Bhargava (HUF), which supported the inclusion of HUFs in the term 'assessee' under Section 54B.Conclusion:The Tribunal concluded that the assessee HUF was entitled to the benefit of Section 54B for the assessment year under consideration. The Tribunal held that the word 'assessee' in Section 54B had always included HUFs, and the amendment by the Finance Act, 2013, was merely clarificatory. The Tribunal allowed the appeal of the assessee, granting the exemption under Section 54B and providing relief on all grounds raised by the assessee.