2022 (1) TMI 1148 - AT - Income Tax

Tribunal Disallows Exemption under Section 54B; Appeal Allows Deduction based on Investment Timing

The Tribunal upheld the disallowance of the exemption under Section 54B, amounting to Rs. 11,41,430, as the requirements of the provision were not met. ... Disallowance of deduction u/s 54B - assessee did not file return under Section 139(1) of the Act and he has not deposited the sale proceeds in the capital account - HELD THAT:- The major emphasis of the learned First Appellate Authority is that the assessee should have deposited capital gain in a bank account meant for this purpose; only then he can claim deduction u/s 54B of the Act. In these submissions it would reveal that the assessee has specifically shown the receipt as well as investment for purchase of agricultural land. Both these things have been made almost simultaneously. Section 54B of the Act authorizes an assessee to claim deduction under this section on an investment made for purchase of agricultural land two years prior to sale of an agricultural land. Similarly, it also authorizes to make investment two years after the sale of agricultural land. The investments of the assessee duly fall in this period. Hence, even if he has not deposited in the capital account, but he has already made investment; therefore, he is entitled for the deduction. We, respectfully following the decision in the case of CIT Vs Ms Jagriti Aggarwal [ 2011 (10) TMI 279 - PUNJAB AND HARYANA HIGH COURT] allow this appeal of the assessee and delete the disallowance, because the objection of the learned CIT(A) is without any basis. The correlation between the investment and receipt of sale proceeds within the time stipulated in Section 54B of the Act has duly been demonstrated by the assessee. In view of the above, the appeal of the assessee is allowed and the Assessing Officer is directed to grant deduction under Section 54B - Decided in favour of assessee. Issues:Disallowance of deduction under Section 54B of the Income-Tax Act, 1961.Analysis:The assessee appealed against the order of the Commissioner of Income-tax (Appeals) confirming the disallowance of a deduction claimed under Section 54B of the Income-Tax Act, 1961. The assessee had sold agricultural land and purchased new land, claiming exemption under Section 54B. However, the Assessing Officer disallowed the claim on the grounds that the unutilized capital gain was not deposited in a Capital Gain Account Scheme before the due date of filing the return under Section 139(1) of the Act. The AO also noted that the assessee had purchased two parcels of land before the sale deed of the agricultural land, and one plot after the deed. The AO further highlighted that the assessee did not file the return on time or deposit the sale proceeds in the CGA Scheme. The appellant contended that various judicial pronouncements supported the claim under Section 54B, even if agricultural land was purchased using advance money from the sale consideration. However, the Tribunal found that the facts of the case differed from the cases cited by the appellant, and the requirements of Section 54B were not met. The Tribunal upheld the disallowance of the exemption under Section 54B, amounting to Rs. 11,41,430.The First Appellate Authority emphasized that the assessee should have deposited the capital gain in a bank account designated for this purpose to claim the deduction under Section 54B. However, the Authority noted that the assessee had shown the receipt and investment for the purchase of agricultural land almost simultaneously, falling within the permissible period under Section 54B. Citing a decision of the Punjab & Haryana High Court, the Authority allowed the appeal and deleted the disallowance, as the correlation between the investment and receipt of sale proceeds within the stipulated time was demonstrated by the assessee. Consequently, the appeal of the assessee was allowed, and the Assessing Officer was directed to grant the deduction under Section 54B amounting to Rs. 11,41,430.In conclusion, the Tribunal upheld the disallowance of the exemption under Section 54B, while the First Appellate Authority allowed the appeal and directed the Assessing Officer to grant the deduction. The decision hinged on the interpretation of statutory provisions and the timing of investments in relation to the sale proceeds, leading to differing outcomes between the two judgments.