Tribunal confirms valuation method & deduction for agricultural lands, rejects Revenue's appeal

The Tribunal upheld the CIT(A)'s decision that the reference to the DVO for valuation was invalid, directing the use of the Registered Valuer's Report for determining fair market value. Additionally, the Tribunal affirmed the CIT(A)'s allowance of the deduction under Section 54B for the investment in new agricultural lands, finding the transfer of the old land occurred on 11.04.2011 and the new lands were purchased within the specified period. The Tribunal dismissed the Revenue's appeal, confirming the CIT(A)'s decisions on both issues.

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Issues Involved:
1. Validity of the reference made by the Assessing Officer to the DVO for valuation under Section 55A of the Act.
2. Deduction under Section 54B of the Act for the investment made in purchase of new agricultural lands.

Issue-wise Detailed Analysis:

1. Validity of the Reference to DVO for Valuation:

The Revenue challenged the CIT(A)'s decision that the reference made by the Assessing Officer to the DVO for valuation was invalid. The CIT(A) directed the Assessing Officer to adopt the cost of acquisition of the asset as on 01.04.1981 at Rs. 32,22,240/- based on the Registered Valuer’s Report, as opposed to Rs. 89,171/- determined by the DVO.

The assessee filed a return for the year declaring a total income of Rs. 4,95,370/- and agricultural income of Rs. 1,88,528/-. The assessee sold ancestral agricultural land for Rs. 9,28,80,948/- and declared his share of long-term capital gain as Rs. 22,05,090/-. The cost of the land as on 01.04.1981 was taken at Rs. 32,22,240/- per the Registered Valuer’s Report. The Assessing Officer disagreed and referred the matter to the DVO, who valued the land at Rs. 89,171/-. The Assessing Officer adopted the DVO's valuation, leading to the dispute.

The CIT(A) found that the reference to the DVO was invalid under Section 55A, which allows such a reference only if the value claimed by the assessee is less than its market value. The CIT(A) relied on several judicial precedents, including decisions by the Gujarat High Court, which supported the assessee's position. The Tribunal upheld the CIT(A)'s decision, noting that the amendment to Section 55A by the Finance Act, 2012, effective from 01.07.2012, was substantive and applicable only from AY 2013-14 onwards. Since the year in question was AY 2012-13, the reference to the DVO was invalid, and the Registered Valuer’s Report was to be used for determining the fair market value.

2. Deduction under Section 54B for Investment in New Agricultural Lands:

The Revenue also challenged the CIT(A)'s decision to allow the assessee's claim for deduction of Rs. 86,50,005/- under Section 54B. The Assessing Officer disallowed the claim because the new agricultural lands were purchased before the transfer of the old agricultural land, which was transferred on 13.06.2011.

The assessee argued that the old land was transferred on 11.04.2011 when an agreement to sell was executed, and possession was given, making it a transfer under Section 2(47)(v) of the Act. The sale proceeds were received on 09.05.2011 and used to purchase new agricultural lands. The CIT(A) accepted this explanation, noting that the agreement to sell was notarized, possession was given, and the sale proceeds were received and invested in new lands. The CIT(A) found that the transfer occurred on 11.04.2011, and the new lands were purchased within two years, making the assessee eligible for the deduction under Section 54B.

The Tribunal upheld the CIT(A)’s decision, agreeing that the transfer of the old land occurred on 11.04.2011 under Section 2(47)(v) read with Section 53A of the Transfer of Property Act, 1882. The new lands were purchased within the specified period, entitling the assessee to the deduction under Section 54B. The Tribunal found no reason to interfere with the CIT(A)'s findings and dismissed the Revenue's appeal.

Conclusion:

The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decisions on both issues. The reference to the DVO was invalid, and the assessee was entitled to the deduction under Section 54B for the investment in new agricultural lands. The order was pronounced in the open Court on 6th April 2022 at Ahmedabad.

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