TaxTMI 
TaxTMI 
2016 (6) TMI 1251
X X X X Extracts X X X X
X X X X Extracts X X X X
.... (c) Whether the ld. CIT(A) is right in allowing deduction u/s 54b whereas the land was purchased before sale of land on which the capital gain has arisen." 2. The AO found that the assessee had not paid due tax on capital gain income of Rs. 2,42,24,176/-, added this amount as the assessee's income, vide assessment order passed u/s 144 of the Income Tax Act, 1961. 3. The ld. CIT(A) deleted the addition by observing as follows: "7. I have considered the facts of the case, the arguments of the AR during assessment proceedings as well as appellate proceedings. The comments of the Assessing Officer during remand proceedings have also been considered. It is seen that the appellant had claimed that an amount of Rs. 3,17,60,750/- had been paid to 11 persons for evicting them from the impugned piece of land before the transaction could be finalized for sale. The details regarding the eviction money paid to different persons had been submitted during the appellate proceedings and the Assessing Officer has verified the contentions of the appellant in this regard to be correct. Since the said amount paid as earnest money had to be paid for ensuring the smooth sale of the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....9 dated 10.05.1983 which is with reference to section 54E. The said circular qualifies the situation as under:- "Section 54 of the Income Tax Act, 1961 provides for exemption of long term capital gains if the net consideration is invested by the assessee in specified assets within a period of six months after the date of such transfer. A technical interpretation of S.54E could mean that the exemption from tax on capital gains would not be available if part of the consideration is invested prior to the date of execution of the sale deed as the investment cannot be regarded as having been made within a period of six months after the date of transfer. On consideration of matter in consultation with the Ministry of Law, it is felt that the foregoing interpretation would go against the purpose and spirit of the section. As the section contemplates investment of the net consideration in specified assets for a minimum period and as earnest money or advance is part of the sale consideration the Board have decided that if the assessee invests the earnest money or the advance received in specified assets before the date of transfer of asset the amount so invested will quali....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion 2(47) of the Act, it is clear that when any right in respect of any capital asset is extinguished and that right is transferred to someone, it would amount to transfer of a capital asset. An agreement to sell in respect of a capital asset had been executed on 27th December, 2002 for transferring the residential house/original asset in question and a sum of Rs. 15 lakhs had been received by way of earnest money. It is also not in dispute that the sale deed could not be executed because of pendency of the litigation between R on one hand and the assessee on the other as R had challenged the validity of the Will under the property had devolved upon the assessee. By virtue of an order passed in the suit filed by R, the assessee were restrained from dealing with the said residential house and a law-abiding citizen cannot be expected to violate the direction of a court by executing a sale deed in favour of a third party while being restrained from doing so. In the circumstances, for a justifiable reason, which was not within the control of the assessee, they could not execute the sale deed and the sale deed had been registered only on 24th September, 2004, after the suit filed by R,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f 'transfer' which would enable the assessee to get the benefit under s.54 - Oxford University Press vs. CIT(2001) 165 CTR (SC) 629: (2001) 3SCC 359 applied. In view of the peculiar facts of the case and looking at the definition of the term 'transfer' as defined under s.2(47) the assessee were entitled to relief under s. 54 in respect of long term capital gain which they had earned in pursuance of transfer of their residential property and used for purchase of a new asset/residential house. The authorities are directed to reassess the income of the assessee for asst. year 2005-06 after taking into account the fact that the assessee were entitled to the relief, subject to fulfilment of other conditions - Sanjeev Lal etc. etc. (judgments dt. 29th Jan, 2013 of the Punjab and Haryana High Court in IT appeal Nos. 153 & 154 of 2012) set aside." In view of the above facts & circumstances and direct judicial pronouncements by the Hon'ble Apex Court on the issue, the appellant's claim for deduction under section 54 is allowed. The difference of Rs. (-)15,79,477/- pointed out by the Assessing Officer between sale and purchase consideration also would not lead any taxable Capital Ga....
X X X X Extracts X X X X
X X X X Extracts X X X X
..../09/2013. The A.O. thereafter not even thinking of providing another opportunity to the assessee jumps over for completion of assessment u/s 144. This act of A.O. of deeming it not necessary to issue another notice to be fair and act in a judicious manner has resulted in the aforesaid assessment u/s 144. The Asstt. was TIME BARRING only on 31/03/2014 and the A.O. had well more than six months with him to frame the Asstt. But the A.O. in his hurry to frame the Asstt. acted in gross violation of the settled legal principles of natural justice and thus the asstt. suffers on this aspect and deserves to be quashed. (ii) From the Order of the A.O. the following legal issues are made out:- 1. That the Asstt. suffers on A/c of lack of opportunity and this needs to be annulled. II. That the land is situated beyond 8 Kilometers from Kartarpur and thus its sale is exempt and no Capital Gains are assessable being Agricultural in nature. III. That the Capital Gain has wrongly been worked out without indexation. IV. So much so, even the demand has not been worked out properly. V. No reasons were even confronted to the assessee which has given....
X X X X Extracts X X X X
X X X X Extracts X X X X
....at if any meager estimate of cost of land is applied as on 01/04/1981 and consequently after indexation, the same shall well be fully covered under section 54B & 54F of the Act and thus there shall be no Capital Gains or question of any tax. The assessee is separately moving an application under rule 46A of the Act for admission of additional evidence. The assessee prays for admission of additional evidence and on that basis requests for deletion of consequential addition on A/c of Capital Gains." 7. The ld. CIT(A) called for a remand report from the AO. This remand report. This remand report, as reproduce in para 4 of the impugned order is as follows: "4. The submissions of the appellant were sent to the Assessing Officer for his comments seeking his opinion on the issue of framing assessment under section 144 of I.T.Act, 1961 and also to verify the claim of the appellant with regard to NIL capital gain arising out of the impugned transaction. The Assessing Officer vide his report dated 24.09.2014 submitted his comments as under:- "In this connection, it is submitted that this case was assessed under section 144 of the Income Tax Act, 1961 at....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e final registry of the said land is not done as the matter is in the Court. Therefore, the final sale of this land has not been done till date. c. As regards, the purchase of house, the house has been purchased in May, 2008. The assessee has submitted that this house being in Lal Lakir, no registry has been done. The claim of the assessee regarding exemption under section 54B & 54F may be decided accordingly." 8. The assessee furnished the counter comments to the remand report. These are as follows: "i. That as far as admission of additional evidence under rule 46A of the Act is concerned, the A.O. has absolutely no objection to its admission and therefore no comments are offered. ii. Coming to the merits of the case the A.O. has conceded that the land sold and purchased is Agricultural which is the basic requisite of section 54B of the Income Tax Act for claim of exemption. iii. The A.O. has also perused the evidence and has agreed that eviction charges to the extent of Rs. 79,70,797/- were paid as per the evidence filed which shall be deducted from the sale of sale consideration u/s 48(1). iv. However the A.O. has the foll....
X X X X Extracts X X X X
X X X X Extracts X X X X
....given to the provisions of the Act." Thus in view of above facts the assessee fully qualifies for exemption u/s 54B of the Act. ii) Coming to the second objection of the A.O. that the four registrations predates the date of sale, it is submitted as under:- That the dates of Regd. as mentioned by A.O. are:- a) Registry dated 29.08.2008 Rs. 1,00,72,500/- b) Registry dated 28.08.2008 Rs. 1,27,92,500/- c) Registry dated 21.08.2008 Rs. 1,32,60,000/- d) Registry dated 17.09.2008 Rs. 8,50,000/- That the A.O. has lost sight of the fact that although in four above cases the registrations took place after the purchase but the entire amount in the first three Registration was received much before the Registrations as per following details:- i) Rs. 1,00,72,500/- received on 21/01/2008 ii) Rs. 1,27,92,500/- received on 21/01/2008 iii) Rs. 1,32,60,000/- date not clear but in any case before 21/04/2008 It was against this money that the purchase was made. The legal position and Courts are clear on the subject. In exactly similar circumstances the Supreme Court in latest judgment of Sanjeev Lal etc. Vs. CIT reported ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cumstances, a right in personam is created in favour of the transferee/vendee by executing an agreement to sell in respect of an immovable property - When such a right is created the vendor is restrained from selling the said property to someone else as the vendee in whose favour the right in personam is created has a legitimate right to enforce specific performance of the agreement if the vendor for some reason is not executing the sale deed-Thus, by virtue of the agreement to sell some right is given by the vendor to the vendee - Though the entire property cannot be said to have been sold at the time when the agreement to sell is entered into, in view of the provision of s. 2(47) which defines the word "transfer" in relation to a capital assets, it can be said that if a right in the property is extinguished by execution of an agreement to sell, the capital asset can be deemed to have been transferred." The facts of the above case are - the same as the amount paid on the basis of Agreement has to be allowed for exemption purposes u/s 54B. iv) The fourth and the last objection of the A.O. is the non registration of Residential House. It is submitted that in Revenue reco....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he assessee himself for agricultural purposes, I do not agree with the view of the Assessing Officer on the issue as the requirement of usage of agricultural land is with reference to the land and not with reference to the person who owns it. For instance, if a person owns agricultural land and derives rent from the same, it also qualifies as agricultural income not taxable under Income Tax Act, 1961 even though the agricultural operations are not performed personally by said owner of agricultural land. The situation in the current case is also same as the owner of the land had given impugned agricultural land for the purpose of tiling who in the course of time developed vested interest in the form of possession of land but the fact remains that land itself had been used for agricultural purposes all along and does not lose its character of being used as agricultural land whether the operations are performed by the owner or the tenant. Therefore, the view of the Assessing Officer on the issue is rejected. The second issue raised by the Assessing Office in the remand report is that certain registrations in respect of purchase of agricultural land had been effected before the date of....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... money had been used for making the consequential purchase should not come in the way of allowing the claim of deduction under section 54B. Even otherwise, the AR has placed reliance on the judgment of Hon'ble Apex Court in the case of Sanjeev Lal etc. Vs. CIT 269 CTR 1 which is directly on the issue of definition of 'transfer' under section 2(47) and claim of deduction under section 54. The Hon'ble Court has observed that even an agreement to sell could amount to a transfer for the purposes of section 2(47)/54." .................... ..................... In view of the above facts & circumstances and direct judicial pronouncements by the Hon'ble Apex Court on the issue, the appellant's claim for deduction under section 54 is allowed. The difference of Rs. (- )15,79,477/- pointed out by the Assessing Officer between sale and purchase consideration also would not lead any taxable Capital Gain as benefit of indexation given on any reasonable value would lead to negative gain. Therefore no Capital gain is leviable on the impugned transaction. The addition made by the Assessing Officer is therefore directed to be deleted. 10. Further, it is seen that....
X X X X Extracts X X X X
X X X X Extracts X X X X
....de. VERY IMPORTANT:- The aforesaid rate and valuation has been accepted by the A.O. during his remand proceedings and his report is clear on the subject. 11. I have considered the arguments of the AR on the issue and it is seen that the Fair Market Value as adopted at Rs. 2923/- per marla is based upon the report of the local revenue authority which is quite logical and records various facets of the impugned land and its related valuation on the given date. The AR has also brought on record the valuation adopted in respect of similar land in respect of particular case heard by Hon'ble ITAT Amritsar wherein the valuation at Rs. 5,000/- per marla has been considered. In view of these indisputable facts, the valuation adopted by the appellant at Rs. 2923/- per marla as on 01.04.1981 is reasonable and therefore acceptable. The computation of capital gain in view of above comes to NIL. In the result appeal is allowed." 10. There is no rebuttal to these well reasoned findings recorded by the ld. CIT(A). The ld. Assessee had claimed to have paid a sum of Rs. 3,17,60,750/- to 11 (eleven) persons for evicting them from the impugned piece of land before the sale of la....