TaxTMI 
TaxTMI 
2018 (8) TMI 642
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....cted under scrutiny by issuing of notice u/s. 143(2) of the act on 3rd Sep, 2014. The assessee was engaged in trading of float glass, figures glass and labour and had also shown income from capital gain and income from other sources. Further, the facts of the case are discussed under respective ground of appeal as under:- First ground of appeal disallowance on deduction u/s. 54F of the act of Rs. 40,74,793/-. 4. On scrutiny, the assessing officer noticed that assessee has claimed exemption u/s. 54F of the act of Rs. 40,74,793/- out of long term capital gain invested in house at Akshar chowk Vadodara. The assessing officer noticed that as per provision of section 54F exemption is available if the assessee has purchased within one year before the date of transfer or two years after the date of transfer (or constructed within three years after the date of the receipt of compensation in the case of compulsory acquisition) one residential house. The assessing officer noticed that the transfer of the land was taken place on 3rd July, 2012, however, the assessee had purchased the residential house on 22nd April, 2010 which was beyond the time allowed as per the provision of section 54F....
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....sfer are exempt from tax if the assessee has purchased another land for agricultural purpose within a period of two years from the date of such transfer. However, the assessing officer has noticed that the assessee has sold the land which was nonagricultural and purchased the above cited agricultural land before the transfer of the said non-agricultural land. Therefore, the assessee was show caused to explain why exemption u/s. 54B of the act should not be disallowed. The assessee explained that he has purchased the agricultural land on 3rd Nov, 1989 which was sold to Smt. Neetaben Mukandbhai Patel and on 13th August, 2008. He had entered into agreement to sell agricultural land to the above party. The buyer of the land has requested him to get the land converted into nonagricultural. The buyer has also agreed to bear all the conversion expenses and the entire conversion expenses were recovered from the buyer of the land. The assessing officer has not accepted the explanation of the asssessee and stated that as per the provision of section 54B of the act capital gain arising from the transfer of land being used by an individual or his parents or Hindu Undivided Family for agricultu....
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....l, the assessee had entered into an agreement to sell the house on December 27, 2002. But the sale deed could not be executed by him because of the fact that the will, by virtue of which he had inherited the house, had been challenged in the Court by another person and only after the decision in that case, the assessee could execute the sale deed. During the pendency of proceedings relating to challenge of the will, the Court had restrained the assessee from the dealing with the house property. Meanwhile the assessee had purchased another house on 30.04.2003 whereas the sale deed of the original house could be executed only on September 24, 2004. Under such peculiar circumstances, the Hon'ble Supreme Court held as follows: "In view of the aforestated peculiar facts of the case and looking at the definition of the term 'transfer" as defined under Section 2(47) of the Act, we are of the view that the appellants were entitled to relief under Section 54 of the Act in respect of the long term capital gain which they had earned in pursuance of transfer of their residential property being House No. 267, Sector 9-C, situated in Chandigarh and used for purchase of a new asset/res....
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.... convert this agricultural land to non agricultural land arose due to the restrictions on such transfer of agricultural land for non agricultural purposes placed by the provisions of Section 43 of the Bombay Tenancy & Agricultural Lands Act, 1948, as applicable to the State of Gujarat, now known in the State of Gujarat as Gujarat Tenancy and Agricultural Lands Act, 1948 (Tenancy Act for short). Section 43 of the Tenancy Act related to restriction on transfer of agricultural land purchased or sold under the Tenancy Act. It was amended from time to time and lastly by virtue of the Gujarat (Amendment) Act No. XXX of 1977, Section 43 came to be further amended by substituting new Section 43, which presently holds the field, and reads as follows : "43. Restriction on transfers of land purchased or sold under this Act.- (1) No land or any interest therein purchased by a tenant under section 17B, 32, 32F, 32-1, 32-0, 320, 43-ID or 88E or sold to any person under section 32P or 64 shall be transferred or shall be agreed by an instrument in writing to be transferred, by sale, gift, exchange, mortgage, lease or assignment, without the previous sanction of the Collector and except in consi....
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....e Agricultural Refinance and Development Corporation, established under the Agricultural Refinance and Development Corporation Act, 1963. (IB) Nothing in sub-section (1) for (1AA) shall apply to land purchased under section 32, 32F or 64 by a permanent tenant thereof, if prior to the purchase, the permanent tenant, by usage, custom, agreement or decree or order of a court, held a transferable right in the tenancy of the land. (2) Any transfer or partition, or any agreement of transfer, or any land or any interest therein in contravention of sub-section (1) shall be invalid." 5.3.3.1. The provisions of the above mentioned section 43 of the Tenancy Act were challenged before the Hon'ble High Court of Gujarat in a writ petition. The Court in its decision in the case of PATEL KAMALBHAI SHARADBHAI-Petitioner(s) Versus STATE OF GUJARAT & 2 - Respondent(s) dated 03/05/2011 in letter Patent Appeals bearing Nos. 1127 of 2008 and others, has held as follows: "42. Many of the petitioners have taken a plea that they have already made agreement for sale long back, applied for permission and there was no latches on their part, but there was latches on the part of the State authori....
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....n is granted by the Collector, the valuation of the land will be that of the date when such permission is granted i.e. the prevailing valuation Therefore, the petitioners cannot claim that the valuation should be made on the basis of the valuation as was existing on the date they applied i.e. about 5 to 6 years back or more. 44. Further, if the petitioners will not transfer the land as of today or in future to another person at the costs as was prevailing 5 to 10 years back and for the purpose of stamp duty, they will pay stamp duty as was prevailing at the time of sale, they cannot claim determination of valuation as was prevailing at the time of sale. For the said reason, the petitioners cannot take any advantage of the judgments referred by them which are not applicable in the facts and circumstances of the cases in hand. We, therefore, hold that the crucial date for determination of the premium is the date on which the Collector grants such permission, i.e. prospective date and not retrospective date. For the same very reason, we hold that the resolution dated 4.7.2008 is prospective and cover all the pending cases, including the cases where assessment was made by State or ....
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....be mentioned here that the sale deed itself mentions that the permission of converting the land into non agricultural land was given by the appropriate authority on 16.05.2012. Due to this fact, the sale agreement and the subsequent possession receipt were illegal and hence did not confer any right on the purchaser in this land. Even the conversion of the agricultural land to the non agricultural land had been carried on by the appellant. Under such circumstances of the present case, it is held that the land was transferred only on 03.07.2012 when a registered sale seed was executed and prior to this, there extinguishment of any right of the appellant in the said land and there was no creation of any right of the purchaser in the said land as the same were prohibited by the law relating to transfer of agricultural land as existing in the state of Gujarat. Thus, the appellant has purchased the house property prior to one year from the date of transfer of the land and hence, he is not eligible for deduction u/s 54F of the Act as has been held by the AO. 5.4.1. In this respect, it is seen that the Hon'ble High Court of Gujarat in its decision in the case of Smt. Santaben P Gand....
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....ew, are the agreements entered into by the assessee with the Brihan Society. The assessee agreed to sell the Ajni land to the Brihan Society admittedly for utilisation for non-agricultural purposes. The sales were to take place within about 4 months of the respective agreements of sale. From the point of time the agreements for sale were entered into, agricultural operations upon the Ajni land were, patently, stop-gap arrangements to cover the space of about 4 months till the conveyances were entered into. On the dates on which the Ajni land was conveyed by the assessee to Brihan Society, its character or nature was, therefore, not agricultural. It was not entitled to the exemption given to agricultural land, an exemption given, as the Supreme Court said in the case noted above, 'to encourage cultivation or actual utilisation of land for agricultural purposes'." 6.3.1. In the present case, the fact are even more against the appellant as in the revenue records also, on the date of sale of land, it had become non agricultural in nature. Hence, the AO has rightly held that the appellant was not entitled to any deduction u/s 54B of the Act. Accordingly, this ground of appeal ....
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....ial house by an order of a competent court, which they could not have violated. We have perused the decision in the case of Sanjeevlal case of the Hon'ble Supreme Court wherein the assessee has entered into an agreement to sell the house on 27th Dec, 2002 and the sale deed could not be executed for the reason that the assessee had been prevented from dealing with the residential house by the order of the court due to pending litigation. The relevant part of the judgment of hon'ble supreme court of India in the case of Sanjiv Lal vs. CIT 365 ITR 389 is reproduced as under:- "23. Consequences of execution of the agreement to sell are also very clear and they are to the effect that the appellants could not have sold the property to someone else. In practical life, there are events when a person, even after executing an agreement to sell an immoveable property in favour of one person, tries to sell the property to another. In our opinion, such an act would not be in accordance with law because once an agreement to sell is executed in favour of one person, the said person gets a right to get the property transferred in his favour by filing a suit for specific performance and therefore....