Commissioner of Income Tax, Ludhiana v. Jaswant Singh

Mr. Rajesh Katoch, Standing Counsel for the appellant-Revenue. Mr. Akshay Bhan, Advocate for the respondent-assessee --- AJAY KUMAR MITTAL, J. This appeal under Section 260A of the Income-Tax Act, 1961 (for short “the Act”) has been filed by the assessee against the order dated 15.7.2005, passed by the Income Tax Appellate Tribunal Income Tax Appeal No. 670 of 2005 2 Chandigarh Bench ‘B’ Chandigarh (in short “the Tribunal”) in ITA No. 547/CHANDI/2003, relating to the assessment year 1998-99. The appeal was admitted on 13.12.2006 for determination of the following substantial question of law by this Court: “Whether exemption of capital gains under Section 54-B of the Act is allowable to the assessee in the absence of completion of sale transactions?” The facts, in brief, necessary for adjudication, as narrated in the appeal are that during the financial year 1997-98, relevant to the assessment year 1998-99, the appellant-assessee sold some agricultural land owned by him and his three brothers, and received a sum of Rs. 16,42,562/- i.e. 1/4th share out of the joint land and Rs. 17,57,644/- as sale consideration of his individual land. In response to the notice under Section 148 of the Act issued by the assessing officer to assess his long term capital gain, the assessee did not file any return of income. The assessing officer vide order dated 28.3.2002 assessed the capital gains to the tune of Rs. 28,37,472/-. The assessing officer observed that deduction under Section 54B of the Act could not be allowed as the assessee did not deposit the sale consideration in the specified account with the bank under the Capital Gains Account Scheme, 1988, before the due date for furnishing the return under Section 139(1) of the Act. The appeal carried by the assessee before the Commissioner of Income-tax (Appeals) {in short “the CIT(A)”}, was allowed vide order dated 11.6.2003. While allowing the appeal, the CIT (A) observed that the assessing officer did not take into consideration the fact that the amount received by the assessee on account of sale Income Tax Appeal No. 670 of 2005 3 consideration in respect of the land sold had been utilized by the assessee for purchasing agricultural lands which was required to be considered for purposes of working out the benefit of deduction under Section 54B of the Act, and since the amount invested was in excess of the capital gains for purchasing agricultural lands, the requirements of Section 54B of the Act stood complied with. The relevant observations read thus: “3.2 As is evident from the above, the amounts utilized towards the purchase of agricultural lands have also to be considered for the purpose of working out the benefit of deduction u/s 54B. Since the amounts, far in excess of the capital gains had been invested in the purchase or had been utilized towards the purchase (in the shape of advances), nothing remained to be deposited in the specified account. The requirements of section 54B, therefore, stood complied with.” Aggrieved by the order of the CIT(A), the Revenue preferred appeal before the Tribunal. The Tribunal dismissed the appeal vide order impugned herein before this Court. We have heard learned counsel for the parties and have perused the record. The Tribunal while upholding the order of the CIT(A) had held that the assessee had purchased the new asset in the form of agricultural lands or had made advance payment for the purchase of the new asset before the expiry of the time due for furnishing the return under Section 139 of the Act and thereby the assessee had utilized the Income Tax Appeal No. 670 of 2005 4 amount in excess of the capital gains. The observations of the Tribunal on the point under consideration are as under: “The assessee purchased land for an amount of Rs. 2,77,602/- vide two different registered deeds executed on

29.8.1997 for Rs. 64,601/- and registration deed No. 10615 for Rs. 2,13,001/- executed on 10.8.1998. The assessee also utilized a sum of Rs. 8 lac by paying an advance on

18.5.1998 to Smt. Ishar Kaur alias Kartar Kaur and Mithu alias Malkiat Kaur against purchase of land. The assessee also paid another sum of Rs. 1,50,000/- as advance to the same vendors on 3.8.1998. The main contention of the assessee before us is that the entire amount of capital gain was utilized for purchase of agricultural land within the specified time and nothing survives for consideration as capital gains. The learned first appellate authority opined that since the capitals gain have been invested in the purchase of the land, nothing remained to be deposited in the specified account and, thus, the requirement of Section 54B stood complied with.

7. The only grievance of the revenue is that the amount was not deposited in the specified account in any bank or institution as per the scheme of Central Government. Section 54B (2) is very much clear which says that the amount of the capital gains which is not utilized by the assessee for the purpose of the new assets before the date of filing of return under Section 139 shall be deposited by him before furnishing such return. Undisputedly, the Income Tax Appeal No. 670 of 2005 5 assessee purchased the new assets or made the advance payment for the purchase of the new asset before the expiry of time for furnishing the return and was utilized by the assessee, so there is no question of attraction of this sub- section when the assessee had already utilized this amount where is the question of depositing the amount in the specified account, as declared by the Central Government. If this issue is analyzed from different angle whether the assessee is having income from any other sources of income. On this count also nothing contrary was brought on record by the revenue. The only source of income of the assessee is from agriculture. In that situation also the assessee is not supposed to pay tax. Undisputedly, the assessee utilized the entire amount of capital gain for purchasing the agricultural land within the stipulated period, nothing survives for consideration as capital gain in the hands of the assessee. On the other hand, the Assessing Officer has adopted arbitrary figures of sale proceeds and no source was specified then the figures in the sale deeds are only to the considered to be true. Since the assessee purchased the agricultural land before the due date of filing of return on a total amount as shown in the different registered deeds, nothing remains for capital gains.

8. The condition of applicability of Section 54B (1) has also been complied with by the assessee. While coming to this conclusion we are further fortified by the decision of the Hon’ble High Court of Madras pronounced in the case of CIT Income Tax Appeal No. 670 of 2005 6 vs. Jayalakshmi Rajendran (1985) 152 ITR 744 (Madras) wherein it was held that for satisfying the condition as mentioned in Section 54B (1), the purchase of any other agricultural land must be through registered conveyance. A mere agreement to purchase is not sufficient. In the present case also the purchase of the new asset/agricultural land is through registered deed further supports the case of the assessee. While coming to this conclusion, we are further fortified by the decision pronounced by the Hon’ble High Court of Allahabad in the case of CIT vs. Janrudhan Das (1987) 163 ITR 806 (All.) and also from the decision of the High Court of Kerala pronounced in the case of P.K. Kesavan Nair Vs. CIT (1988) 174 ITR 253 (Ker.). This is also not the case of the revenue that the land in question was not agricultural land or was not used for agricultural purposes so as to disentitle the assessee for benefit of Section 54B. For this purpose, we are fortified by the decision pronounced by the High Court of Allahabad in the case of Handicrafts Industries vs. CIT (1995) 216 ITR 522, 524 (All.) In view of these facts and judicial pronouncements we are upholding the order of the learned CIT(A), the appeal of the revenue is dismissed.” Both the appellate authorities have observed in clear terms that the assessee utilized the amount of sale consideration received by him in respect of sale of his land by purchasing the new assets and making advance payment for that purpose, well before the expiry of time due for furnishing the return and, therefore, the assessee was entitled to Income Tax Appeal No. 670 of 2005 7 the benefit of provisions of Section 54B of the Act. Learned counsel for the Revenue could not point out any mistake of law or perversity in the aforesaid finding recorded by the CIT(A) and the Tribunal that may persuade this Court to interfere therewith. In view of the above, the substantial question of law is answered against the Revenue and finding no merit in the appeal, the same is dismissed. (AJAY KUMAR MITTAL) JUDGE November 30, 2010 *rkmalik* (ADARSH KUMAR GOEL) JUDGE