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Capital gain

MOHD AZID (TAX LAWYER) (142 Points)

12 March 2015

My client & his other 4 brothers & his mother sold urban parental agriculture land for Rs. 1 crore through a single registry. All 6 indidiuals were nominees of said agriculture land. All 6 individuals purchased further agriculate land for Rs. 1 crore in the name of mother only.

can all 5 brothers claim deduction u/s 54B?

looking for earliest reply.

Reagards

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CA HAYEDAR SHAIKH (Practice ) (622 Points)
Replied 26 March 2015

Dear Md. Azid,

All the five brothers will not eligible to claim deduction u/s. 54B as the same was in the case of High Court of Rajasthan Kalya Vs. Commissioner of Income Tax ( IT appeal no. 112 of 2012).

Please go through the following for the better understanding -

In the given case, the assessee sold his agricultural land to M/s. Vatika Limited on 12/10/2006. In order to claim the exemption u/s.54b , the assessee purchased new agricultural land in the name of son and daughter in law.

“Also the Hon’ble Delhi High Court in the case of Vipin Malik (HUF) v. CIT, 330 ITR 309 has held that residential house which was purchased or constructed had to be of the same assessee whose agricultural land was sold. In the case before Hon’ble Delhi High Court, the residential house was in the individual name of the assessee and his mother while the land belonged to HUF. The deduction u/s. 54F was not allowed in the case of Jai Narain v. ITO, 306 ITR 335 in which it was held that term ‘assessee’ mentioned in Section 54B is quantified by the expression ‘Purchased any other land for being used for agricultural purposes which necessarily means that the new asset should be in the name of the assessee himself. In the case of Gurnam Singh (supra), it was noticed by the Tribunal that the assessee’s son was shown in the sale deed as co-owner. The Hon’ble Punjab & Haryana High Court held that no substantial question of law is involved because it is not the case of the revenue that the land in question was exclusively used by the son of the assessee. We therefore, uphold the findings of the ld. CIT (A) that no deduction u/s 54B will be available on the issue of purchase of land in the name of his son and wife.”

It is relevant to note that the land sold was in the name of appellant-assessee, while the land purchased was in the name of his son and daughter-in-law. A bare reading of Section 54B of the Income Tax Act does not suggest that assessee would be entitled to get exemption for the land purchased by him in the name of his son and daughter-in-law.

In the facts and circumstances of the case also aforesaid inference has not been drawn. Same is question of fact. No substantial question of law arises in appeal. Question whether purchase was by assessee or by son, is a question of fact.

Secondly, the word “assessee” used in the Income Tax Act needs to be given a ‘legal interpretation’ and not a ‘liberal interpretation’, as contended by the learned counsel for the appellant. If the word ‘assessee’ is given a liberal interpretation, it would be tantamount to giving a free hand to the assessee and his legal heirs and it shall curtail the revenue of the Government, which the law does not permit.

The Income Tax Appellate Tribunal, having considered all the facts and circumstances of the case, is found to have rightly disallowed the exemption under Section 54B of the Act.

The order passed by the learned Tribunal is just and apposite, based on logical findings, with which we fully agree and therefore, the same warrants no intervention.

For the reasons stated above, the income tax appeal fails and the same being bereft of any merit deserves to be dismissed, which stands dismissed accordingly.