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For claiming deduction u/s 54B, condition of investment prior to filing of ROI is applicable only if sale consideration is received before filing of Return: ITAT

2019-TIOL-1561-ITAT-JAIPUR

IN THE INCOME TAX APPELLATE TRIBUNAL
BENCH ‘B’ JAIPUR

ITA No.678/JP/2018
Assessment Year: 2013-14

BIRMA DEVI
B-21, JADON NAGAR
NEAR RAILWAY STATION
DURGAPURA, JAIPUR
PAN NO: BKCPD2758M

Vs

INCOME TAX OFFICER
WARD 6(2), JAIPUR

Ramesh C Sharma, AM & Vijay Pal Rao, JM

Date of Hearing: March 06, 2019
Date of Decision: April 12, 2019

Appellant Rep by: Shri S L Poddar, Adv.
Respondent Rep by: 
Shri B K Gupta, CIT DR

Income Tax – Section 54B.

Keywords – Sale of agricultural land – Long term capital gain.

THE assessee an Individual filed return for relevant AY. The assessee had shown her income from tuition and agriculture. Apart from it, the assessee had sold agricultural land for total consideration of Rs.5,68,81,546/- and shown long term capital gain of Rs.5,39,67,384/- and further claimed deduction u/s 54B of Rs.5,39,67,384/-. The assessee was asked to furnish the details of her income, capital gain and supporting evidence in respect of deduction claimed u/s 54B. During assessment, the AO noticed that the assessee had sold three agriculture lands situated at Muhana, Sanganer, Jaipur on 06/02/2013 for total sale consideration of Rs. 5,68,81,546/- and further deduction u/s 54B had been claimed by purchasing of agriculture land at Mauja Sheikhpur, Fatehabad on 28/08/2014 for consideration of Rs.5,50,00,000/-. The assessee sold agriculture property on 06/02/2013 and made investment in agriculture land on 28/08/2014. The due date of filing return of income was 31/07/2013 for the year under consideration. Further it was noticed that the assessee had not deposited the sale consideration in capital gain account before the due date of filing of income tax return. Accordingly, the AO declined claim of deduction U/s 54B of the Act. On appeal, CIT(A) upheld the order of AO.

On appeal, Tribunal held that,

Whether for claiming deduction u/s 54B of Act, condition of investment prior to the filing of ROI is applicable only if sale consideration is received before filing of Return – YES : ITAT

Whether claim of deduction u/s 54B upon sale of agriculture land can be allowed if sale consideration is used to purchase another agriculture land within two days of receipts – YES : ITAT

++ in section 54E/54EC, the investment in the bonds are to be made within 6 months from the date of transfer of capital asset, whereas u/s 54B, the agriculture land is to be purchased before filing of ROI. Further, there is no concept of deposit in capital gains deposit account scheme u/s 54E/54EC, whereas, u/s 54, 54B, 54F, if the amount of capital gains is not invested in the purchase of land before filing of ROI, then the same has to be deposited in capital gains deposit account scheme. In this regard, it was observed that the contention of the DR is not acceptable on the- ground that the amount of capital gain can be invested in purchase of land only on receipt of the sale consideration and the intention of the legislature is that the amount of sale consideration should not be utilized otherwise other than purchase of agriculture land and in the instant case the assessee has invested the wholesale consideration in purchase of another agriculture land within two days which is clear from the bank statement of the assessee. The period of six month or condition of investment prior to the filing of ROI is applicable only in the cases where sale consideration has been received before filing of ROI. When the sales consideration itself was received after filing of ROI then the case law relied upon by the AR is squarely applicable in the instant case. Specially the case of CIT Vs Jagriti Aggarwal, 2011-TIOL-672-HC-P&H-IT wherein it has been held. That the assessee is entitle to claim benefit u/s 54, if the investment was made in purchase of new assets or deposit in account before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment whichever is earlier under sub-s. (4) of s. 139. It was also the contention of the CIT-DR that the second proviso to section 54E is also relevant, But this is not a case of compulsory acquisition where second proviso to section 54E is applicable similarly the provisions of section 54 and 54B are pari materia, but the provision of section 54E/54EC are not pari materia with 54B/54F. It was found that the case law cited by the AR in the case of Chanchal Kumar Sircar Vs ITO is applicable because of the circumstances in that case it was held that the period of limitation for making deposit or investment in new assets should be reckoned from the date of actual receipt of the consideration- If period is reckoned from date of agreement and receipt of part payment at the first instance, then it would lead to an impossible situation by asking assessee to invest money in specified asset before actual receipt of the same. Likewise in other cases it was held by the various authorities that the liberal interpretation should be considered in case of exemption. The case of Jyotindra H Shodhan Vs ITO, 2003-TIOL-117-ITAT-AHM-SB, is also not applicable because the case is related to the provision of section 54E and not 54B. The AO was directed to allow the assessee’s claim of deduction U/s 54B of the Act amounting to Rs. 5,39,67,384/- on sale of agricultural land. In the result, appeal of the assessee is allowed.

Assessee’s appeal allowed

ORDER

Per: R C Sharma:

This is an appeal filed by the assessee against the order of ld.CIT(A)-2, Jaipur dated 26/03/2018 for the A.Y. 2013-14 in the matter order passed U/s 143(3) of the Income Tax Act, 1961 (in short the Act). Following grounds have been taken by the assessee:

“1. That the ld. CIT(A)-2 not allowed the deduction claimed by the assessee U/s 54B of Rs. 5,39,67,384/- on sale of agriculture land and confirmed the addition made by the A.O.

2. That the appellant have crave permission to add, alter, amend or delete any ground or grounds of appeal on or before the hearing of this appeal.”

The assessee has also taken following additional grounds of appeal:

(i) The Ld. CIT(A) has erred in holding that “the appellant has neither deposited the amount in the capital gain scheme nor purchased the new asset not only till the date of filing return u/s 139(1) but even the extended date u/s 139(4).” The Ld. CIT(A) failed to notice that the new asset purchased by the assessee was well within the extended time u/s 139(4) and thus deduction u/s 54B claimed by the assessee was fully allowable.

(ii) The Ld. CIT(A) failed to consider the genuine reasons which delayed the investment in the purchase of new asset and thereby erred in disallowing the deduction claimed by the assessee u/s 54B.

(iii) The Ld. CIT(A) failed to consider that the agricultural land sold by assessee is not an asset u/s 2(14)(iii)(a) or (b) as these provisions stood then and therefore no capital gains are leviable. The agricultural land sold by the assessee is not urban but rural agricultural land.

(iv) The Ld. CIT(A) failed to consider the fact that the agricultural land sold by the assessee is not an asset with reference to provisions of section 2(14)(iii)(a) or 2(14)(iii)(b) as these stood then and thus the provisions of capital gains are not attracted in the case in view of notification dated 06.01.1994.

3. Rival contentions have been heard and record perused. The brief facts of the case are that during the year under consideration, the assessee has shown her income from tuition and agriculture. Apart from it, the assessee has sold agricultural land for total consideration of Rs.5,68,81,546/- and shown long term capital gain of Rs.5,39,67,384/- and further claimed deduction u/s 54B of Rs.5,39,67,384/-. The assessee was asked to furnish the details of her income, capital gain and supporting evidence in respect of deduction claimed u/s 54B. The assessee has filed the details. On perusal of details filed, The A.O. noticed that during the year under consideration, the assessee has sold three agriculture lands situated at Muhana, Sanganer, Jaipur on 06/02/2013 for total sale consideration of Rs. 5,68,81,546/- and further deduction u/s 54B has been claimed by purchasing of agriculture land at Mauja Sheikhpur, Fatehabad on 28/08/2014 for consideration of Rs.5,50,00,000/-. The assessee has sold agriculture property on 06/02/2013 and made investment in agriculture land on 28/08/2014. The due date of filing return of income was 31/07/2013 for the year under consideration. Further perusal of details filed, it is noticed that the assessee has not deposited the sale consideration in capital gain account before the due date of filing of income tax return. Accordingly, the A.O. declined claim of deduction U/s 54B of the Act.

4. Being aggrieved by the order of the Assessing Officer, the assessee filed the appeal before the ld. CIT(A), who after considering the material available on record confirmed the action of the Assessing Officer by holding as under:

“2.3 I have perused the facts of the case, the assessment order and the submissions of the appellant. The facts of the case are that the appellant had shown her income from tuition and agriculture. During the year, the appellant has shown sale of agricultural land for a total consideration of Rs.5,68,81,546/- and shown long term capital gain of Rs.5,39,67,684/- and claimed deduction u/s 54B of Rs.5,39,67,384/-. The AO noted that the sale of agricultural lands at Muhana, Sanganer have been made on 06/02/2013 and further agricultural lands purchased on 28/08/2014 at Mauja Shiekpur, Fatehabad. Thus, it was noted by the AO that while the lands are sold on 06/02/2013, investment in lands is made on 28/08/2014 whereas the due date of filing the return was 31/07/2013 for the year under consideration and since the amounts had not been deposited in the capital gain account Scheme, hence the deduction u/s 54B was not allowable. The AR in his submissions stated before the AO that the lands were sold through three registered sale deeds on 06/02/2013 & 07/02/2013 and the sale consideration was received in the form of advance for an amount of Rs.21,00,000/- i.e. Rs.7,00,000/- for each land and balance consideration was received vide cheques dated 06/08/2014 and 05/08/2014 which were cleared and received in the accounts on 12/08/2014, 20/08/2014 and 19/08/2014 for different amounts. It was further mentioned that these cheques have been recorded in the sale deeds executed for these lands. Thus, it was submitted that the consideration has been received in August, 2014 and further the agricultural lands have been purchased on 28/08/2014 through registered sale deeds, hence the deduction was allowable. Further reliance was placed on the provisions of Section 54E proviso 2 and section 54H. The AO rejected these submissions and concluded that since the net consideration was neither deposited in capital gain account balance till the due date for filing the return u/s 139(1) and investments in agricultural land were made on 28/08/2014 i.e. subsequent to the date of filing the return, thus the deduction u/s 54B was not allowable.

In the present proceedings, the submissions as made in the assessment proceedings were reiterated. It was submitted that the consideration was received subsequently and as soon as the same was received the investment in agricultural land was made. The AR further taking support from Section 54E proviso 2 relied on the content of the section which says that in case of compulsory acquisition of land, the period of 6 months referred to in the sub section shall be reckoned from the date immediately following the date on which such compensation is received by the assesse. Reliance was placed on the judgment in the case of CIT Vs Mrs Shahzada Begum 179 ITR 397 (AP). Further, reliance was placed on the case of GST Vs J. H. Gola 156 ITR 323 (SC) = 2002-TIOL-131-SC-IT where the Apex court held that where the literal interpretation of a statutory provision produces a manifestly unjust result, the same could never have been intended by the legislature.

The conditions for deduction under section 54B are that the if the appellant has purchased an agricultural land within a period of two years after the date of sale of any other land being used for agricultural purposes then it shall be dealt as per sub section 54(1)(i) or (ii). Further 54B(2) states that the amount of capital gain which is not utilized by the assessee for the purchases of new asset before the date of furnishing the return of income under section 139, shall be deposited by him before furnishing such return in an account as specified by the Central Government in this regard and the amount deposited shall be deemed to be the cost of the new asset. The section reads as follows:-

54B(2)

“(2) The amount of the capital gain which is not utilised by the assessee for the purchase of the new asset before the date of furnishing the return of income under section 139, shall be deposited by him before furnishing such return [such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under sub-section (1) of section 139] in an account in any such bank or institution as may be specified in, and utilised in accordance with, any scheme which the Central Government may, by notification in the Official Gazette, frame in this behalf and such return shall be accompanied by proof of such deposit; and, for the purposes of sub-section (1), the amount, if any, already utilised by the assessee for the purchase of the new asset together with the amount so deposited shall be deemed to be the cost of the new asset:

Provided that if the amount deposited under this sub-section is not utilised wholly or partly for the purchase of the new asset within the period specified in sub-section (1), then,-

(i) the amount not so utilised shall be charged under section 45 as the income of the previous year in which the period of two years from the date of the transfer of the original asset expires; and

(ii) the assessee shall be entitled to withdraw such amount in accordance with the scheme aforesaid. “

As is clear from the facts discussed earlier, the appellant has neither p deposited the amount in the capital gains scheme nor purchased the new asset, not only till the date for filing the return under section 139(1) but even the extended date under section 139(4). The agricultural lands are purchased only on 28.08.2014. The plea taken by the appellant that since the cheques mentioned in the sale deed were post dated and so the consideration has actually been received later and so these conditions could not be fulfilled and appellant has invested the amounts as soon as they were received, needs to be rejected. The AR has placed reliance on the case CST Vs J H Golta 156 ITR 323 (SC) = 2002-TIOL-131-SC-IT as discussed earlier. The facts of the case are entirely different. In the present case the terms and conditions have been agreed to by the appellant herself, they were not beyond her control. Thus, if the conditions agreed by the appellant are such as would result in not being able to fulfill the requirements of law, the appellant has landed herself in the situation knowingly. An agreement or sale deed is in the knowledge of both parties to such agreements and terms and conditions are decided mutually and by consent. Therefore, the situation has been created with full knowledge of the provision of the Act. In the case cited, the situation was beyond the control of the appellant and hence the judgement of the Apex Court. Here I would like to place reliance on the judgement of [2013] 38 taxmann.com 7 (Chandigarh-Trib Hussan Lai Puri v. Income-tax Officer, Ward-6(1), Mohali wherein a similar issue came up for consideration that how could the deductions be availed if the amounts had not been received.

“90 Second aspect of this contention was that if consideration which has not been received was to be taxed then the assessee would be deprived for claiming exemption u/s 54 and 54EC. As observed above as per Section 45 r.w.s 48 whole of the consideration, received or accrued has to be taxed. Every person is supposed to know the law and if the transaction is structured in such a way for the transfer of capital asset that some of the consideration would be received later then such person is supposed to know the consequences of the denial of such benefits. However, if the section is interpreted in the manner suggested by the Id. counsel of the assessee then no person would pay capital gain tax on transfer of a property. This will be clear from a simple example. Let us assume if “A” sells the property to “B” for a consideration of RS. 100 crore and receive only a consideration of 1.00 crore and it is mentioned in the transfer instrument that balance of consideration would he paid after 20 years then no tax can be levied on such balance consideration of Rs. 99.00 crore which has not been received as per the contention of the Id. counsel of the assessee. But in that case no taxes can be levied even after 20 years because no transfer can be said to have taken place after 20 years and Revenue cannot do anything because capital gain can be charged u/s 45 only on transfer of capital asset. We do not think that this kind of interpretation can be made while interpreting Section 45 r.w.s. 48 by invoking the rule that there cannot be any tax on notional receipt.”

In view of the facts as above and judicial decision the appellant has clearly not fulfilled the requirements of the provisions of 54B and the deduction disallowed by the AO is confirmed. Ground of appeal is dismissed.”

5. Now the assessee is in further appeal before us. The ld AR of the assessee submitted that in this case the sale consideration was received at Rs. 7,00,000/- cash in each case on 09.02.2013, 11.02.2013 & 12.02.2013. Thus a sum of Rs. 21,00,000/- was received in February 2013. Balance amount was received through cheques and stands accounted for in the bank account of the assessee with Oriental Bank of Commerce in August-2014. Apparently, the sale conditions were such that post-dated cheques were received at the time of sale on 06.02.2013 and the amount of Rs. 5,47,81,456/- (56881546-2100000) was received in August 2014. Soon on receipt of this sale consideration of Rs. 5,47,81,456/- the assessee immediately invested the same in purchase of agricultural land at Mauja Shekhpur, Fatehbad on 28.08.2014 for a sum of Rs. 5,50,00,000/-. As the assessee had immediately invested the sales consideration in purchase of new asset, deduction was correctly claimed u/s 54B in the computation of income. However the Assessing Officer disregarded the submissions of the assessee that she could not invest the sale consideration by the due date u/s 139(1) i.e. 31.07.2013 for filing return of income as the funds were stipulated to be received in August 2014 as such there was no question for investing the same earlier by 31.07.2013.

6. The ld. AR has further submitted that the ld. CIT(A) was conscious that the sale proceeds could be invested in extended period available for filing of return u/s 139(4). It is in the background of this that the Ld. CIT(A) has observed on page 11 of the appellate order that “the appellant has neither deposited the amount in the capital gain scheme nor purchased the new asset not only till the date of filing return u/s 139(1) but even the extended date u/s 139(4). As per ld. AR, this case the Assessment Year involved is Assessment Year 2013-14, therefore time available for investing in the purchase of new asset was up to 31.03.2015. The assessee invested the funds in August 2014 well within the time available u/s 139(4). Reliance was placed by the ld AR on the following judicial pronouncements:

(i) COMMISSIONER OF INCOME TAX vs. MS. JAGRITI AGGARWAL (HIGH COURT OF PUNJAB AND HARYANA) (2011) 339 ITR 0610 = 2011-TIOL-672-HC-P&H-IT

(ii) Mohan Singh vs. Assistant Commissioner of Income Tax, (2015) 173 TTJ 634 (Chd)

(iii) CIT vs. Rajesh Kumar Jalan (2006) 286 ITR 0274 (ITAT Gauhati)

(iv) Nipun Mehtotra vs. Assistant Commissioner of Income Tax (Banglore Tribunal) 113 TTJ 0223

7. The ld AR has further submitted that in view of the aforesaid decisions, the case of the assessee is fully covered for deduction u/s 54B of the Act as the investment made falls within the period u/s 139(4) of the Act.

8. The ld AR of the assessee has further submitted that under the provisions of section 139(4) time was available with the assessee for investment in purchase of new asset up to 31.03.2015 and assessee made investment well within time by purchasing agricultural land on 28.08.2014. Further it was also submitted that even otherwise also on ground of genuine hardship and special features of the case the Learned Assessing Officer should have allowed deduction as claimed by the assessee. The Assessing Officer should have considered the fact that when the sales consideration itself has been received late, how could the assessee be expected to make investments prior to receipt of the sales consideration. It is only when the money is received in hands that assessee could make investments. In support of above proposition he relied upon the following case laws:

(i) Chanchal Kumar Sircar vs. INCOME TAX OFFICER (KOLKATA TRIBUNAL) (2012) 16 ITR 0091, (2012) 50 SOT 0289 = 2012-TIOL-268-ITAT-KOL

(ii) S. GOPAL REDDY vs. COMMISSIONER OF INCOME TAX (HIGH COURT OF ANDHRA PRADESH) (1990) 181 ITR 0378

(iii) COMMISSIONER OF INCOME TAX vs. CELLO PLAST HIGH COURT OF BOMBAY (2012) 76 DTR 0439) = 2012-TIOL-622-HC-MUM-IT

(iv) RAM AGARWAL vs. JOINT COMMISSIONER OF INCOME TAX (BOMBAY TRIBUNAL) (2002) 81 ITD 0163

(v) COMMISSIONER OF INCOME TAX vs. AKBAR ALI DHALA (HIGH COURT OF MADRAS) (2014) 89 CCH 0209 Chen HC/226 Taxman 254 = 2014-TIOL-1319-HC-MAD-IT

(vi) ACIT vs. KAMLAKAR MOGHA (HIGH COURT OF BOMBAY) (2015) 125 DTR 0273 (Bom) = 2015-TIOL-2154-HC-MUM-IT,

9. In the additional ground so raised at sl. No. (iii) and (iv) it was submitted in the written submission so placed on record that the agricultural land sold by the assessee was not an asset u/s 2(14)(iii). The same deserves to be considered accordingly. The then counsel of the assessee while filing of return erred in claiming deduction u/s 54B by treating the agricultural land sold as an asset. The mistake of the counsel cannot come in the way of correct claim that the agricultural land was not an asset. Therefore are plethora of decisions holding that tax has to be charged in accordance with law and revenue is debarred in taking advantage of any mistake of the assessee or her AR. There is circular from CBDT to this effect also. It is submitted that while filing return of income assessee claimed deduction u/s 54B assuming that the agricultural land sold by her was an asset u/s 2(14)(iii) whereas the fact is that the land sold was a rural agricultural land and therefore not an asset within the meaning of section 2(14)(iii). It is submitted that the error committed in showing agricultural land as asset in the return of income is ascribable to the then counsel of the assessee who perhaps was not fully aware with the latest position of law on the issue. It is submitted that the agricultural land sold by the assessee which was situated at village Muhana Tehsil Sanganer was not an urban agricultural land. It was rural agricultural land controlled and administered by Local Panchayat/Tehsil and not by any municipality, Municipal Council, Municipal Corporation, notified area committee, town area committee, town committee etc. etc. The provisions of section 2(14)(iii) are applicable to urban agricultural land and not to rural agricultural land. In view of the aforesaid position of law which is discussed further in detail in the following paragraphs it is submitted that the revenue cannot avail benefit on account of any mistake on the part of the assessee in filing return of income. The ld AR has relied on the following case laws:

(i) Sanchit Software and Solutions Pvt. Ltd vs. CIT (2012) 349 ITR 404 (Mumbai High Court) = 2012-TIOL-797-HC-MUM-IT

In any civilized system, the assessee is bound to pay the tax which he liable under the law to the Government. The Government on the other hand is obliged to collect only that amount of tax which is legally payable by an assessee. The entire object of administration of tax is to secure the revenue for the development of the Country and not to charge assessee more tax than that which is due and payable by the assessee. It is in aforesaid circumstances that as far back as in 11/04/1955 the Central Board of Direct Tax had issued a circular directing AO not to take advantage of assessee’s ignorance and/or mistake. Therefore the Circular should always be borne in mind by the officers of the respondent- revenue while administering the said Act.

(ii) STREAM INTERNATIONAL SERVICES PVT. LTD. vs. ASSISTANT DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION) (2013) 023 ITR 0070

Having heard the rival submissions and perused the relevant material on record, we find that the purpose of income tax assessment is to determine correct income of the assessee. As the Revenue cannot allow an assessee to depress his income, in the same manner, it is not permissible to the Revenue to take advantage of the ignorance or mistake of the assessee in offering more than due income. It is trite that no tax can be collected except as per law. Circular No. 14(XI-35) of 1955 dated 1.4.1955 cautions the Officers of the Department from taking advantage of ignorance of an assessee as to his rights. The Hon’ble Bombay High Court in court in the case of Nirmala L. Mehta v. A. Balasubramaniam, CIT (2004) 269 ITR 1 has held that there cannot be any estoppel against the statute. Article 265 of the Constitution of India clearly provides that no tax shall be levied or collected except by authority of law. Similar view has been taken recently by the Hon’ble jurisdictional High Court in Sancheti Software and Solutions P. Ltd. VS. CIT (2012) 349 ITR 404 (Bom) = 2012-TIOL-797-HC-MUM-IT. In our considered opinion there can be no escape from the proposition that the assessee is entitled to argue at least before the appellate authorities that a wrong stand taken at the time of filing the return of income should be allowed to be modified. The ld. AR has rightly relied on order passed by the Mumbai bench of the Tribunal in the case of M/s. A. M. Tod Company India Pvt. Ltd. v. ITO (ITA No.492/Mum/2006). Vide order dated 24.06.2009, the Tribunal accepted the assessee’s contention for exclusion of certain cases which were wrongly included in the Transfer pricing study but were actually not comparable. It is observed that the Special Bench of the Tribunal in the case of DCIT v. Quark Systems (P) Ltd. [(2010) 132 TTJ (Chd.) (SB) 1] = 2010-TIOL-31-ITAT-CHD-SB also allowed the assessee to claim exclusion of certain cases from the list of comparables which were inadvertently included by it in its transfer pricing study. In view of the afore-noted discussion and the ratio of the these precedents, we direct the AO/TPO to examine the correctness of the figures placed on record by the assessee in support of its contention that the case of Goldstone Teleservices Limited was wrongly included by it in the list of comparables, which is actually not comparable. We want to make it clear that the above discussion made by us considering the figures given by the learned AR is only for a prima facie ascertainment as to whether this case is passing through the filter chosen by the TPO. The AO/TPO in the fresh proceedings will decide the question of inclusion or exclusion of this case afresh independent of our above observations, albeit keeping in mind the afore-quoted filter of ‘Companies whose export revenues are more than 25 percent of the revenues.

(iii) Raghuveer Nayak vs. Assistant Commissioner of Income Tax (2018) 162 DTR 353 (Kerla)

(iv) CIT vs. Mithex Impex (2014) 104 DTR (Guj) 169

CIT(A) and ITAT are competent to entertain any laful claimed which the assessee failed to claim in the return before the Assessing Officer.

(v) Anju Mittal v/s ACIT. (ITAT JP)-ITA 201/JP/2014 dt 30.04.15

(vi) Keshavji Ramji v/s CIT (SC) 183 ITR 1 = 2002-TIOL-129-SC-IT-LB

(vii) J.P. Boder Co. v/s CBDT (SC) 223 ITR 271 = 2002-TIOL-2578-SC-IT

(viii) CIT v/s Hero Cycles (SC) 228 ITR 463 = 2002-TIOL-1263-SC-IT

(ix) CIT v/s National Thermal Power Co. Ltd. (SC) 157 CTR 249 = 2002-TIOL-279-SC-IT

(x) C.I.T v/s Ramco International 332 ITR 306 (P&H) = 2009-TIOL-20-HC-P&H-IT

(xi) C.I.T v/s Bhaskar Mitter (Cal) 73 TAXMAN 437

(xii) C.I.T v/s Rajasthan Fasteners Pvt. Ltd. (Raj) 100 DTR 152 = 2014-TIOL-719-HC-RAJ-IT

(xiii) Wipro Vs. CIT 282 CTR 346

(xiv) CIT Vs. Prithvi Brokers and Share Holders Pvt. Ltd. (2012) 252 CTR 151 (Bom) = 2012-TIOL-489-HC-MUM-IT

10. The ld AR has also drawn our attention towards the CBDT CIRCULAR No. 014 (XL-35) and submitted that the Circular no. 014 (XL- 35) issued by the Board as back as 11th April 1955 wherein the Board has impressed upon the Officers of the Department that no advantage should be taken on assessee’s ignorance to collect more than out of him than is legitimately due from him. It has been specifically mentioned in the circular that the mandatory relief about exemption from tax must be granted whether claimed or not. Thus the circular makes it clear that if the assessee has not claimed any deduction or exemption which otherwise is allowable, the same should be allowed by the Learned Assessing Officer. Mere filing of an incorrect return cannot come in the way of allowing lawful deduction and exemptions. The relevant para from the circular is quoted below:

“Officers of the Department must not take advantage of ignorance of an assessee as to his rights. It is one of their duties to assist a taxpayer in every reasonable way, particularly in the matter of claiming and securing reliefs and in this regard the Officers should take the initiative in guiding a taxpayer where proceedings or other particulars before them indicate that some refund or relief is due to him. This attitude would, in the long run, benefit the Department for it would inspire confidence in him that he may be sure of getting a square deal from the Department. Although, therefore, the responsibility for claiming refunds and reliefs rests with assessees on whom it is imposed by law, officers should:-

(a) draw their attention to any refunds or reliefs to which they appear to be clearly entitled but which they have omitted to claim for some reason or other;

(b) freely advise them when approached by them as to their rights and liabilities and as to the procedure to be adopted for claiming refunds and reliefs.

4. Public Relations Officers have been appointed at important centres, but by the very nature of their duties, their field of activity is bound to be limited.

The following examples (which are by no means exhaustive) indicate the attitude which officers should adopt :-

(a) Sec. 17(1) : While dealing with the assessment of a non-resident assessee the officer should bring to his notice that he may exercise the option to pay tax on his Indian income with reference to his total world income if it is to his advantage.

(b) Sec. 18(3), (3A), (3B) and (3D) : The officer should in every appropriate case bring to the assessee’s notice the possibility of obtaining a certificate authorising deduction of income-tax at a rate less than the maximum or deduction of super tax at a rate lower than the flat rate, as the case may be.

(c) Secs. 25(3) and 25(4) : The mandatory relief about exemption from tax must be granted whether claimed or not; the other relief about substitution, if not time barred, must be brought to the notice of a taxpayer.

(d) Sec. 26A : The benefit to be obtained by registration should be explained in appropriate cases. Where an application for registration presented by a firm is found defective, the officer should point out the defect to it and give it an opportunity to present a proper application.

(e) Sec. 33A : Cases in which the ITO or the Asstt. Commissioner thinks that an assessment should be revised, must be brought to the notice of the CIT.

(f) Sec. 35 : Mistakes should be rectified as soon as they are discovered without waiting for an assessee to point them out.

(g) Sec. 60(2) : Cases where relief can properly be given under this sub-section should be reported to the Board.”

11. The ld AR has also drawn our attention towards the provisions of section 2(14)(iii) and submitted that the provisions of section 2(14)(iii) as these stood for the relevant Assessment Year 2013-14 are quoted below:-

Section 2(14)(iii)(a) and 2(14)(iii)(b) –

[(iii) agricultural land46 in India, not being land situate-

(a) in any area which is comprised within the jurisdiction of a municipality46 (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population46 of not less than ten thousand according to the last preceding census of which the relevant figures have been published before the first day of the previous year; or

(b) in any area within such distance, not being more than eight kilo metres, from the local limits of any municipality or cantonment board referred to in item (a), as the Central Government may, having regard to the extent of, and scope for, urbanisation of that area and other relevant considerations, specify in this behalf by notification in the Official Gazette47;]

(a) in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population of not less than ten thousand; or

The above provisions clearly stipulate the following:-

(i) The agricultural land will not be treated as agricultural land if it is situated in the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population of not less than ten thousand.

(xv) The first condition is that it has to be within the jurisdiction of a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board. It means that the land has to be situated within the jurisdiction of a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board. The provisions of section 2(14)(iii)(a) are distinct in this way from 2(14)(iii)(b). In section 2(14)(iii)(b) it is ‘ANY MUNICIPALITY’ whereas in the provisions of section 2(14)(iii)(a) the land has to be within the JURISDICTION OF A MUNICIPALITY. The jurisdiction has been defied as territorial jurisdiction of municipality etc. Hemander Kumant v. CIT 57 ITD 409 (Delhi Trib). In this decision it has been held that “every local authority is not a municipality. Accordingly areas lying within the jurisdiction of any township etc. cannot be said to be areas lying within the jurisdiction of a municipality. Hence the land situated not in the jurisdiction of a municipality cannot be treated as capital asset.”. The claim of the assessee is that the land sold by him was agricultural land being not situate in the jurisdiction of a Municipality having population not less than 10000. The assessee submitted that the land sold by her was agricultural land being situate under the jurisdiction of Gram Panchayat Muhana which is not Municipality in any way and also have population less than 10000. These facts remained unconsidered by the Learned Assessing Officer.

The above certificates very clearly states that the agricultural land was in the jurisdiction of Gram Panchayat Muhana. It has also been specifically mentioned in both the certificates that the agricultural land did not fall under the jurisdiction and administrative control of Municipality or Council. Thus the conditions of section 2(14)(iii)(a) are fulfilled that the agricultural land is not in the jurisdiction of a Municipality not to speak any population.. Thus the agricultural land is not an asset in view of the provisions of section 2(14)(iii)(a)). These certificates very clearly lay down that being not under the jurisdiction of any Municipality and being in the jurisdiction of Panchayat, the agricultural land sold was agricultural and not urban. Therefore the Learned Assessing Officer was not justified in taxing capital gains on sale of such agricultural land which was not situate in jurisdiction of Municipality and was situate in the jurisdiction of Panchayat. The addition made by the Learned Assessing Officer therefore deserves to be deleted.

When these provisions of section 2(14)(iii) were brought on the statue by Finance Act 1970 w.e.f. 01.04.1970 the Finance Minister who at that time was also The Prime Minister of the Country in his speech had observed as under: –

“The definition of an urban area is also being enlarged to include areas within the limits of any municipality or other similar authority having a population of 10,000 or more, with powers to cover by notification areas unto 8 kilometers outside such limits…. .. …… …. Another measure which is intended to save a similar purpose, provides for the taxation of capital gains arising from the sale or transfer of agricultural land situated within urban areas.” ((1970) 75 ITR (St) 22). The relevant portions of Notes on Clauses of the Finance Bill read as follows :

“Sub-cl. (a) seeks to amend cl. (14) of s. 2 of the IT Act which defines the term ‘capital asset’. The amendment seeks to bring within the term ‘capital asset’ agricultural land situated within the limits of any municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee or by any other name) or a cantonment board having a population of 10,000 or more according to the last census for which the figures have been published before the first day of the previous year. Further, agricultural land situated in areas lying within a distance not exceeding 8 kilometers from the local limits of such municipalities or cantonment boards will also be covered by the amended definition of ‘capital asset’, if such areas are, having regard to the extent of and scope for their urbanisation and other relevant considerations, notified by the Central Government in this behalf. The effect of the proposed amendment will be that capital gains arising from the transfer of agricultural land situated in municipal or other urban areas or notified adjoining areas will be liable to income-tax for the asst. yr. 1970-71 and subsequent years. However, in view of the proposed amendment to s. 47 of the IT Act, under cl. 11 of the Bill, capital gains arising from transfers of such land effected prior to 1st March, 1970, will be excluded from taxation.

Agricultural land which is situated outside such municipal or other urban areas or the notified adjoining areas will, however, continue to be excluded from the term ‘capital asset’ and no capital gains tax will be payable with reference to the transfer of such agricultural land, as hitherto.” ((1970) 75 ITR (St) 69)

(B) Further in the memorandum explaining the provision of this Finance Bill it was explained that –

“Presently, capital gains arising from the transfer of a capital asset are chargeable to income-tax. The definition of ‘capital asset’ excludes from its scope, inter alia, agricultural land in India. Accordingly, no liability to tax arises on gains derived from transfer of agricultural land in India. This exemption of agricultural land from the scope of the levy of tax on capital gains has a historical origin and is not due to any bar in the Constitution on the competence or Parliament to legislate for such levy. Agricultural land situated in municipal and other urban areas is essentially similar to non-agricultural land in such areas in its potentialities for use due to the progress of urbanisation and industrialisation. It is accordingly proposed to bring, within the scope of taxation, capital gains arising from the transfer of agricultural land situated within the limits of any municipality or cantonment board which has a population of not less than 10,000 according to the latest census for which the relevant figures have been published. Power is also being taken to the Central Government to bring within the scope of the levy (by notification in the Official Gazette), capital gains arising from transfer of agricultural lands situate outside the limits of any such municipality or cantonment board up to a maximum distance of 8 kilometers, where this is considered necessary having regard to the extent of and scope for urbanisation of that area and other relevant considerations. Agricultural land which is situated in rural areas will continue to be outside the scope of the abovementioned provision. Accordingly, no liability to tax will arise in respect of gains derived from transfer of agricultural land in rural area.” ((1970) 75 ITR (St) 90)”

(C) FAVOURABLE DECISION IN THE CASE OF INCOME TAX OFFICER VS. SURJAN SINGH (1983) 3 ITD 438 (DEL) –

In view of the aforesaid speech it is clear that the purposes of introducing the provisions of section 2(14)(iii)(a) was to bring the gains of sale of urban land under taxation. There was no provisions of taxing the gains of sale of agricultural land. The similar finding have been given by the ITAT Delhi Bench in the case of Income Tax Officer vs. Surjan Singh (1983) 3 ITD 438 (Del). In this decision it has been held that provisions of section 2(14)(iii)(a) are applicable only in respect of urban land situate in the jurisdiction of a municipality that too having a population not less than 10000. It has been held by The Hon’ble ITAT Delhi that agricultural land situate under the Panchayat Raj Act whether under a Gram Panchayat or under A Panchayat Samiti is rural in nature and therefore not an asset u/s 2(14) although it was overall under the control of Delhi Municipal Corporation. The case of the assesse is also that the land situate at Village Borkhandi Khurd falling under the Gram Panchayat of Sohela, Tehsil Peeplu, District Tonk The land was thus under the control of Gram Panchayat Act and not under the Administrative Control of Tonk Municipality. The Hon’ble ITAT has held as under: –

“From a careful reading of the idea behind the amendment introduced by the Finance Act, 1970 one thing appears to be clear, namely, that the definition of ‘capital asset’ was enlarged so as to bring within its fold some lands, which are factually agricultural lands, because of the potentiality which such lands possessed in view of the urbanisation. It is well known that the cities in India are growing fast. Those lands which are adjacent to the city areas, which were essentially rural areas, are gradually getting urbanised with the result that the value of such proportion have been going up. It is also well known that the value of urban lands is much higher than the value of lands in the rural areas. The Parliament wanted to bring the surplus arising out of sale of agricultural lands also within the net of taxation under the capital gains, if essentially those lands partake the character of urban land. It is also very clear from the Prime Minister’s speech that lands in the rural areas are not to be affected by the amended provisions.”…. …

It is clear from what we have set out that the concept of municipalities relate to urban local self-government and the concept of Panchayat to rural self-government. Both these concepts which are mutually exclusive were well known and well established by the time the amendment to s. 2(14) (iii) was made w.e.f. 1st April, 1970. Since the concepts were well known, it would follow that if the intention of Parliament was to include Panchayat also in the term ‘municipality’ it would have been so mentioned in the statute along with such terms as notified area committees, town area committee and town committee. This has not been done.”… …..

The word ‘municipality’ in s. 2(14) (iii) (a) has to be understood only as body for the Governments of urban local area. The very concept of municipalities indicates that it applies only to urban areas. It cannot by any stretch of imagination apply to rural area, which is kept separate and having a distinct entity. It is not as though some of the lands in the urban area are agricultural lands because agricultural operations are being carried on or that they are separately recorded as such in the Revenue records. The entire Union territory of Delhi is basically divided into two parts; one is an urban area and the other is a rural area. So far as urban area is concerned, there is definite local self-government governed by the Delhi Municipal Corporation Act. In the rural areas their is a different type of local self-government, which governed by the provisions of the Gram Panchayat Raj Act. It is true that on a superficial reading of s. 2(14) (iii) (a) any area within the jurisdiction of municipality (whatever be its nature) is caught within the mischief of that provision but on a closer analysis in the background of the peculiar features of the Union territory of Delhi coupled with the concept of a municipality as also the intention of the Parliament as reflected in the Prime Minister’s speech at the time of introduction of the provision, it is evident that as far as the rural areas are concerned, which are governed by separate local self-government, they cannot be treated as a part of municipality. Municipality by its very nature envisages a local urban area. Municipality is nothing but a body for local self-government of an urban area. One cannot conceive of a municipality for a rural area. At the cost of repetition, we may state that the word ‘municipality’ occurring in s. 2(14) (iii) (a) must be related to the local self-government body for urban areas. Therefore, the area falling within the urban areas of the local selfgoverning body would be caught within the mischief of s. 2(14) (iii) (a). For an area where there is no municipality and there is only a Panchayat (local self-government for rural areas) s. 2(14) (iii) (a) is out of place.”….. … .

16. For all the above reasons, we hold that the provisions of s. 2(14) (ii) (a) are not applicable to the rural areas of Union territory of Delhi and Nangal Dewat being a part of the rural area, the agricultural lands therein are outside the definition of capital asset. The capital gains, therefore, cannot be charged on the surplus arising out of the transfer of the lands in the village Nangal Dewat. The order of the CIT(A) is accordingly upheld.”

In view of the aforesaid decision the addition made deserves to be deleted.

(D) Favourable circular no. 45 dated 02.09.1970 of CBDT: –

In pursuance to the speech of the Finance Minister the CBDT also issued clarificatory circular that rural agricultural land was not an asset. The same is quoted below –

71. In the Explanatory Notes on the Provisions of the Finance Act, 1970, vide Circular No. 45, dt. 2nd Sept., 1970, the CBDT, on the issue, has stated as follows :

“30. Agricultural land situated in municipal and other urban areas is essentially similar to non-agricultural land in such areas in its potentialities for use due to the progress of urbanisation and industrialisation. The Finance Act, 1970, has accordingly amended the relevant provision of the IT Act so as to bring within the scope of taxation capital gains arising from the transfer of agricultural land situated in certain areas. For this purpose, the definition of the term ‘capital asset’ in s. 2(14) of the IT Act has been amended so as to exclude from its scope only agricultural land in India which is not situate in any area comprised within the jurisdiction of a municipality or cantonment board and which has a population of not less than ten thousand persons according to the last preceding census of which the relevant figures have been published before the first day of the previous year. The Central Government has been authorised to notify in the Official Gazette any area outside the limits of any municipality or cantonment board having a population of not less than ten thousand, upto a maximum distance of 8 kms. from such limits. For the purpose of this provision, such notification will be issued by the Central Government having regard to the extent of, and scope for, urbanisation of such area, and, when any such area is notified by the Central Government, agricultural land situated within such areas will stand included within the term ‘capital asset’. Agricultural land situated in rural areas, i.e., areas outside any municipality or cantonment board having a population of not less then ten thousand and also beyond the distance notified by the Central Government from the limits of any such municipality or cantonment board, will continue to be excluded from the term ‘capital asset’.”

12. The ld AR has also relied upon the following case laws:

Sr. no.DecisionRemarks/findings
1DCIT vs. Capital Area Bank Ltd. 123 TTJ 918When the land for all administrative controls falls within the jurisdiction of Phagwada municipality it cannot be considered within the 8 km of municipal limit of Jalandhar. Urbanisation of an area, then, falls within the exclusive domain of the concerned municipality exercising regulatory as well as administrative control over such area. It is such concerned municipality, id est, the parent municipality or jurisdictional municipality of the area, which has to carry out the urbanisation of the area. Areas situate within the local limits of a Gram Panchayat are govered bylaws applicable to such area and not by any other municipality.
2K. Parameshwaran vs. Income Tax Officer 2 ITD 371It is clear from what we have set out that the concept of municipalities relates to urban local self-government and the concept of panchayat to rural self-government. Both these concepts which are mutually exclusive were wellknown and well-established by the time the amendment to s. 2(14)(iii) was made with effect from 1st April, 1970. Since the concepts were well-known it would follow that if the intention of Parliament was to include panchayats also in the term “municipality” it would have been so mentioned in the statute along with such terms as notified area committee, town area committee and town committee. This has not been done. ….. . ….. it is clear that the terms “municipality”, “notified area committee” “town area committee” and “town committee” occurring in s. 2(14)(iii)(a) have legal conceptions and the terms must be given their legal meaning. If given their legal meaning the terms “municipality”, “notified area committee”, “town area committee” and “town committee” are entirely different concepts from the term “panchayat” be it a village panchayat or a town panchayat. Thus the land sold by the assessee was not governed by a municipality or Madras District Municipalities Act but by Madras Panchayat Raj Act as such the same was not an asset.
3Income Tax Officer vs Nrain Singh 12 TTJ 396The net result is that at best it can be said that the agricultural land in question was situated in an area which is comprised within the jurisdiction of Municipality of Delhi, known as Delhi Municipal Corporation as also within the jurisdiction of Municipality of Nangal Dewat known as Gaon Sabha Nangal Dewat. Whereas the population of the area comprised within the jurisdiction of Gaon Sabha Nangal Dewat is less than 10,000, the population of the area comprised within the jurisdiction of DMC is over 10,000. Obviously, such a situation could not be said to have been provided for in s. 2(14)(iii)(a), otherwise, the Parliament would have enacted some guidelines for making appropriate choice for including or not including in the definition of capital asset such an agricultural land. The decision clearly laid down that although the land was situate in the overall jurisdiction of Delhi Municipality but was governed by Gaon Sabha Nagal Dewat having population less than 10000 and hence the same was not an asset.
4Income Tax Officer vs. Chander HUF (2011) 47 SOT 17 (Chennai)A town panchayat is notified for urban agglomeration, but it is not a municipality. Agricultural lands falling within said town panchayat would not fall within municipality, and hence is not a capital asset as per the definition under section 2(14)(iii).
5Income Tax Officer vs. Uppala Bhatkavatsala Rao 12 Taxman 40Land situate in a gram panchayat is not in a municipality with the meaning of Andrapradesh Municipality Act as such land cannot be treated as capital asset.
6CIT vs. Charan Singh and Nafe Singh 101 ITR 46 (Del)The decision clearly laid down that although the land was situate in the overall jurisdiction of Delhi Municipality but was governed by Gaon Sabha Nagal Dewat having population less than 10000 and hence the same was not an asset. The village was under the Administrative Control of Gaon Sabha Nagal Dewat and hence it was rural agricultural land.

The crux of the matter is that once the agricultural land is found to be rural agricultural the provisions of section 2(14)(iii) (a) or (b) are not applicable. In the case of the assessee the land sold was rural agricultural land. The learned A.O. erred in applying the provisions of section 2(14) (iii) (a) or (b) on the sale such rural agricultural land. The assessee’s AR also erred in showing the agricultural land as capital asset and claiming deduction u/s 54B. However the discussion establishes beyond doubt that the agricultural land sold was rural agricultural land.

13. The ld AR has also drawn our attention towards the additional ground No. (iv) of the appeal and submitted that the land sold by the assessee was rural agricultural land whereas the provisions of section 2(14)(iii)(a) & 2(14)(iii)(b) were introduced on the statue book for purposes of levying capital gains on sale of urban agricultural land. In the case of the assessee these provisions were not applicable at all as the land sold was rural agricultural land situate in Muhana Village administered by Muhana Panchayat. It is further submitted over and above the submissions made against ground no. 3, the assessee erred in disclosing the sale of agricultural land as an asset without considering the provisions of section 2(14)(iii)(b) and the notification No. 9447 issued by the Central Govt in this regard on 06.01.1994. A copy of this notification is available on Paper book page number 35 to 37. It is submitted that as per provisions of section 2(14)(iii)(a) the land situate in the jurisdiction of a municipality will be liable for capital gains provided such municipality has population ten thousand and above. In the case of the assessee these conditions were not satisfied as such the provisions of section 2(14)(iii)(a) were not applicable and the agricultural land sold by the assessee was not an asset with reference to these provisions of section 2(14)(iii)(a). The provisions of section 2(14)(iii)(a) and 2(14)(iii)(b) are quoted below: –

“Section 2(14)(iii)(a) and 2(14)(iii)(b) –

[(iii) agricultural land46 in India, not being land situate-

(a) in any area which is comprised within the jurisdiction of a municipality46 (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population46 of not less than ten thousand according to the last preceding census of which the relevant figures have been published before the first day of the previous year; or

(b) in any area within such distance, not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item (a), as the Central Government may, having regard to the extent of, and scope for, urbanisation of that area and other relevant considerations, specify in this behalf by notification in the Official Gazette47;]”

So far as provisions of section 2(14)(iii)(b) are concerned it is submitted that these provisions require the agricultural land to situate within 8 km of the local limits of the municipality as notified by Central Govt. It is submitted that in this regard the Central Govt. issued notification on 06.01.1994 and thereafter there has been no notification on the issue. A copy of this notification dated 06.01.1994 is available on paper book cited supra. As per this notification explanation 2 the local limits of the municipality shall be reckoned as on the date of the unification i.e. 06.01.1994. In other words the lands situate within 8 km of the municipal limits as on 06.01.1994 shall be covered under the provisions of section 2(14)(iii)(b). It is submitted that as on 06.01.1994 the land of the assessee was not within the distance of 8 km. from the municipal limits. In view of this the provisions of section 2(14)(iii)(b) are also not applicable. It is submitted that the notification no. 9447 issued by the Central Govt dated 06.01.1994 lays down limit of 8 km. from the Municipal Limits as on 06.01.1994. It is submitted that the Municipal limits have been notified by State Govt in Gazette on 25.09.1994. Copy of Gazette Notification issued by State Govt dated 25.09.1994 is available on paper book page number 38 to 46. Strictly speaking no municipal limits are available as on the date of 06.01.1994. The nearest date for which municipal limits are available are as per Govt. of Rajasthan Gazette Notification dated 25.09.1994 which shows Village Bhankrota for the purposes of Ward 12 wherein lies the agricultural land of the assessee as the municipal limit. Therefore land falling within 8 km. from this municipal limit of (Village Bhankrota) shall be an asset with reference to the provisions of section 2(14)(iii)(b). The distance of the agricultural land situate at village Muhana from Municipal Limit Bhankrota is more than 15 kilometers. Hence it was not an asset within the meaning of provisions of section 2(14)(iii)(b). Therefore the sale of land does not attract capital gains. The addition made by the Learned Assessing Officer deserves to be deleted. The assessee is scanning below the google map outlining the distance between Village Muhana and Bhankrota which is as under –

Considering the above position of law with respect to the provisions of section 2(14)(iii)(a) & (b) the agricultural land sold by the assessee could not treated as an asset and the question of levy of capital gain did not arise. In view of this there was no case for disclosing capital gain on the sale of such land and claiming deduction u/s 54B because the agricultural land sold was not an asset. In view of this the addition made by the Learned Assessing Officer does not hold good and deserves to be deleted. He has relied upon the following case laws:

Dinesh kumar Jain Vs. ITO Ward 6(1) jaipur ITA No. 372/JP/2015

The fact of the case decided by the ITAT are quite similar to the facts of the case of the assessee. It is submitted that the honble ITAT decided the case taking into consideration the decisions on the issue of Hon,ble karnatka High court in the case of CIT Vs. Madhukumar N. (HUF) (2012) 208 Taxman 394/23 Taxman .com 341(kar), 2. Bombay High court in the case of commissioner of Income Tax Nagpur Vs . Ramesh Chandra Chordia (2015) 57 taxmann.com 394 (Bombay) and Punjab and Haryana High court in the case of Commissioner of Income Tax II, Ludhiana Vs, Satinder Pal Singh (2010) 188 Taxman 54(Punj & Har.) =2010-TIOL-73-HC-P&H-IT The Hon’ble Tribunal has held that distance of 8 km shall be of municipal limit as on the date of 06.01.1994.

14. On the other hand, the ld CIT-DR has vehemently supported the orders of the authorities below and contended that for claiming deduction u/s 54B, the new agriculture lands should have been purchased on or before 05.08.2013 i.e. the date of filing of ROI and if the sale consideration is not used for purchase of agriculture land, then the same should have been deposited in the capital gains deposit account scheme. It is an undisputed fact that no such deposits were made in that scheme by the assessee.

15. Reliance was placed by the ld. CIT-DR on the decision of the Hon’ble High Court of Bombay in the judgement dated 18.08.2016 in the case of Humayun Suleman Merchant Vs CCIT [2016] 73 taxmann.com 2 (Bombay) = 2016-TIOL-1949-HC-MUM-IT considered a number of decisions on the issue including the case of CIT vs. K. Ramachandra Rao [2015] 230 Taxman 334 (Kar.)CIT vs. Ravindra Kumar Arora [2012] 342 ITR 38 (Del.)2011-TIOL-818-HC-DEL-IT and distinguished the decision of Hon’ble High Court of Gauhati in the case of CIT Vs Rajesh Kumar Jalan (Supra) as relied upon by the appellant and held as under:

“As the instant case is for assessment year 1996-97, it is the amended provision which applies. Therefore, now section 54F(1) which grants exemption from Capital gain tax where a flat is purchased either within one year prior to the sale of capital asset or within 2 years after the date of sale of the capital asset or where a residential house is constructed within 3 years from the date of sale of the capital asset, is now subject to the provisions of section 54F(4). Thus, where the consideration received on sale of capital asset is not appropriated (where purchase was earlier than sale) or utilized (where purchase is after the sale) then the same would be subject to the charge of capital gain tax, unless the unutilized amounts are deposited in specified bank account as notified in terms of section 54F(4). The exemption would be available to the unutilized amounts only if the mandate of sub-section (4) of section 54F is complied with. Further the proviso to sub-section (4) of section 54F, safeguards the revenue where the assessee had not invested the amounts chargeable to Capital Gains within the time prescribed under sub-section (1) of section 54F. This by providing that in such cases, Capital Gain under section 45 would be charged on the unutilized amount as Income of the previous year in which the period of three years from the date of transfer of the capital asset expires. [Para 6(h)]

On the basis of the above broad analysis, the facts of the instant case need to be analyzed. The sale of capital asset took place on 29-4-1995 for a consideration of Rs. 85.33 lakhs. The agreement for purchase of construction of flat for consideration of Rs.69.90 lakhs was entered into by the assessee on 16-7-1996. An amount of Rs. 35 lakhs were utilized by the assessee in purchase of flat before the return of income was filed on 4-11-1996 under section 139. However, the mandate under sub-section (4) of section 54F is that the amount not utilized towards the purchase of the flat has to be deposited before the due date of filing return of Income under section 139(1) in the specified bank account. In this case admittedly the entire amount of capital gains on sale of asset which is not utilized has not been deposited in a specified bank account before due date of filing of return under section 139(1). Therefore, where the amounts of capital gains is utilized before filing of the return of income in purchase/construction of a residential house, then the benefit of exemption under section 54F is available, (emphasis supplied) It is an undisputed position that except Rs.35 lakhs, the balance of the amounts subject to capital gains tax has not been utilized before date of furnishing of return of income, i.e., 4-11- 1996 under section 139.Therefore, on plain interpretation of section 54F, it appears that the impugned order of the Tribunal cannot be faulted. [Para 6(i)]

The mandate of section 54F(4) is clear that amount which has not been utilized in construction and/or purchase of property before filing the return of income, must necessarily be deposited in an account duly notified by the Central Government, so as to be exempted. [Para 6(o)]

Further, section 54F(4) specifically provides that the amounts which have not been invested either in purchase/construction of house have to be deposited in the specified accounts before the due date of filing of return of income under section 139(1). [Para 6(p)]

(emphasis supplied)

It is a settled position in law that no occasion to give a beneficial construction to a statute can arise when there is no ambiguity in the provision of law which is subject to interpretation. Thus, in the face of the clear words of the Statute the intent of parties and/or beneficial construction is irrelevant. In the instant facts the provision of section 54F(4) are very dear. There is no ambiguity. Thus, there is no occasion to apply liberal/beneficial construction while interpreting the section as contended by the assessee. [Para 6(s)]

(emphasis supplied)

In the instant case, the return of income is admittedly filed on 4-11-1996. In terms of section 54F(4) interpreted by the Gauhati High Court in CIT v. Rajesh Kumar Jalan [2006] 286 ITR 274/157 Taxman 398 the amount subject to capital gain on sale of the capital asset for purpose of exemption, has to be utilized before the date of filing of return of income. In instant case 4-11-1996 is the date of filing the return of Income. It is not disputed that on 4-11-1996 when the return of income was filed, the entire amount which was subject to capital gain tax had not been utilized for the purpose of construction of new house nor were the unutilized amounts deposited in the notified Bank Accounts in terms of section 54F(4) before filing the return of income. It is also to be noted that, the Assessing Officer had taken into account all amounts utilized for construction of a house before filing the return of income on 4-11-1996 for extending the benefit of exemption under section 54F. Therefore, in the instant facts, the decision of the Gauhati High Court in Rajesh Kumar Jalan’s (supra) would not apply so as to hold that the assessee had complied with section 54F(4). [Para 6(w)]

(emphasis supplied).

16. Our attention was also invited by the ld. CIT-DR to the head note in the case of Smt. Basaribanu Mohd. Rafiq Latiwala Vs ITO[2017] 81 taxmann.com 62 (Mumbai-Trib.), which reads as under:

“Section 54F of the Income-tax Act, 1961-Capital gains-Exemption of, in case of investment in residential house (Condition precedent)-Assessment year 2011-12-Assessee transferred shares on which long term capital gain of Rs. 92.66 lakhs was earned-Assessee purchased an under construction residential property for total consideration of Rs. 98 lakhs and claimed deduction under section 54F-Assessee paid Rs. 52.47 lakhs out of consideration on sale of shares before due date of filing of return-Assessee did not deposit balance net consideration on sale of shares with capital gain account maintained with bank as stipulated under section 54F(4) before filing of return-Whether assessee would be entitled to exemption of amount which was invested in acquiring new residential property till date of filing of return of income-Held, yes [Para 9].

17. Reliance was also placed on by the ld. CIT-DR the decision in the case of Shri Hariharan Ramasubramanian Vs ITO in I.T.A. No. 1616/Mum/2017 dated 29.08.2018, it has been held by the Hon’ble Mumbai Tribunal that:

“6 ……We have considered rival contention and perused the material on record including cited case laws. The facts of the case are elaborately discussed by us in preceding para’s of this order which are not repeated again. The dispute between rival parties is in narrow compass and the Hon’ble Bombay High Court in Humayun Suleman Merchant(supra) has held that even if the assessee has not invested in the notified bank account under capital gain scheme of the bank as mandated u/s 54 of the 1961 Act but still the benefit of deduction u/s 54 of the 1961 Act cannot be denied for investments made in new residential flat till the date of filing of return of income by the assessee with Revenue. Thus in our considered view keeping in view decision of Hon’ble jurisdictional High Court in the case of Humayun Suleman Merchant(supra) and also keeping in view the fact the assessee has not deposited the amount in notified bank account maintained under capital gain bank account scheme as provided u/s 54 of the 1961 Act before the due date of furnishing of return of income, deduction of Rs. 1.76 lakh on account of investment made in said residential flat being constructed by DLF at Bangalore cannot be allowed to the assessee u/s 54 of the 1961 Act as the said payment of Rs.1.76 lacs was made on 01-10-2013 while return of income was filed by the assessee on 31.07.2011.”

18. As per the ld. CIT-DR, in the case of Anita Ajay Shah vs. ITO ITA No.3154/Ahd/2015 = 2017-TIOL-1489-ITAT-AHM, the similar issue of making investment in purchase of property after filing of return of income was before the Hon’ble Tribunal and it has been held that any investment after filing of ROI but before the date of filing ROI u/s 139(4) has no meaning. It would be appropriate to reproduce the relevant findings as under:

“9. We have carefully considered the rival submissions and perused the orders of the authorities below. The assessee in the present appeal has controverted the denial of exemption claimed under s.54 of the Act towards capital gain arising on sale of residential property. Section 54 inter alia provides that capital gain invested in the purchase of residential House will be exempt from tax. Although, as per section 54, the assessee is given two years for purchase of House property (or three years for construction thereof) yet the taxable event of capital gains on transfer of original House property is the year in which it is sold. In terms of S. 54(2), however, the assessee may at his discretion invest the capital gains before the filing of return of income to avoid incidence of tax. Section 54(2) inter alia specifies an alternative in the form of deposit under ‘capital gain accounts scheme’ before the due date of filing of return of income under s.139(1) of the Act. Thus, the amount of capital gains which is not utilized by the assessee for purchase or construction of new house before the date of furnishing of return of income ought to be deposited by him under the capital gains accounts scheme before the due date of furnishing the return.

9.1 In the instant case, the assessee claims to have utilized Rs.15 lakhs (50% of Rs.30 lakhs invested towards purchase of new residential House) before the due date of filing of return of income. The assessee simultaneously claims that another Rs.5 lakhs (50% of Rs.10 lakhs similarly invested) has been invested in the residential property before the actual filing of the return on 25/08/2011 i.e. within the time limit provided under s.139(4) of the Act.

9.2 Section 54(2) enjoins that the capital gain is required to be appropriated by the assessee towards purchase of new asset before furnishing of return of income under s. 139 of the Act. Alternatively, in the event of non-utilization of capital gains towards purchase of new asset, the assessee is required to deposit the capital gains in specified bank account before the due date of filing of return of income under s. 139(1) of the Act. Any payment towards purchase subsequent to the furnishing of return of income (25/08/2011-in the instant case) but before the last date available to file the return of income under s. 139(4) of the Act is irrelevant. Such subsequent payments after filing of return are required to be routed out of deposits made in capital gain account scheme. Thus, the plea of the assessee that utilization of capital gain can be made before the extended date for filing of return of income under s.139(4) of the Act even after filing of return do not coincide with the plain language employed under s.54(2) of the Act. Nonetheless, the capital gain employed towards purchase of new asset before the actual date of furnishing return of income either under s,139(1) or under s.139(4) of the Act will be deemed to be sufficient compliance of section 54(2) of the Act.

9.3 The assessee, in the instant case, does not claim to have deposited the money in these specified bank account under capital gain scheme at all. Therefore, the claim of the assessee is required to be weighed on the second limb of section 54(2) of the Act, i.e. whether the capital gain has been utilized for purchase of new asset before the date of furnishing of return of income under s.139 of the Act. At this juncture, we notice that the legislature in its own wisdom has used the expression section 139 for purchase etc. of new asset while on the other hand, time limit under section 139(1) has been specified for deposit in the capital gain account scheme. When viewed liberally, the distinction between the two different form of expression of time limit can yield different results. S.139 encompasses both s, 139(1) and s.139(4) of the Act. There is presumption that words are used in an act of parliament correctly and exactly and not loosely and inexactly. In the present case, we are concerned with the utilization of capital gain towards purchase of new asset for which the legislature has stopped short by making reference of section 139 of the Act in variation to 139 (1) of the Act for deposit in capital gain scheme. This distinction assumes significance for interpretation of beneficial provision. Thus, a beneficial view may be taken to say that section 139 being omnibus would also cover extended time limit provided under s.139(4) of the Act. Thus, when an assessee furnishes return subsequent to due date of filing return under s.139(1) but within the extended time limit under s,139(4), the benefit of investment made upto the date of furnishing return of income under 139(4) cannot be denied on such beneficial construction. However, any investment made after the furnishing of return of income but before extended date available under s.139(4) would not receive beneficial construction in view of unambiguous and express provision of s.54(2) of the Act. The suggestion on behalf of the assessee on eligibility of payments subsequent to furnishing of return of income is not aligned with and militates against the plain provision of law certified in s.54(2) of the Act.

9.4 In the light of the mandate of section 54(2) as noted above, we shall now turn to the facts of the case. It is the case of the assessee that Rs.40 lakhs in aggregate has been utilized towards purchase of new asset before furnishing the return of income under s.139(4) of the Act. The assessee claims to have invested Rs.20 lakhs (being 1A of her share) for purchase of new asset. However, we notice that assessee appears to have shown a total investment Rs.50 lakhs in aggregate i.e. 30 lakhs from personal account and Rs.20 lakhs (A share) from joint account as against her obligation to the extent of Rs.35 lakhs only. Also ambiguity exists on record as to whether the other joint owner (husband of the assessee) has availed claim of exemption, if any, upto Rs.20 lakhs (being 1/2 of his share only) or entire Rs.40 lakhs made through joint account towards purchase in his own right. In such circumstances, the assessee, in our view, would be entitled to exemption to the extent of Rs.20 lakhs being 50% of her share in the utilization of capital gain subject to the satisfaction of the AO that the aforesaid claim of payments from joint account has not been simultaneously availed by other joint owner also.

9.5 The other portion on the investment claimed from the personal account of the assessee is stated to have been made after furnishing the return of income but before extended the due date of filing of return of income. However, as noted above, once the return has been furnished, the subsequent payments made towards purchase would not be eligible for exemption unless the same was first deposited in capital gain account scheme and utilized therefrom. Therefore, the assessee is entitled to relief to the extent of Rs.20 lakhs only out of indexed capital gain subject, however, to the necessary verification of the claim of the other joint-owner as noted above. The decision relied upon by the assessee does not spell anything different.

10. In view of the foregoing discussion, the issue is set aside and remanded back to the file of AO for the limited purpose of verification of extent of claim made by other joint-owner on payment of Rs.40 lakhs towards purchase made out of joint Bank account as elaborated earlier. The assessee shall be at liberty to adduce the necessary evidences in this regard and remove prevailing ambiguity.”

19. With regard to the contention of the assessee that the sale consideration could not be utilized earlier as the same was received by it in August, 2014 only and thus, it was prevented by sufficient cause in not making the investment earlier. It was submitted by the ld. CIT-DR that the issue has been discussed by Ld. CIT(A) on page 11 of her order. The assessee has failed to bring on record any exigency or circumstances which lead to the delayed payments in August, 2014. It is pertinent to mention here that the cheques as appearing in the sale deeds of land sold by the assessee were deposited in the bank account of the assessee in August, 2014 and the assessee did not submit any reason for not depositing these cheques on an earlier date or receiving the post dated cheques. Thus, the assessee has to blame itself and not the department. Reliance is placed on the decision of Hon’ble ITAT, Chandigarh in the case of Hussan Lai Puri Vs ITO [2013] 38 taxmann.com 7 (Chandigarh), which has been discussed by the Ld. CIT(A) on page 12 of her appellate order.

20. It was further contended by the ld CIT-DR that the Ld. AR has relied upon a number of judicial pronouncements, which are related to exemption u/s 54E/54EC, whereas in the instant case, exemption is claimed u/s 54B. It is to be noted that sections 54E/54EC and 54B operate in altogether different spheres. In section 54E/54EC, the investment in the bonds are to be made within 6 months from the date of transfer of capital asset, whereas u/s 54B, the agriculture land is to be purchased before filing of ROI. Further, there is no concept of deposit in capital gains deposit account scheme u/s 54E/54EC, whereas, u/s 54, 54B, 54F,if the amount of capital gains is not invested in the purchase of land before filing of ROI, then the same has to be deposited in capital gains deposit account scheme.

21. The ld. CIT-DR has further argued that as per 2nd proviso to section 54E, in the case of compulsory acquisition of capital asset under any law wherein the full amount of compensation awarded for such acquisition is not received by the assessee on the date of such transfer, only in that case, the period of six months could be extended. The said proviso is being reproduced as under:

“Provided further that in a case where the transfer of the original asset is by way of compulsory acquisition under any law and the full amount of compensation awarded for such acquisition is not received by the assessee on the date of such transfer, the period of six months referred to in this sub-section shall, in relation to so much of such compensation as is not received on the date of the transfer, be reckoned from the date immediately following the date on which such compensation is received by the assessee or the 31st day of March, 1992, whichever is earlier.”

As per the ld. CIT-DR, no such provision exists either u/s 54EC or 54B. Thus, the provisions of section 54E/54EC and 54B/54/54F operates in different spheres and the provisions of these sections are not pari materia. Thus, it was submitted that the judicial pronouncements relied upon by the ld. A.R. are not applicable to the facts of the instant case before the Hon’ble Tribunal.

22. Distinguishing the facts of the case relied on by the ld AR, it was submitted by the ld. CIT-DR that the case of Chanchal Kumar Sircar Vs ITO is related to section 54EC, the part payment have been received and possession of land was also given but the investment u/s 54EC was made before the date of registered sale deed. In the said case, the reliance was placed on the judgement of Hon’ble Andhra Pradesh High Court in the case of S. Gopal Reddy v. CIT [1990] 181 ITR 378, which was related to compensation for acquisition and for delayed receipt of compensation and the claim was u/s 54E. The delayed investment on account of delayed receipt of compensation is covered under second proviso to section 54E as discussed above.

In the case of CIT Vs. Cello Plast (supra), the time for making investment was extended by the Hon’ble Court as the relevant bonds were not available during the period of six months from the date of transfer of the capital asset.

The case of Ram Agarwal Vs. JCIT is relating to Sec. 54, however, in the said case, the deposit in the specified scheme could not be made on 31.08.1995, being the last date on account of bank strike and consequently the deposit was made on 01.09.1995, which was allowed by the Hon’ble Tribunal.

In the case of CIT Vs. Akhbar AM Dhala and ACIT Vs. Kamlakar Mogha, the issues were relating to sec. 54EC and the investment in the bonds was allowed beyond the period of 6 months as the relevant bonds were not available in part of relevant period.

23. As per the ld CIT-DR, the issue is also covered by the decision of ITAT, Special Bench in the case of Jyotindra H Shodhan Vs ITO (2003) 87 ITD 312 (Ahd) = 2003-TIOL-117-ITAT-AHM-SB wherein, it has been held by the Special Bench that:

“The question to be decided is whether for the purpose of allowing deduction under section 54E, the period of six months is to be reckoned from the date of transfer or from the date of final receipt of sale consideration. Separate provisions have been made in the Act for both the situations. Where reckoning date is specifically provided as the date of receipt of the consideration, the period of six months is to be counted from the date of receipt. Conversingly, wherever it is not so specifically provided to be reckoned from the date of receipt it cannot be imported into the provision of section 54E(1), particularly when a contrary intention is expressed, namely, the period of six months is to be reckoned from the date of transfer in contrast to the date of receipt. [Paras 10 and 11]].

There is no ambiguity in the statutory provision related to the controversy under consideration. Section 54E(1) clearly provides that if the capital gain arises from a transfer of a long-term capital asset and the assessee has within a period of six months after the date of such transfer invested or deposited sale consideration in any specified assets, the capital gain would be dealt with in accordance with provisions of section 54E(l)(a ) and (b). The investment or deposit in specified assets within the stipulated period is a mandatory requirement of the section for getting benefit from tax on capital gain. [Para 16]

In view of the above, an assessee who desires to avail benefit of section 54E, must strictly satisfy all those conditions which are provided therein. One of the conditions of the section is that the assessee is to deposit whole or any part of the net consideration in any specified assets within a period of six months after the date of transfer. The transaction, in the instant case, took place when sale deed was executed and registered on 7-8-1982 and the investment was made by the assessee on 20-2-1987, i.e., after the stipulated period of six months from the date of transfer. Further the instant case did not fall under the proviso to section 54E(1) where under the period of six months is allowed to be reckoned from the date of receipt instead of date of transfer. The case of the assessee being not a case of compulsory acquisition of property, the benefit granted under the proviso would not be available to the assessee. The contention of the assessee that the said stipulated period of six months was to be reckoned from the date of receipt of consideration was not acceptable. In view of clear language of section 54E(1), the alternative submission that the view beneficial to the assessee was to be accepted, was also not acceptable. [Para 17]

The benefit of section 54E(1) was, therefore, not allowable to the assessee. The appeal of the assessee was to be dismissed. [Paras 18 and 19]”

The above decision of Special Bench was affirmed by the Hon’ble Gujarat High Court in the case of Jyotindra H. Shodhan Vs ITO [2015] 54 taxmann.com 342 (Gujarat) = 2015-TIOL-242-HC-AHM-IT, wherein it has been held that:

“6. We have heard learned advocate for the parties and perused the material on record. In our view, the contention of learned advocate for the appellant assessee is misconceived inasmuch as the six months’ period will have to be counted when sale-deed was executed i.e. from 07.08.1982. Therefore, we are of the opinion that the contention of learned advocate for the appellant assessee is not acceptable.

7. Further, the Tribunal in paragraph No.17 of its order has observed as under:-

“17. From the aforesaid discussion, it is very clear that an assessee who desired to avail benefit of section 54E must strictly satisfy all those conditions which are provided therein. One of the conditions of the section is that assessee is to deposit whole or any part of the net consideration in any specified assets within a period of six months after the date of transfer. There is no dispute about the facts that the transfer in the present case took place when sale deed was executed and registered on 07.08.1982 and the investment of Rs.1,89,904/- is made by the assessee in National Rural Development Bonds on 20.02.1987 i.e. after the stipulated period of 6 months from the date of transfer. Further, this case does not falls under the provisions to Sec. 54E(1) whereof the period of six months is allowed to be reckoned from the date of receipt instead of date of transfer. The case of assessee being not a case of compulsory acquisition of property, the benefit granted under the provision would not be available to the assessee. The contention of the assessee that this stipulated period of six months which is to be reckoned from the date of receipt of consideration is not acceptable. In view of clear language of Section 54E(1), the alternate submission, that the view beneficial to the assessee is to be accepted, is also not acceptable.”

8. In view of the aforesaid discussions, we are in complete agreement with the view taken by the Tribunal. The Tribunal has not committed any error in dismissing the appeal of the assessee. Hence, the present appeal is dismissed. The questions of law raised in this appeal is answered in favour of the revenue and against the assessee. Accordingly, we hold that the Tribunal was right in law in holding that benefit of Section 54E is available where the assessee has invested or deposited the whole or any part of net consideration in any specified asset within six months from the date of consideration received and not from the date of such transfer.”

24. The ld. CIT-DR has further submitted that in the case of Smt. Sarala Devi K. Vs CIT [1996] 88 TAXMAN 18 (KER.), it has been held by the Hon’ble Kerala High Court that the assessee is not entitled to claim exemption under section 54E, since the deposit was made only in May 1978 and February 1979 whereas the sale took place on 17-3-1977. The deposit was not admittedly made within six months. He has further submitted that as per provisions of section 54B of the Act, the land sold as well as purchased must be used for agriculture purposes. However, the Ld. AR has filed a copy of “Jamabandi’ in the name of the seller Smt. Rupinder Kaur and that too for the year 2006-07 and not for the relevant periods. Further, the said document does not reflect raising of any crops on the said land during the period as required by the provisions of section 54B. It is humbly submitted that in the interest of justice, this aspect of the matter may kindly be considered by the Hon’ble Tribunal. In view of the above submission, the ld. CIT-DR has contended that the orders of the lower authorities for declining the claim of deduction U/s 54B of the Act may be upheld.

25. We have considered the rival contentions and carefully gone through the orders of the authorities below. We had also deliberated on the judicial pronouncements referred by the lower authorities in their respective orders as well as cited by the ld. AR and ld. DR during the course of hearing before us in the context of factual matrix of the case. From the record we found that during the year under consideration the assessee had sold agricultural land as under: –

Particulars of landsDate of saleValueDetails of consideration received
Agricultural land at Munaha, Sanganer Khasra No. 116806.02.2013208138081) Rs. 700000/- by cash on 09.02.2013.2) Rs. 2,01,13,808/- by cheques in August-2014Total Rs. 20813808/-
Agricultural land at Munaha, Sanganer Khasra No. 117906.02.2013166562821) Rs. 700000/- by cash on 11.02.2013.2) Rs. 1,59,56,282/- by cheques in August-2014Total Rs. 16656282/-
Agricultural land at Munaha, Sanganer Khasra No. 117506.02.2013194114561) Rs. 700000/- by cash on 12.02.2013.2) Rs. 1,87,11,456/- by cheques in August-2014Total Rs. 19411456/-
Total 56881546 

It is clear from the above table that the sale consideration was received Rs.7,00,000/- cash in each case on 09.02.2013, 11.02.2013 & 12.02.2013. Thus a sum of Rs. 21,00,000/- was received in February 2013. Balance amount was received through cheques and stands accounted for in the bank account of the assessee with Oriental Bank of Commerce in August-2014. Apparently the sale conditions were such that post dated cheques were received at the time of sale on 06.02.2013 and the amount of Rs. 5,47,81,456/- (56881546-2100000) was received in August 2014. Soon on receipt of this sale consideration of Rs. 5,47,81,456/- the assessee immediately invested the same in purchase of agricultural land at Mauja Shekhpur, Fatehbad on 28.08.2014 for a sum of Rs. 5,50,00,000/-. A copy of the purchase deed is available on paper book page number 27 to 34. As the assessee immediately invested the sales consideration in purchase of new asset, deduction was claimed u/s 54B in the computation of income. The assessee disclosed Nil capital gains giving the following computation:-

Agricultural land 06/02/2013 Sales consideration  56881546
Less: indexed cost Purchase F.Y. 1997-98 525000/331*8521351360  
Registry charges F.Y. 1996-97 507115/305*8521416597  
Total2767957  
Capital gain  54113589
Deduction u/s 54B55000000Deduction54113589
Purchase of agricultural land on   
Capital gain  Nil

However during the course of assessment proceedings the Assessing Officer disregarded the submissions of the assessee that she could not invest the sale consideration by the due date u/s 139(1) i.e. 31.07.2013 for filing return of income as the funds were stipulated to be received in August-2014 as such there was no question for investing the same earlier by 31.07.2013. In view of this the Assessing Officer disregarded the claim of the assessee and made addition accordingly. However Ld. CIT(A) was conscious that the sale proceeds could be invested in extended period available for filing of return u/s 139(4). It is in the background of this that the Ld. CIT(A) has observed on page 11 of the appellate order that “the appellant has neither deposited the amount in the capital gain scheme nor purchased the new asset not only till the date of filing return u/s 139(1) but even the extended date u/s 139(4).” The Ld. CIT(A) has erred in observing that the assessee did not invest the funds in the purchase of new asset even in the extended date available u/s 139(4). The provisions of section 139(4) as these stood for the relevant period are quoted below: –

“Section 139(4)-Any person who has not furnished a return within the time allowed61 to him under sub-section (1), or within the time allowed under a notice issued under sub-section (1) of section 142, may furnish the return for any previous year at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier “

The aforesaid provisions lay down that return can be filed at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier. In this case the Assessment Year involved is Assessment Year 2013-14, therefore time available for investing in the purchase of new asset was up to 31.03.2015. The assessee invested the funds in August 2014 well within the time available u/s 139(4). The Hon’ble Punjab & Haryana High Court in the case of CIT Vs. Ms. Jagriti Aggarwal 339 ITR 610 = 2011-TIOL-672-HC-P&H-IT has held as under:-

Capital gains-Exemption under s. 54-Time-limit for making deposit under the scheme vis-a-vis purchase of new house property-As per subs. (2) of s. 54, the amount of capital gains is required to be deposited by the assessee before furnishing the return not later than the due date under s. 139(1) in a specified account only if such amount is not appropriated by the assessee towards the purchase or construction of new asset before the date of furnishing the return under s. 139-Sub-s. (4) of s. 139 is in fact, a proviso to sub-s. (1) and provides for extension of period of due date for filing the return in certain circumstances-Such provision is not an independent provision but relates to the time contemplated under sub-s. (1) of s. 139-Due date for furnishing the return of income as per s. 139(1) is subject to the extended period provided under sub-s. (4) of s. 139-In the instant case, assessee sold her residential house on 13th Jan., 2006 and purchased another property jointly with her father-in-law on 2nd Jan, 2007, and filed her return on 28th March, 2007, i.e., before the extended due date of filing of return under s. 139(4) for the relevant asst. yr. 2006-07-Therefore, assessee is entitled to exemption under s. 54

26. Similarly in the case of Mohan Singh vs. Assistant Commissioner of Income Tax, (2015) 173 TTJ 634 (Chd):

In the case of the assessee, the period under section 139(4) would be expiring on 31.03,.2011. Since the assessee made deposit of Rs. 50 lacs under Capital Gain Accounts Scheme on 14.10.2010. Therefore, it was deposited within the period prescribed under section 139(4) of the Act. Therefore, assessee would be entitled for exemption under section 54B of the Income Tax Act in respect of Rs. 50 lacs deposited with Punjab National Bank. This ground of appeal of the assessee is accordingly, allowed. The Assessing Officer is directed to give relief to the assessee accordingly.

(ii) CIT vs. Rajesh Kumar Jalan (2006) 286 ITR 0274 (ITAT Gauhati)

From a plain reading of sub-s. (2) of s. 54, it is clear that only s. 139 is mentioned in s. 54(2) in the context that the un-utilized portion of the capital gain on the sale of property used for residence should be deposited before the date of furnishing the return of the income-tax under s. 139. Sec. 139 cannot be meant only as s. 139(1) but it means all sub-sections of s. 139. Under sub-s. (4) of s. 139, any person who has not furnished a return within the time allowed to him under sub-s. (1) of s. 142 may furnish the return for any previous year at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment whichever is earlier. Such being the situation, it is the case of the assessee that the assessee could fulfil the requirement under s. 54 for exemption of the capital gain from being charged to income-tax on the sale of property used for residence upto 30th March, 1998, inasmuch as the return of income-tax for the asst. yr. 1996-97 could be furnished before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment whichever is earlier under sub-s. (4) of s. 139. In the facts and circumstances of the case, the assessee was entitled to claim benefit under s. 54 on the entire amount received by him on account of sale of his house property.

(iii) Nipun Mehtotra vs. Assistant Commissioner of Income Tax (Banglore Tribunal) 113 TTJ 0223

Perusal of sub-s. (4) of s. 54 shows that the assessee has to utilize the amount for the purchase or construction of the new asset before the date of furnishing the return of income under s. 139. There is no mention of any sub-section of s. 139. Hence, one cannot interpret that s. 139 mentioned should be read as s. 139(1). Similar language is appearing in s. 54(2). In the instant case, it is not disputed that sale consideration has been utilised before the date of filing of the return under s. 139(4). The assessee is entitled to exemption of Rs. 2,10,833 under s. 54F

27. Applying the proposition of law as discussed above to the facts of the instant case, we hold that the case of the assessee is fully covered for deduction U/s 54B of the Act as the investment made falls within the period for filing the return U/s 139(4) of the Act.

28. At the cost of repletion, we observe here that the uncontroverted and admitted facts are that the assessee sold agricultural land vide registered deed on 06.02.2013. However the sales consideration were received under various cheques as mentioned in the three sale deeds were realized only in August 2014 as the cheques tendered against sales consideration were post-dated. Return was filed well within time on 05.08.2013. In view of this it is clear that the assessee was not in a position to invest in the new asset that agricultural land by 05.08.2013 as the sales consideration itself was received in August 2014 and immediately thereafter in August 2014 itself assessee made investment in the purchase of agricultural land. From the record we found that soon on realization of sales consideration the assessee had invested in the purchase of agricultural land. Thus the spirit of law stands complied with. The Assessing Officer should have considered the fact that when the sales consideration itself has been received late, how could the assessee be expected to make investments prior to receipt of the sales consideration. It is only when the money is received in hands that assessee could make investments. In view of this when the spirit of law stands complied with, the deduction claimed by the assessee u/s 54B should have been allowed.

29. For this purpose, reliance may be placed on the following judicial pronouncements:

(i) Chanchal Kumar Sircar vs. INCOME TAX OFFICER (KOLKATA TRIBUNAL) (2012) 16 ITR 0091, (2012) 50 SOT 0289 = 2012-TIOL-268-ITAT-KOL

Exemption u/s 54EC-Assessee, the joint owner of the house property, sold parts of the building-Possession was handed over to buyers and consideration for the sale was made in installments-Consideration received by assessee on account of the sale was invested in NABARD Bonds which were beyond six months from the date of the transfer, though within six months from the date of receipt of the consideration- Assessee claimed an exemption under s. 54EC on Capital Gains-AO and CIT(A) held that for purpose of the exemption under s. 54EC, the period to be reckoned was from the date of the agreement and receipt of part payment at the first instance-Held, period of six months for making a deposit under s. 54EC should be reckoned from the date of actual receipt of the consideration-If period is reckoned from date of agreement and receipt of part payment at the first instance, then it would lead to an impossible situation by asking assessee to invest money in specified asset before actual receipt of the same-Assessee is eligible for an exemption under s 54EC of the Act on the part payment received after the completion of the transaction.

(ii) S. GOPAL REDDY vs. COMMISSIONER OF INCOME TAX (HIGH COURT OF ANDHRA PRADESH) (1990) 181 ITR 0378

Capital gains-Exemption under s. 54E-Second proviso to s. 54E(1) inserted w.e.f. 1st April, 1984 is clarificatory in nature and should be deemed to have prevailed even before 1st April, 1984-Therefore, though the property of assessee was compulsorily acquired in 1978, as the compensation of Rs. 66,605.13 was received on 19th Aug., 1981 and the assessee invested a sum of Rs. 50,000 in specified asset on 7th Feb., 1981, i.e. within six months of the receipt of compensation, exemption under s. 54E was available to him.

(iii) COMMISSIONER OF INCOME TAX vs. CELLO PLAST HIGH COURT OF BOMBAY (2012) 76 DTR 0439) = 2012-TIOL-622-HC-MUM-IT

Capital Gains-Exemption u/s. 54EC-Investment in Rural Electrification Corporation Limited (REC) bonds-Time limit-Six months-Availability of bonds-On 22/3/2006, respondent sold factory building earning long term capital gain-Assessee could purchase REC bonds only on 31/1/2007 due to unavailability of bonds from 4/8/2006 to 22/1/2007- Revenue denied deduction u/s 54EC to the assessee-Held, a person cannot be expected to make the investment on the first possible date on which the bonds were made available after the expiry of the six months period-During the period the bonds were unavailable a person is likely to invest elsewhere-To expect him not to do so would be unjust for reasons too obvious to state-Considering that the bonds were not available for such a long period, an extension of merely nine days is extremely reasonable in the present facts-Section 54EC having given the respondent a choice of investing in bonds, revenue cannot insist that the respondent ought to have invested in the bonds of the National Highway Authority-Revenue’s appeal dismissed

In this case also investment within the statutory period was beyond the control of the assessee as the bonds were not available and hence delayed investment in the bonds was accepted. In the case of the assessee also investment within statutory period was beyond his control. Hence the ratio of the case is applicable.

(iv) RAM AGARWAL vs. JOINT COMMISSIONER OF INCOME TAX (BOMBAY TRIBUNAL) (2002) 81 ITD 0163

Capital gains-Exemption under s. 54F-Time-limit for making deposit under the specified scheme-Claim for exemption was disallowed by the AO for two reasons, firstly as the assessee did not have business income the prescribed date for filing the return was 30th June, 1995, and not 31st Aug., 1995, and secondly even if the assessee was having business income the deposit made on 1st Sept., 1995, was not made within the prescribed time i.e., by 31st Aug., 1995-Not justified-Merely on account of the fact that this was the first year in which the assessee earned commission would not alter the character of receipt from ‘business’ to ‘other source’-Commission received by the assessee for arranging sale of goods for another party fell under the head ‘business income’-Deposit could not be made on 31st Aug., 1995, due to a reason which was beyond the control of the assessee viz. strike in bank-Thus the assessee was not at fault in not depositing the amount before 31st Aug., 1995, and the deposit made on 1st Sept., 1995, satisfied the condition laid down in s. 54F-Therefore, assessee was entitled to exemption under s. 54F.

(v) COMMISSIONER OF INCOME TAX vs. AKBAR ALI DHALA (HIGH COURT OF MADRAS) (2014) 89 CCH 0209 Chen HC/226 Taxman 254 = 2014-TIOL-1319-HC-MAD-IT

Capital gains-Exemption to capital gains investment in certain bonds- Time limit of investment, when funds not available-Assessee claimed exemption from capital gains u/s 54EC on sale of his property on 22.11.2006 and investment was made in REC Bonds on 2.7.2007, which was well beyond period of six months stipulated in Section 54EC- Assessee submitted that REC Bonds were not available between 1.4.2007 and 21.5.2007 (on which date six months period expires) and, therefore, he could not invest within six months as stipulated in Section 54EC-AO rejected assessee’s claim of capital gains exemption u/s 54EC-CIT(A) affirmed findings of AO holding that bonds were available on date of sale of asset by assessee, namely, 22.11.2006, till 31.3.2007, that there was four months period available to assessee to invest- Tribunal allowed assessee’s claim of exemption u/s 54EC holding that since bonds were not available during period from 1.4.2007 to 1.7.2007, assessee had no other option except to invest in REC Bonds on 2.7.2007-Held, purport of Section 54EC is to grant a benefit to assessee, who had invested capital gain that arises from transfer of long-term capital asset, within a period six months after date of such transfer, in long-term specified asset-There is no hard and fast rule that assessee should invest on a particular date within six months period specified in said provision-More so when assessee is entitled to invest in any such long term specified asset specified in Explanation (b) to Section 54EC(3) that would be most beneficial to him-Assessee will be entitled to exercise his option during entire period of six months-Thus assessee can wait till last date to see whether any bond that is profitable to him is issued/available in market-Fact that REC Bonds were not available for a period of 51 days shows that prejudice was caused to assessee, as he will not be able to exercise right any time during entire period of six months-Non availability of bonds from 1.4.2007 to 1.7.2007, creates an artificial cut-off period contrary to Section 54EC- Statutory benefit granted u/s 54EC cannot be curtailed on ground that said option should have been exercised in a period earlier to six months, even though such right was available to assessee for a period of six months as a whole, because assessee cannot be expected to visualize unforeseen eventualities and do the impossible-Tribunal was justified in holding that assessee was entitled to capital gains exemption u/s 54EC-Revenues’ appeal dismissed.

(vi) Assistant Commissioner of Income Tax vs. KAMLAKAR MOGHA (HIGH COURT OF BOMBAY) (2015) 125 DTR 0273 (Bom) = 2015-TIOL-2154-HC-MUM-IT,

Capital Gains-Capital gain not to be charged on investment in certain cases-ITAT allowed deduction of Rs.22 lacs claimed u/s 54EC for investment in purchase of REC Bonds-Held substantive provision u/s 54EC(1) mandates investment within period of six months after date of transfer-National Highway Authority Bonds and bonds issued by Rural Electrification Corporation Limited were specified to be long term specified assets-Assessee transferred premises on 07.07.2006 and, therefore, was duty bound to invest within six months i.e. by 06.01.2007-Statutorily, Assessee had time of six months to make investment and the fact that he did not make this investment at any time during that period when bonds were available was, therefore, not relevant-Show cause notice dated 03.12.2009 was issued to Assessee in connection with investment in question and to it Assessee replied satisfactorily-Division Bench of Court at Bombay in Income tax Appeal No. 3731 of 2010 held that availability of bonds only for limited period during statutory period could not prejudice Assessee’s right to exercise same up to last date-Option or discretion given by Parliament to Assessee needs to be honored-REC Bonds became available in VIA issue on 22.01.2007 and, therefore, investment made therein could not be said to be after undue or unreasonable delay-Revenue’s appeal dismissed.

In view of the aforesaid case laws it is established beyond doubt that if the circumstances are beyond the control of the assessee and the bonafides of the assessee are clear, in such circumstances even delayed investment i.e. beyond the period of six months is also eligible for deduction under various provisions of section 54. Thus the case of the assessee also deserves to succeed.

30. Now coming to the contention raised by the ld CIT-DR to the effect that exemption under section 54B and 54E/54EC operate in altogether different spheres. In section 54E/54EC, the investment in the bonds are to be made within 6 months from the date of transfer of capital asset, whereas u/s 54B, the agriculture land is to be purchased before filing of ROI. Further, there is no concept of deposit in capital gains deposit account scheme u/s 54E/54EC, whereas, u/s 54, 54B, 54F, if the amount of capital gains is not invested in the purchase of land before filing of ROI, then the same has to be deposited in capital gains deposit account scheme. In this regard, we observe that the contention of the learned DR is not acceptable on the ground that the amount of capital gain can be invested in purchase of land only on receipt of the sale consideration and the intention of the legislature is that the amount of sale consideration should not be utilized otherwise other than purchase of agriculture land and in the instant case the assessee has invested the wholesale consideration in purchase of another agriculture land within two days which is clear from the bank statement of the assessee. The period of six month or condition of investment prior to the filing of ROI is applicable only in the cases where sale consideration has been received before filing of ROI. When the sales consideration itself was received after filing of ROI then the case law relied upon by the AR is squarely applicable in the instant case. Specially the case of CIT Vs Jagriti Aggarwal (High Court of Punjab and Haryana) (2011) 339 ITR 0610 = 2011-TIOL-672-HC-P&H-IT wherein it has been held. That the assessee is entitle to claim benefit u/s 54, if the investment was made in purchase of new assets or deposit in account before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment whichever is earlier under sub-s. (4) of s. 139.

31. It was also the contention of the ld CIT-DR that the second proviso to section 54E is also relevant, But this is not a case of compulsory acquisition where second proviso to section 54E is applicable similarly the provisions of section 54 and 54B are pari materia, but the provision of section 54E/54EC are not pari materia with 54B/54F. We found that the case law cited by the learned AR in the case of Chanchal Kumar Sircar Vs ITO is applicable because of the circumstances in that case it was held that the period of limitation for making deposit or investment in new assets should be reckoned from the date of actual receipt of the consideration- If period is reckoned from date of agreement and receipt of part payment at the first instance, then it would lead to an impossible situation by asking assessee to invest money in specified asset before actual receipt of the same. Likewise in other cases it was held by the various authorities that the liberal interpretation should be considered in case of exemption. The case of Jyotindra H Shodhan Vs ITO (2003) 87 ITD 312 (AHD.) (SB) = 2003-TIOL-117-ITAT-AHM-SB, is also not applicable because the case is related to the provision of section 54E and not 54B.

32. In view of above discussion, we direct the Assessing Officer to allow the assessee’s claim of deduction U/s 54B of the Act amounting to Rs. 5,39,67,384/- on sale of agricultural land. The other grounds raised by the assessee with regard to the fact that agricultural land so sold by the assessee are not an asset U/s 2(14)(iii)(a) or (b) of the Act as these provisions stood then and therefore no capital gains are leviable. The assessee had also raised a ground that the agricultural land sold by the assessee is not urban but rural agricultural land. As we have already decided the issue for granting deduction U/s 54B of the Act we are not going into the grounds taken by the assessee with regard to nature of land so held and sold by the assessee being in the nature of agricultural land or not.

33. In the result, appeal of the assessee is allowed in terms indicated hereinabove.

(Order pronounced in the open court on 12.04.2019)

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