Income Tax Appellate Tribunal - Amritsar
S. Dalbir Singh , Jalandhar vs Department Of Income Tax on 30 June, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL
AMRITSAR BENCH; AMRITSAR.
(CAMP AT JALANDHAR)
BEFORE SH. A.D. JAIN, JUDICIAL MEMBER
AND SH. T.S. KAPOOR, ACCOUNTANT MEMBER
ITA No. 27(Asr)/2015
Assessment Year:2009-10
PAN: CLQPS4591H
Dy. Commr. Of Income Tax vs. Sh. Dalbir Singh,
Central Circle-1, S/o Sh. Dhanna Singh,
Jalandhar, VPO Sarmastpur.
Distt. Jalandhar.
(Appellant) (Respondent)
Appellant by: Sh.Bhawani Shanker, DR
Respondent by: Sh. S.S. Kalra, CA
Date of hearing: 27/06/2016
Date of pronouncement: 30/06/2016
ORDER
PER A.D. JAIN, JM;
This is the Revenue's appeal for the assessment year 2009-10, against the order, dated 17.10.2014, passed by the ld. CIT(A), Jalandhar. The Revenue has raised the following grounds of appeal:
"1.(a) Whether the decision of the ld. CIT(A) is right in deleting the addition of Rs.2,42,24,170/- made by the AO ( on account of Capital Gain), relying upon the decision in the case of Sanjeev Lal vs. CIT reported as (2014) 269 CTR 1 (SC) which is not applicable to the facts of this case and by ignoring the facts submitted in remand report.
(b) Whether the ld. CIT(A) is right in allowing expenses u/s 48(1) paid at Rs.79,70,797/- for eviction of land to the third party cultivators of land when the assessee is Khud Kasht.2 ITA No..27(Asr)2015
A.Y. 2009-10
(c) Whether the ld. CIT(A) is right in allowing deduction u/s 54b whereas the land was purchased before sale of land on which the capital gain has arisen."
2. The AO found that the assessee had not paid due tax on capital gain income of Rs.2,42,24,176/-, added this amount as the assessee's income, vide assessment order passed u/s 144 of the Income Tax Act, 1961.
3. The ld. CIT(A) deleted the addition by observing as follows:
"7. I have considered the facts of the case, the arguments of the AR during assessment proceedings as well as appellate proceedings. The comments of the Assessing Officer during remand proceedings have also been considered. It is seen that the appellant had claimed that an amount of Rs. 3,17,60,750/- had been paid to 11 persons for evicting them from the impugned piece of land before the transaction could be finalized for sale. The details regarding the eviction money paid to different persons had been submitted during the appellate proceedings and the Assessing Officer has verified the contentions of the appellant in this regard to be correct. Since the said amount paid as earnest money had to be paid for ensuring the smooth sale of the impugned property the said amount has to be reduced from the gross sale consideration to work out the net sale consideration for the purposes of computation of Capital Gain. The Assessing Officer has verified during the remand proceedings that the land sold by the appellant had been used for agricultural purposes and the land purchased was also being used for the purposes of agriculture only.
8. The next issue raised by the Assessing Officer is that since the land in question is being used for the agricultural purposes by the persons who had the possession of the land and those persons had to be paid eviction charges as detailed above, the claim of the assessee would not fall under the purview of section 54B as the said laid was not being used by the assessee himself for agricultural purposes, I do not agree with the view of the Assessing Officer on the issue as the requirement of usage of agricultural land is with reference to the land and not with reference to the person who owns it. For instance, if a person owns agricultural land and derives rent from the same, it also qualifies as agricultural income not taxable under Income Tax Act, 1961 even though the agricultural operations are not performed personally by said owner of agricultural land. The situation in the current case is also same as the owner of the land had given impugned agricultural land for the purpose of tiling who in the course of time developed vested interest in the form of possession of land but the fact remains that land itself had been used for agricultural purposes all along and 3 ITA No..27(Asr)2015 A.Y. 2009-10 does not lose its character of being used as agricultural land whether the operations are performed by the owner or the tenant. Therefore, the view of the Assessing Officer on the issue is rejected. The second issue raised by the Assessing Office in the remand report is that certain registrations in respect of purchase of agricultural land had been effected before the date of sale and therefore would not strictly get covered by the provisions of Section 54B. The facts of the case are clear that the payment for purchase of land has been made out of advance received by assessee against sale of land. In fact, payments have been made directly by the buyer of the agricultural land from the assessee to the sellers who sold the land to the appellant. The AR has brought on record the circular of CBDT no. 359 dated 10.05.1983 which is with reference to section 54E. The said circular qualifies the situation as under:-
"Section 54 of the Income Tax Act, 1961 provides for exemption of long term capital gains if the net consideration is invested by the assessee in specified assets within a period of six months after the date of such transfer. A technical interpretation of S.54E could mean that the exemption from tax on capital gains would not be available if part of the consideration is invested prior to the date of execution of the sale deed as the investment cannot be regarded as having been made within a period of six months after the date of transfer.
On consideration of matter in consultation with the Ministry of Law, it is felt that the foregoing interpretation would go against the purpose and spirit of the section. As the section contemplates investment of the net consideration in specified assets for a minimum period and as earnest money or advance is part of the sale consideration the Board have decided that if the assessee invests the earnest money or the advance received in specified assets before the date of transfer of asset the amount so invested will qualify for exemption under s. 54E of the Income Tax Act, 1961."
9. It has been clarified that the intention of the legislature was to ensure that the net consideration was invested in specified assets and earnest money or advance being part of sale consideration should be considered to have been invested for exemption under section 54E of the Income Tax Act, 1961. The facts of the present case are on the same lines and the legislature's intention in respect of section 54B cannot be said to be different as the essential purpose of incorporating the impugned provision of section 54B is to ensure that anybody selling agricultural land should not be subjected to taxation if the proceeds thereof are used for buying agricultural land. The fact that the advance/ earnest money had been used for making the consequential purchase should not come in the way of allowing the claim of deduction under section 54B. Even otherwise, the AR has placed reliance on the judgment of Hon'ble Apex Court in the case of Sanjeev Lal etc. Vs. CIT 269 CTR 1 which is directly on the issue of definition of 'transfer' under section 2(47) and claim of deduction under section 54. The 4 ITA No..27(Asr)2015 A.Y. 2009-10 Hon'ble Court has observed that even an agreement to sell could amount to a transfer for the purposes of section 2(47)/54. The specific observations of the Hon'ble Court are as under:-
"In normal circumstances by executing an agreement to sell in respect of an immoveable property, a right in personam is created in favour of transferee/vendee. When such right is created in favour of the vendee, the vendor is restrained from selling the said property to someone else because the vendee, in whose favour the right in personam is created, has a legitimate right to enforce specific performance of the agreement, if the vendor, for some reason is not executing the sale deed. Thus, by virtue of the agreement to sell some right is given by the vendor to the vendee. Though the entire property cannot be said to have been sold at the time when an agreement to sell is entered into. Looking at the provisions of Section 2(47) of the Act, which defines the word "transfer" in relation to a capital asset, one can say that if a right in the property is extinguished by execution of an agreement to sell, the capital asset can be deemed to have been transferred. In the light of definition of "transfer"
as defined under section 2(47) of the Act, it is clear that when any right in respect of any capital asset is extinguished and that right is transferred to someone, it would amount to transfer of a capital asset. An agreement to sell in respect of a capital asset had been executed on 27th December, 2002 for transferring the residential house/original asset in question and a sum of Rs. 15 lakhs had been received by way of earnest money. It is also not in dispute that the sale deed could not be executed because of pendency of the litigation between R on one hand and the assessee on the other as R had challenged the validity of the Will under the property had devolved upon the assessee. By virtue of an order passed in the suit filed by R, the assessee were restrained from dealing with the said residential house and a law-abiding citizen cannot be expected to violate the direction of a court by executing a sale deed in favour of a third party while being restrained from doing so. In the circumstances, for a justifiable reason, which was not within the control of the assessee, they could not execute the sale deed and the sale deed had been registered only on 24th September, 2004, after the suit filed by R, challenging the validity of the Will, had been dismissed. In the light of the aforestated facts and in view of the definition of the term "transfer", one can come to a conclusion that some right in respect of the capital asset in question had been transferred in favour of the vendee and therefore, some right which the assessee had, in respect of the capital asset in question, had been extinguished because after execution of the agreement to sell it was not open to the appellants to sell the property to someone else in accordance with law. A right in personam had been created in favour of the vendee, in whose favour the agreement to sell had been executed and who had also paid Rs.15 lacs by way of earnest money. No doubt, such contractual 5 ITA No..27(Asr)2015 A.Y. 2009-10 right can be surrendered or neutralized by the parties through subsequent contract or conduct leading to no transfer of the property to the proposed vendee but that is not the case at hand.
In addition to the fact that the term "transfer" has been defined under section 2(47) of the Act, even if looked at the provisions of Section 54 of the Act which gives relief to a person who has transferred his one residential house and is purchasing another residential house either before one year of the transfer or even two years after transfer, the intention of the Legislature is to give him relief in the matter of payment of tax on the long term capital gain. If a person, who gets some excess amount upon transfer of his old premises within the time stipulated under Section 54 of the Act, the Legislature does not want him to be burdened with tax on the long term capital gain and therefore, relief has been given to him in respect of paying income tax on the long term capital gain. The intention of the Legislature or the purpose with which the said provision has been incorporated in the Act, is also very clear that the assessee should be given some relief. Though it has been very often said that common sense is a stranger and an incompatible partner to the Income Tax Act and it is also said that equity and tax are strangers to each other, still this Court has often observed that purposive interpretation should be given to the provisions of the Act. Considering the principles with regard to the interpretation of statute pertaining to the tax laws, one can very well interpret the provisions of s.54 r/w s.2(47), i.e. definition of 'transfer' which would enable the assessee to get the benefit under s.54 - Oxford University Press vs. CIT(2001) 165 CTR (SC) 629: (2001) 3SCC 359 applied. In view of the peculiar facts of the case and looking at the definition of the term 'transfer' as defined under s.2(47) the assessee were entitled to relief under s. 54 in respect of long term capital gain which they had earned in pursuance of transfer of their residential property and used for purchase of a new asset/residential house. The authorities are directed to reassess the income of the assessee for asst. year 2005-06 after taking into account the fact that the assessee were entitled to the relief, subject to fulfilment of other conditions - Sanjeev Lal etc. etc. (judgments dt. 29th Jan, 2013 of the Punjab and Haryana High Court in IT appeal Nos. 153 & 154 of 2012) set aside."
In view of the above facts & circumstances and direct judicial pronouncements by the Hon'ble Apex Court on the issue, the appellant's claim for deduction under section 54 is allowed. The difference of Rs. (-)15,79,477/- pointed out by the Assessing Officer between sale and purchase consideration also would not lead any taxable Capital Gain as benefit of indexation given on any reasonable value would lead to negative gain. Therefore no Capital gain is leviable on the impugned transaction.The addition made by the Assessing Officer is therefore directed to be deleted."
6 ITA No..27(Asr)2015A.Y. 2009-10
4. The ld. DR has contended that the ld. CIT(A) has erred in deleting the addition correctly made by the AO; that while doing so, the ld. CIT(A) has failed to appreciate that the decision of the Hon'ble Supreme Court in the case of 'Sanjeev Lal vs. CIT', 269 CTR 1 (SC), is not at all applicable to the facts of the present case; that the ld. CIT(A) further erred in ignoring the remand report of the AO; that the ld. CIT(A) has further erred in allowing expenses of Rs.79,70,797/- under section 148(1), for eviction of land to the third party cultivators of land when the assessee was Khud Kasht; that the ld. CIT(A) has also erred in allowing deduction under section 54B even in the face of the fact that the land was purchased befor3 the sale of land, on which, capital gain has arisen.
5. The ld. Counsel for the assessee, Sh. S.S. Kalra, on the other hand, has placed strong reliance on the impugned order and has reiterated the stand maintained before the authorities below. Written submissions have also been filed.
6. Having heard the rival contentions in the light of the material placed on record, we find that the assessee filed written submission before the ld. CIT(A), these have been reproduced by the ld. CIT(A). In para-3 of the impugned order.
It would be appropriate to reproduce these written submissions as under:
"Pertain to assessment u/s 144 framed by the A.O. vide Order dated 23/09/2013 wherein he has assessed a sum of Rs. 2,42,24,176/- as Capital Gains on sale of Agricultural land in the hands of the assessee on the sole reasoning that the assessee has not complied with notice issued by the A.O. and thus he consequently invoked section 144.7 ITA No..27(Asr)2015
A.Y. 2009-10 Plea of the assessee:-
(i) From the very Asstt. Order it is evident that the A.O. was in an undue hurry to frame the Asstt. without affording a reasonable opportunity to the assessee to file his return of income in response to notice u/s 148 and to explain his case in response to notice u/s 143(1) & 142(1). The A.O. has done that after the service of notice u/s 148 and thereafter he just issues only ONE notice u/s 143(2) & 142(1) dated 30/08/2013 for 10/09/2013. The A.O. thereafter not even thinking of providing another opportunity to the assessee jumps over for completion of assessment u/s 144. This act of A.O. of deeming it not necessary to issue another notice to be fair and act in a judicious manner has resulted in the aforesaid assessment u/s
144. The Asstt. was TIME BARRING only on 31/03/2014 and the A.O. had well more than six months with him to frame the Asstt.
But the A.O. in his hurry to frame the Asstt. acted in gross violation of the settled legal principles of natural justice and thus the asstt. suffers on this aspect and deserves to be quashed.
(ii) From the Order of the A.O. the following legal issues are made out:-
1. That the Asstt. suffers on A/c of lack of opportunity and this needs to be annulled.
II. That the land is situated beyond 8 Kilometers from Kartarpur and thus its sale is exempt and no Capital Gains are assessable being Agricultural in nature.
III. That the Capital Gain has wrongly been worked out without indexation.
IV. So much so, even the demand has not been worked out properly.
V. No reasons were even confronted to the assessee which has given rise to proceedings u/s 148 which seem to be vague and untenable.
(iii) Without prejudice to the above legal issues on facts it is submitted as under:-
That the assessee during the year sold his share of land app. 651 marlas for Rs. 2,76,67,500/- although the Deptt. has take 186.40 Marlas for Rs.8 ITA No..27(Asr)2015
A.Y. 2009-10 2,65,76,750/-. This amount is to further go down when an amount of Rs. 79,70,797/- is subtracted for amount paid for eviction of land to the persons who were in possession thereof and shall qualify for the deduction u/s 48(1) of the Act. Complete details with documentary evidence is enclosed for which the assessee is separately moving application under Rule 46A of the Act. Thus the net consideration comes to (2,76,67,500 - 79,70,797 = 1,96,96,703/-).
The assessee as per the documents enclosed had purchased the following agricultural land after receipt of sale consideration to the extent of Rs. 1,96,96,703/-.
i) Agricultural Land 62K 5M in Village Kingra for Rs. 1,16,71,875/- + Expenses Rs. 6,00,000/-. Thus totaling Rs. 1,22,71,875/- for which the payment was directly made by M/s. Bhagwati Agricultural Farms to the seller Mr. Surinder Singh as per following details:-
S.No. Date Cheque No. Amount
1. 19/03/2008 187954 10,00,000.00
2. 25/03/2008 187958 99,000.00
3. 28/03/2008 187960 15,00,000.00
4. 02/04/2008 187961 99,000.00
5. 11/06/2008 384603 2,03,89,375.00
6. 25/06/2008 Cash 22,000.00
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2,31,09,375.00
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Total Land purchased 123 K 5 M = 2465 Marlas pertaining to two
brothers for which joint payment made by Bhagwati Agricultural Farm as per details enclosed coupled with the Bank Statement of Bhagwati Agricultural Farm:-
Assa Singh (As per Regd.) 61K (1220 Marla)= 1,14,37,500.00 9 ITA No..27(Asr)2015 A.Y. 2009-10 Dalbir Singh (As per Regd.) 62K 5M (1245 Marlas) = 1,16,71,875.00
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2,31,09,375.00
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ii) Agricultural land measuring 13K 13M in Village Khakhli, Teh. & Distt. Hoshiarpur worth Rs. 25,13,000/- for which the payment was directly made by Bhagwati Agricultural Farm.
iii) Purchased Residential House in Village Sarmastpur worth Rs.
24,00,000/- whose payment stands made directly by M/s. Bhagwati Agricultural Farm and which entitles him for exemption u/s 54F That if any meager estimate of cost of land is applied as on 01/04/1981 and consequently after indexation, the same shall well be fully covered under section 54B & 54F of the Act and thus there shall be no Capital Gains or question of any tax.
The assessee is separately moving an application under rule 46A of the Act for admission of additional evidence.
The assessee prays for admission of additional evidence and on that basis requests for deletion of consequential addition on A/c of Capital Gains."
7. The ld. CIT(A) called for a remand report from the AO. This remand report. This remand report, as reproduce in para 4 of the impugned order is as follows:
"4. The submissions of the appellant were sent to the Assessing Officer for his comments seeking his opinion on the issue of framing assessment under section 144 of I.T.Act, 1961 and also to verify the claim of the appellant with regard to NIL capital gain arising out of the impugned 10 ITA No..27(Asr)2015 A.Y. 2009-10 transaction. The Assessing Officer vide his report dated 24.09.2014 submitted his comments as under:-
"In this connection, it is submitted that this case was assessed under section 144 of the Income Tax Act, 1961 at an income of Rs. 2,42,24,176/- . The assessment record reveals that inspite of number of opportunities as mentioned in the assessment order, the assessee did not comply and furnish any reply. However, it is seen that the assessee is an agriculturist with little knowledge of law. Therefore, in view of the principles of natural justice, additional evidence may be admitted in this case.
The merits of the case in light of the submission of the assessee in the office of your goodself are being discussed as follows:-
i. As regards the sale consideration received by the assessee, the assessee has claimed in his reply that his share of land 651 Marlas was sold for Rs. 2,76,67,500/-. However, the assessee has claimed that it was to be reduced by an amount of Rs. 79,70,797/- paid for the eviction of land to persons in possession of the land. The net sale consideration therefore is Rs. 1,96,96,703/-. The assessee has submitted copy fards of the said land which mention the land to be Khud Khast i.e. Agricultural land. The assessee has also submitted confirmations of receipt by the eleven persons who were paid the amounts for eviction.
However, a perusal of the confirmation filed by the assessee reveals that the persons in possession of land have stated that they were carrying out agricultural operations on the said land. This means that the land was not being used by the assessee himself for agricultural purposes which is one of the basic prerequisites for claiming exemption under section 54.
ii. As regard the sale of the land the assessee has claimed that he has purchased two pieces of land and a residential house being discussed as follows:-
a. First one being agricultural land of 62 kanal 5 Marlas at Vill. Kingra for Rs. 1,22,71,875/-. However, it is seen that the date of purchase of this land predates the date of sale of the following portions of the land sold by the assessee:-
i. Registry dated 29.08.2008 Rs. 1,00,72,500/-.
ii. Registry dated 28.08.2008 Rs. 1,27,92,500/-
iii. Registry dated 21.08.2008 Rs. 1,32,60,000/-
11 ITA No..27(Asr)2015
A.Y. 2009-10
iv. Registry dated 17.09.2008 Rs. 8,50,000/-
The assessee has submitted the fard of this land which mention the land to be khud khast i.e. Agricultural land.
b. The other land measuring 13 kanal 13 malras for Rs. 25,13,000/-. The assessee has submitted that the final registry of the said land is not done as the matter is in the Court. Therefore, the final sale of this land has not been done till date.
c. As regards, the purchase of house, the house has been purchased in May, 2008. The assessee has submitted that this house being in Lal Lakir, no registry has been done.
The claim of the assessee regarding exemption under section 54B & 54F may be decided accordingly."
8. The assessee furnished the counter comments to the remand report.
These are as follows:
"i. That as far as admission of additional evidence under rule 46A of the Act is concerned, the A.O. has absolutely no objection to its admission and therefore no comments are offered.
ii. Coming to the merits of the case the A.O. has conceded that the land sold and purchased is Agricultural which is the basic requisite of section 54B of the Income Tax Act for claim of exemption. iii. The A.O. has also perused the evidence and has agreed that eviction charges to the extent of Rs. 79,70,797/- were paid as per the evidence filed which shall be deducted from the sale of sale consideration u/s 48(1).
iv. However the A.O. has the following objections:-
i) Since the land sold was not being used by the himself in view of the eviction charges paid, the claim doesn't fall under the purview of section 54B,
ii) That the four registrations of purchase as per following details predates the date of sale:-
a) Registry dated 29.08.2008 Rs. 1,00,72,500/-
b) Registry dated 28.08.2008 Rs. 1,27,92,500/-
c) Registry dated 21.08.2008 Rs. 1,32,60,000/-12 ITA No..27(Asr)2015
A.Y. 2009-10
d) Registry dated 17.09.2008 Rs. 8,50,000/-
iii) And the third objection that for the land 13K 13M worth Rs.
25,13,000/- the Regd. is yet to take place.
iv) And last one that as far as Residential Huse is concerned, no Regd. is done.
The objection of the A.O. are dealt with as under:-
i) As far as the first objection of the A.O. that in view of eviction charges paid the land was not used by the assessee himself is concerned it is submitted that it is true that PART of the land was being cultivated by the persons to whom eviction charges were paid and this cultivation was with the consent of the assessee and not that they were forcibly cultivating the land. And for this the assessee must be in receipt of consideration in the shape of Patta money / Lease money. It was only when the question of sale of land arose that they insisted not to vacate the land and they had to be paid the amount settled for giving the vacant possession. These things are very common in India.
This will not change the character of use. The assessee as owner receiving the consideration for use of land has to be treated as the real and virtual user of the land. The section 54B uses the word 'was being used by the assessee'. It doesn't specify or has any qualification as to its use. Agriculture income is assessed for amount received on A/c of lease or patta money in all cases and the definition as per sections 2(1A) is clear and therefore it has to be held that it was the assessee who had been the virtual user. The Supreme Court in its latest judgment in para 22 of decision Sanjev Lal Vs. CIT reported as 269 CTR (SC) 1 has observed as under:-
"Though it has been very often said that common sense is a stranger and the incompatible partner to the IT Act and it is also said that equity and tax are strangers to each other, still this Court has often observed that purposive interpretation should be given to the provisions of the Act."
Thus in view of above facts the assessee fully qualifies for exemption u/s 54B of the Act.
13 ITA No..27(Asr)2015A.Y. 2009-10
ii) Coming to the second objection of the A.O. that the four registrations predates the date of sale, it is submitted as under:-
That the dates of Regd. as mentioned by A.O. are:-
a) Registry dated 29.08.2008 Rs. 1,00,72,500/-
b) Registry dated 28.08.2008 Rs. 1,27,92,500/-
c) Registry dated 21.08.2008 Rs. 1,32,60,000/-
d) Registry dated 17.09.2008 Rs. 8,50,000/-
That the A.O. has lost sight of the fact that although in four above cases the registrations took place after the purchase but the entire amount in the first three Registration was received much before the Registrations as per following details:-
i) Rs. 1,00,72,500/- received on 21/01/2008
ii) Rs. 1,27,92,500/- received on 21/01/2008
iii) Rs. 1,32,60,000/- date not clear but in any case before 21/04/2008 It was against this money that the purchase was made. The legal position and Courts are clear on the subject. In exactly similar circumstances the Supreme Court in latest judgment of Sanjeev Lal etc. Vs. CIT reported as (2014) 269 CTR (SC) 1 has held that purchase made with Advance or earnest money, although the Registrations effected later shall qualify for exemption. Your honours attention is further invited to the circular of the board vide circular No. 359 dated 10/05/1983 which although is u/s 54E, but the crux is the same. Thus the assessee fully qualifies for exemption u/s 54B.
Without prejudice to above legal position, even on facts no Capital Gain can be worked out if we see the following working:-
Registrations which were done Registrations which were done After the purchase although before the purchase Amount received much before Rs. 1,00,72,500.00 Rs. 3,19,60,000.00 Rs. 1,27,92,500.00 Rs. 4,13,44,000.00 Rs. 1,32,60,000.00 Rs. 8,50,000.00 . .
Rs. 3,69,75,000.00 Rs. 7,33,04,000.00
14 ITA No..27(Asr)2015
A.Y. 2009-10
Percentage
Rs. 3,69,75,000.00 33.53%
Rs. 7,33,04,000.00 66,47%
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Total = Rs. 11,02,79,000.00
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Share of Dalbir Singh Rs. 2,76,67,500.00
Less Eviction Charges Rs. 79,70,797.00
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Balance = Rs. 1,96,96,703.00
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The above consideration is divided in the ratio of 33.53 : 66.47 which comes to Rs. 1,96,96,703 x 33.53/100 =Rs. 66,04,305.00 Rs. Rs. 1,96,96,703 x 66.47/100 = Rs. 1,30,92,398.00 As against this the respective purchase is as under:-
Purchase made after the sale Purchase made after the sale Rs. 25,13,000.00 Rs. 1,22,71,875.00 Add: House (Resi) Rs. 24,00,000.00 Rs. 1,46,71,875.00 Difference Difference 66,04,305 - 25,13,000 = 40,19,305.00 1,30,92,398 - 1,46,71,875 = - 15,79,477.00 If a very meagrest estimate of value as on 01/04/1981 is applied for indexation the aforesaid figures shall turn out to be negative. And therefore on facts there is no liability to Capital Gain as the negative figure of Rs. -15,79,477/- too shall also be offset against any positive figure.
iii) The third objection of the A.O. is that as far as purchase of land amounting to Rs. 25,13,000/- is concerned, the Regd has not been done. That the A.O. was explained that the Regd. could not be made because the matter was in Court of law and this fact finds place in the very Agreement itself. Here too the verdict of Sanjeev Lal Jain Vs. CIT reported as (2014) 269 CTR (SC) shall apply which has held as under:-
"In normal circumstances, a right in personam is created in favour of the transferee/vendee by executing an agreement to sell in respect of an immovable property - When such a right is created the vendor is 15 ITA No..27(Asr)2015 A.Y. 2009-10 restrained from selling the said property to someone else as the vendee in whose favour the right in personam is created has a legitimate right to enforce specific performance of the agreement if the vendor for some reason is not executing the sale deed-Thus, by virtue of the agreement to sell some right is given by the vendor to the vendee - Though the entire property cannot be said to have been sold at the time when the agreement to sell is entered into, in view of the provision of s. 2(47) which defines the word "transfer" in relation to a capital assets, it can be said that if a right in the property is extinguished by execution of an agreement to sell, the capital asset can be deemed to have been transferred."
The facts of the above case are - the same as the amount paid on the basis of Agreement has to be allowed for exemption purposes u/s 54B.
iv) The fourth and the last objection of the A.O. is the non registration of Residential House. It is submitted that in Revenue records there is some areas which are within 'LAL LAKIR' where transfers are only made through Agreements and no Regd. takes place. The A.O. has simply ignored this fact.
Thus in view of above all the objections of the A.O. being erroneous and not based on facts and legal position, it is therefore requested that the addition made by the A.O. on A/c of Capital Gains be deleted."
6. The perusal of the comments of the Assessing Officer and the facts of the case clearly goes on to show that no proper opportunity could be given at the time of assessment and therefore appellant's request to admit additional evidence deserves to succeed on merits."
9. It was after considering the above facts, i.e., the assessee's submissions, the AO's remand report and the assessee's counter comments that the ld.
CIT(A) held as follows, while deleting the addition made:
"7. I have considered the facts of the case, the arguments of the AR during assessment proceedings as well as appellate proceedings. The comments of the Assessing Officer during remand proceedings have also been considered. It is seen that the appellant had claimed that an amount of Rs. 3,17,60,750/- had been paid to 11 persons for evicting them from the impugned piece of land before the transaction could be finalized for sale. The details regarding the eviction money paid to different persons 16 ITA No..27(Asr)2015 A.Y. 2009-10 had been submitted during the appellate proceedings and the Assessing Officer has verified the contentions of the appellant in this regard to be correct. Since the said amount paid as earnest money had to be paid for ensuring the smooth sale of the impugned property the said amount has to be reduced from the gross sale consideration to work out the net sale consideration for the purposes of computation of Capital Gain. The Assessing Officer has verified during the remand proceedings that the land sold by the appellant had been used for agricultural purposes and the land purchased was also being used for the purposes of agriculture only.
8. The next issue raised by the Assessing Officer is that since the land in question is being used for the agricultural purposes by the persons who had the possession of the land and those persons had to be paid eviction charges as detailed above, the claim of the assessee would not fall under the purview of section 54B as the said laid was not being used by the assessee himself for agricultural purposes, I do not agree with the view of the Assessing Officer on the issue as the requirement of usage of agricultural land is with reference to the land and not with reference to the person who owns it. For instance, if a person owns agricultural land and derives rent from the same, it also qualifies as agricultural income not taxable under Income Tax Act, 1961 even though the agricultural operations are not performed personally by said owner of agricultural land. The situation in the current case is also same as the owner of the land had given impugned agricultural land for the purpose of tiling who in the course of time developed vested interest in the form of possession of land but the fact remains that land itself had been used for agricultural purposes all along and does not lose its character of being used as agricultural land whether the operations are performed by the owner or the tenant. Therefore, the view of the Assessing Officer on the issue is rejected. The second issue raised by the Assessing Office in the remand report is that certain registrations in respect of purchase of agricultural land had been effected before the date of sale and therefore would not strictly get covered by the provisions of Section 54B. The facts of the case are clear that the payment for purchase of land has been made out of advance received by assessee against sale of land. Infact, payments have been made directly by the buyer of the agricultural land from the assessee to the sellers who sold the land to the appellant. The AR has brought on record the circular of CBDT no. 359 dated 10.05.1983 which is with reference to section 54E. The said circular qualifies the situation as under:-
"Section 54 of the Income Tax Act, 1961 provides for exemption of long term capital gains if the net consideration is invested by the assessee in specified assets within a period of six months after the date of such transfer. A technical interpretation of S.54E could 17 ITA No..27(Asr)2015 A.Y. 2009-10 mean that the exemption from tax on capital gains would not be available if part of the consideration is invested prior to the date of execution of the sale deed as the investment cannot be regarded as having been made within a period of six months after the date of transfer.
On consideration of matter in consultation with the Ministry of Law, it is felt that the foregoing interpretation would go against the purpose and spirit of the section. As the section contemplates investment of the net consideration in specified assets for a minimum period and as earnest money or advance is part of the sale consideration the Board have decided that if the assessee invests the earnest money or the advance received in specified assets before the date of transfer of asset the amount so invested will qualify for exemption under s. 54E of the Income Tax Act, 1961."
9. It has been clarified that the intention of the legislature was to ensure that the net consideration was invested in specified assets and earnest money or advance being part of sale consideration should be considered to have been invested for exemption under section 54E of the Income Tax Act, 1961. The facts of the present case are on the same lines and the legislature's intention in respect of section 54B cannot be said to be different as the essential purpose of incorporating the impugned provision of section 54B is to ensure that anybody selling agricultural land should not be subjected to taxation if the proceeds thereof are used for buying agricultural land. The fact that the advance/ earnest money had been used for making the consequential purchase should not come in the way of allowing the claim of deduction under section 54B. Even otherwise, the AR has placed reliance on the judgment of Hon'ble Apex Court in the case of Sanjeev Lal etc. Vs. CIT 269 CTR 1 which is directly on the issue of definition of 'transfer' under section 2(47) and claim of deduction under section 54. The Hon'ble Court has observed that even an agreement to sell could amount to a transfer for the purposes of section 2(47)/54."
....................
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In view of the above facts & circumstances and direct judicial pronouncements by the Hon'ble Apex Court on the issue, the appellant's claim for deduction under section 54 is allowed. The difference of Rs. (- )15,79,477/- pointed out by the Assessing Officer between sale and purchase consideration also would not lead any taxable Capital Gain as benefit of indexation given on any reasonable value would lead to negative gain. Therefore no Capital gain is leviable on the impugned transaction.
18 ITA No..27(Asr)2015A.Y. 2009-10 The addition made by the Assessing Officer is therefore directed to be deleted.
10. Further, it is seen that appellant had worked out the resultant capital gain on the basis of fair market value of the impugned property as on 01.04.1981 at Rs. 2923/- per marla. However, no evidence to support the said claim had been filed. The AR was therefore required to substantiate his claim on the issue. The AR vide his letter dated 14.10.2014 submitted his arguments as under:-
"Kindly refer to the appellate proceedings in the above case and on the last date of hearing your honours had directed the assessee to justify the value adopted at Rs. 20 Lacs as on 01/04/1981 for working out the indexation. In this context it is submitted as under:-
That the value adopted by the assessee on 01/04/1981 for working out indexation has been Rs. 20 Lacs which gives a rate per marls @ Rs. 2923/- as on 01/04/1981 (20,00,000 / 684). To justify the land rate as on 01/04/1981 @ Rs. 2923/- per marla kindly find enclosed the certificate of lambardar of the Village which interalia states that the land rate per Acre of land at Vill. Samastpur was Rs. 4,50,000/- to Rs. 5,00,000/- per Acre. If we take the value at Rs. 5,00,000/- per Acre the per marla value comes to Rs. 3125/- (5,00,000 / 160). He has further mentioned in the certificate the following facts:-
i. That the land falls on the main G.T. Road, National Highway No.1, i.e., Jalandhar - Pathankot Road.
ii. That location is 12 mile stone from Jalandhar.
iii. Kishan Garh Chowk is 1 KM from the present location.
iv. The main Hoshiarpur Road passes from the back and the distance from the place is 1 KM app.
And v. The D.A.V. University was been set up because of locational advantage.
That to support the above version of the certificate your honours attention is invited to the rate fixed by the I.T.A.T. (ASR) Bench of the land situated on main Hoshiarpur Road in the case of Basant Metal & Ravi Kumar Jain in ITA Nos. 553 & 560 of 2011 dated 06/08/2012 whose distance from the assessee's location is about 1 KM. The rate adopted by the CIT(A) on the front was @ Rs. 6000/- per marla and on the back @ Rs. 4000/- per 19 ITA No..27(Asr)2015 A.Y. 2009-10 marla which was upheld by the Tribunal as per copies of both Orders enclosed herewith. Even if average is taken (6000 + 4000), the rate works out at Rs. 5000/- per marla as against Rs. 2923/- adopted by the assessee, which is requested to be accepted being on much lower side.
VERY IMPORTANT:-
The aforesaid rate and valuation has been accepted by the A.O. during his remand proceedings and his report is clear on the subject.
11. I have considered the arguments of the AR on the issue and it is seen that the Fair Market Value as adopted at Rs. 2923/- per marla is based upon the report of the local revenue authority which is quite logical and records various facets of the impugned land and its related valuation on the given date. The AR has also brought on record the valuation adopted in respect of similar land in respect of particular case heard by Hon'ble ITAT Amritsar wherein the valuation at Rs. 5,000/- per marla has been considered. In view of these indisputable facts, the valuation adopted by the appellant at Rs. 2923/- per marla as on 01.04.1981 is reasonable and therefore acceptable. The computation of capital gain in view of above comes to NIL. In the result appeal is allowed."
10. There is no rebuttal to these well reasoned findings recorded by the ld.
CIT(A). The ld. Assessee had claimed to have paid a sum of Rs.3,17,60,750/- to 11 (eleven) persons for evicting them from the impugned piece of land before the sale of land could be finalized. The department has tried to make much out of the fact that this land was Khud Khasht, or self cultivated land of the assessee. According to the department, that being so, there could have been no question of payment for eviction of any person from the land. However, the matter has come clear on remand to the A.O. by the ld. CIT(A). The land was no doubt self-cultivated by the assessee. However, this cultivation was through certain other persons, to whom the land was leased out for the purpose of cultivation. However, when the issue of sale of the land arose, these persons refused to budge and it was, accordingly, that the payment had to be made to 20 ITA No..27(Asr)2015 A.Y. 2009-10 them. This position was accepted by the AO in the remand report. In this regard, the AO was of the view that the provisions of section 54B of the Act were not attracted, since the land was not used by the assessee himself for agricultural purposes. Here, the ld. CIT(A) has correctly observed that the requirement under the law is that of the usage of the land, as to whether it is used for agricultural purposes or not. The reference, obviously, is to the land per se and not to the owner thereof.
12. Regarding the objection with regard to the registration qua the purchase of agricultural land having been effected before the date of sale, it remains undisputed that, as per the remand report, that the payments were made out of advance received by the assessee against the sale of land. Such payments having been made directly by the persons who purchased the land from the assessee, to the person who sold it to the assessee. The CBDT Circular No.359 dated 10.05.1983, though applicable to section 54E, as correctly observed by the ld. CIT(A), it is applicable equally to section 54b of the Act.
13. Concerning these issues, ' Sanjeev Lal vs. CIT' (supra), undeniably is directly applicable. Therein, it was held that in normal circumstances, by executing ab agreement to sell in respect of immovable property, a right in personam is created in favour of the transfree/vendee and on such right, vendor is restrained from selling the immovable property, the vendee having a right to enforce specific performance of the agreement otherwise.
21 ITA No..27(Asr)2015A.Y. 2009-10
14. In view of the above, the assessee claimed deduction under section 54 of the Act was rightly allowed by the ld. CIT(A).
15. Apropos capital gain, on the basis of fair market value of the property as on 14.1981, such value was adopted at Rs.2923/- per marla. This was based on the report of the local revenue authority, which remained undisputed.
Besides, the valuation adopted regarding similar land was also relied on by the assessee, wherein, the valuation of Rs.5000/- per marla had been considered.
16. In these facts, the ld. CIT(A) was well justified in accepting the rate of Rs.2923/- per marla as on 01.04.1981 concerning the assessee's land. It was due to these facts that the ld. CIT(A) arrived at the conclusion and, in our considered opinion, correctly so, that the computation of capital gain came to Nil. Moreover, the issue stands directly covered in favour of the assessee by the decision of this Bench of the Tribunal in the cases of brother and sister of the assessee, for A.Y. 2009-2010, i.e., the same assessment year, as the one under consideration herein. The order of the Tribunal was passed by one of us, i.e. the ld. A.M., on 11.03.2016, in ITA Nos. 26 & 28(Asr)/2015.
17. Therefore, finding no error in the order of the ld. CIT(A) with regard to any issue raised, the impugned order is confirmed in its entirety, rejecting the grievance of the Department, as shorn of merit.
18. In the result, the appeal of the Department is dismissed.
Order pronounced in the open Court on 30/06/2016.
Sd/- Sd/-
22 ITA No..27(Asr)2015
A.Y. 2009-10
(T. S. KAPOOR) (A.D. JAIN)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 30/06/2016.
/skr/
Copy of the order forwarded to:
(1) The Assessee:Sh. Dalbir Singh s/o S. Dhanna Singh, VPO Sarmastpur, Teh. Kartarpur, Distt. Jalandhar.
(2) The DCIT, Central Circle-1, Jalandhar.
(3) The CIT(A), JLR (4) The CIT, JLR (5) The SR DR, I.T.A.T. True copy By order