Delhi Bench of Income Tax Appellate Tribunal (ITAT) allowed the capital gain exemption under section 54B of Income Tax Act, 1961. The tribunal stated that such deduction shall not be denied merely stating that the agricultural land was purchased in the name of the wife of the taxpayer.
The assessee Ashok Kumr, a resident individual. During the year under consideration, the assessee received an amount of Rs.34,45,000 towards consideration from sale of an immovable property.
Since, the assessee did not file any return of income for the year under consideration, based on AIR information received indicating the sale transaction, the Assessing Officer reopened the assessment under Section 147 of the Income Tax Act.
As the assessee did not comply with the notice issued, the Assessing Officer (AO) proceeded to complete the proceedings as per the section 144 of Income Tax Act. AO considering the land is shared by 4 persons, apportioned on 1/4th of the total sales consideration as gain of the assessee from sale of immovable property and added back an amount of Rs.8,61,250.
A claim was made by the assessee during the appellate proceedings before the Commissioner of Income Tax (Appeals) [CIT(A)] that the sales consideration received, which the AO added back as other income instead of capital gain, was actually invested in the purchase of agricultural land. Thus claimed that the assessee qualified to make a deduction claim under Section 54B of the Income Tax Act.
Further stated that the agricultural land was purchased in the wife’s name, however the claim was rejected by the CIT(A).
The CIT(A) determined that the assessee’s actual portion of the sales consideration was to the tune of Rs. 4,30,625 and that the ensuing long-term capital gain at the assessee’s disposal was Rs. 3,55,602.
This was done after taking into account the remand report and other information on file. In order to maintain the addition of Rs. 3,55,602 as long-term capital gain, the AO was thus instructed.
Before the tribunal, the counsels for assessee submitted that investment in purchase of agricultural land in the name of wife would also be eligible for deduction under Section 54B of the Income Tax Act.
The single appeal bench of Saktijit Dey (Judicial Member) drew on various High Court rulings in reaching its conclusion that investments in real estate bought in the wife’s name are eligible for a deduction under Section 54B of the Income Tax Act.
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