Deduction can’t be denied on ground that Entire Agricultural Land not used for Cultivation: ITAT [Read Order]

Agricultural Land

The Income Tax Appellate Tribunal (ITAT), Pune has held that the provisions of Section 54B of the Income Tax Act cannot be denied for the reason that the entire agricultural land should be used for cultivation for claiming benefit under such provision.

The assessee sold agricultural land at Gut No.247 at Titoli for Rs.50 lakhs and shown long term capital gains of Rs.12,64,923/- being his share. It was stated that assessee had invested the capital gains for the purchase of another agricultural land and accordingly had claimed an exemption under section 54B of the Act. The assessing officer asked the assessee to produce 7/12 extract of land for sale of land and justify the claim of exemption under section 54B of the Act.

The Tribunal found that the reason for denying the claim of deduction u/s 54B of the Act was for the reason that out of the total area of 1 hectare 12R, agricultural activities were carried out on a portion of the land and there was no evidence of crop grown on the balance portion of the land.

The Tribunal found that the Co-ordinate Bench of the Tribunal in the case of Shri Mahesh Danabhai Patel has held that provisions of Sec.54B of the Act do not specify that the entire land should be used for cultivation for claiming benefit u/s 54B of the Act.

“It held that if any part of the land is under cultivation for two years immediately two preceding years prior to the date of transfer, it would be sufficient to claim benefit u/s 54B of the Act. Before us, Revenue has not placed any contrary binding decision in its support nor has placed any material on record to demonstrate that the aforesaid decision in the case of DCIT Vs. Shri Mahesh Danabhai Patel (supra) has been set aside or stayed by the higher Judicial Authorities. We find that AO has noted that A.R of the assessee agreed for disallowance and therefore the AO proceeded with proportionate disallowance. On the other hand, it is assessee’s contention that the statement of AO of the A.R having agreed for disallowance is factually incorrect. In the present case, we are of the view that since the issue on merits is covered in assessee’s favour by the decision of Pune ITAT, cited hereinabove, then merely because of admission of disallowance, the assessee cannot be denied the benefit to which he is eligible. We, therefore, following the decision of Co-ordinate Bench of the Tribunal in the case of Shri Mahesh Danabhai Patel (supra) are of the view that the AO was not justified in denying the claim of deduction u/s 54B of the Act and we, therefore, direct the AO to deduct the claim,” the Tribunal said.

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