The Surat bench of Income Tax Appellate Tribunal (ITAT) has recently held that deduction under Section 54B of Income Tax Act 1961 should not be disallowed if agricultural land is converted to Non- agriculture just before transfer of land to seller.
The Assessee Bharatkumar Laljibhai Tejani engaged in diamond brokerage and agricultural activities. After filing the original return assessee revised its return by filing revised return of income on 02/05/2015 declaring total income at Rs. 2,34,251/- and agricultural income of Rs.1,28,990.
Thereafter the assesse case was selected for scrutiny and the AO observed that the assessee claimed deduction under Section 54B of the Income Tax Act for purchasing other agricultural land by investing sale proceeds for purchase of new agricultural land. But the AO disallowed the claim on ground that the land sold by assessee was non agriculture land.
After seeking the explanation and considering the submissions of the assessee AO computed the long term capital gain by taking the value of sale consideration on the basis of stamp valuation authorities and added long term capital gain of Rs. 4.65 crores.
Aggrieved by the assessment order assesee filed an appeal before the Commissioner of Income Tax(Appeals) [CIT(A)].
The CIT(A) during the proceedings observed that Assessing Officer has not considered the fact that the assessee purchased agricultural land for an amount of Rs. 3.91 crores and was eligible for deduction as he fulfills the condition of Section 54B of the Income Tax Act and held that assessee eligible for deduction under Section 54B of the Income Tax Act.
Against the order of CIT(A) revenue filed an appeal before the tribunal.
Ashok B. Koli,counsel for the assessee submitted that, the assessee could not furnish complete details of agricultural activities undertaken by the assessee on the impugned land. The nature of land in the conveyance deed on the date of transfer clearly mentioned the nature of land as non- agricultural land.
Further the land use was changed before transfer of land, therefore, the assessee cannot take the plea that the assessee sold agricultural land
Sapnesh Sheth, counsel for the revenue submitted that assessee has sold agricultural land and purchased another agricultural land.
Further before the Assessing Officer as well as before the CIT(A) proved beyond doubt that the assessee was doing agriculture activities by furnishing requisite evidence.
It was observed by the tribunal that nature of land was also converted from agriculture to non-agriculture purpose just before transfer of land and the same was considered as a transfer of agricultural land as far as the seller is concerned.
Therefore the two member benches of Pawan Singh (Judicial Member) and Dr. Arjun Lal Saini, Accountant Member dismissed the appeal filed by the revenue.
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