The Income Tax Appellate Tribunal (ITAT), Pune bench has held that the exemption under section 54B of the Income Tax Act, 1961 is not available if the assessee purchased new agricultural land in the name of sons out of the sale consideration received for transferring the old agricultural land.
As per section 54B, the exemption can be claimed in respect of capital gains arising on transfer of the capital asset, being agricultural land (may be long-term or short-term).
The assessee transferred certain agricultural lands and claimed exemption under section 54B of the Act amounting to Rs.18 lakhs. During the course of assessment proceedings, the assessee submitted that she purchased new agricultural land in the name of her sons, Swapnil M. Pathare and Sonal M. Pathare. The Assessing Officer (AO) came to hold that the condition precedent for claiming exemption under section 54B of the Act was that the new property should be purchased in the name of the assessee only.
ITAT Vice President R S Syal found that the jurisdictional High Court in Prakash Vs. ITO and others have disentitled the assessee to the claim of exemption when a new property is not purchased in the name of the assessee, who transferred the original property.
Upholding the order of the Assessing Officer, the Tribunal held that “The principle of following a view in favour of the assessee when contrary views are available, applies to the authorities acting under a neutral High Court, namely, which has not expressed any opinion – for or against – on that point. Once the jurisdictional High Court decides a particular issue in a particular manner, that manner has to be mandatorily followed by all the authorities acting under it so long as it holds the field and is not deactivated by the Hon’ble Supreme Court. In that view of the matter, I am bound to follow the view taken by the Hon’ble jurisdictional High Court. The ld. AR failed to draw my attention towards any other subsequent decision rendered by the Hon’ble Bombay High Court in favour of the assessee on this issue. I, therefore, hold that the authorities below were justified in making the assessee not eligible to exemption u/s 54B of the Act.”
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