Commissioner Of Income Tax, Faridabad v. Shri Bhim Singh

ITA No. 354 of 2005 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Commissioner of Income Tax, Faridabad Versus Shri Bhim Singh ITA No. 354 of 2005 Date of Decision: 23.11.2010 ....Appellant. ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL.HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Ms. Urvashi Dhugga, Standing Counsel for the appellant.Mr. Avneesh Jhingan, Advocate for the respondent. AJAY KUMAR MITTAL, J. 1.This appeal is filed by the revenue against the order dated28.02.2005, passed by the Income Tax Appellate Tribunal, Delhi Bench,'G', New Delhi (in short 'the Tribunal') arising out of order passed in ITANo. 1739/Del./2003 for assessment year 1996-97, claiming followingsubstantial question of law:- “Whether on the facts and in the circumstances ofthe case, the Hon'ble ITAT was right in law in holdingthat the provisions of section 54B is applicable to thecases other than the individuals?” 2.Briefly stated, the facts necessary for adjudication asnarrated in the appeal are that the assessee filed his return for the assessment year 1996-97 declaring an income of Rs.63,240/- for bankinterest only. The case of the assessee was processed and on comingto know that the assessee had wrongly computed the capital gains onthe sale of the agricultural land, the Assessing Officer issued noticeunder Section 148 of the Income Tax Act, 1961 (in short “the Act”) on1.12.2000. The assessee had acquired agricultural land about 30 yearsback out of the sale proceeds of ancestral agricultural land which wassold for a consideration of Rs.62,50,000/- during the year in question.In the original return, the assessee, in the status of individual, adoptedmarket value of the land at Rs.5 lacs as on 1.4.1981 and after applyingindexed cost of acquisition and claiming deduction under Section 54Bfor purchase of new agricultural land and under Section 54F in respectof investment in the construction of new residential house and cost ofboring, fencing etc., had shown income from capital gains at “nil”. TheAssessing Officer completed the assessment on 19.3.2002 and takingthe status of the assessee as Hindu Undivided Family (HUF),disallowed the deduction under Section 54B of the Act at Rs.38,27,195/-as claimed by the assessee. Feeling aggrieved, the assessee filed anappeal before the Commissioner of Income Tax (Appeals) [in short “theCIT(A)”] who vide order dated 4.2.2003 allowed the appeal and directedthe Assessing Officer to recompute the income under the head “capitalgains”. Against the order of the CIT(A), the revenue filed an appealbefore the Income Tax Appellate Tribunal (hereinafter referred to as“the Tribunal). The Tribunal vide order dated 28.2.2005 affirmed theorder of the CIT(A) and dismissed the appeal holding the assesseeentitled to deduction under Section 54B of the Act. Hence, the present appeal by the revenue. 3.We have heard learned counsel for the parties. 4.Learned counsel for the revenue argued that the assesseeis a HUF and, therefore, the exemption as claimed by it under Section54B(1) of the Act was not admissible. She submitted that wherever thelegislature intended to grant benefit to Hindu Undivided Families, it hadspecifically provided for the same in the provision. She drew attention ofthe Court to Section 54 (1) of the Act where the same has beenspecifically provided. On the strength of the aforesaid submission, itwas contended that the Tribunal was in error in granting the benefit ofexemption under Section 54B (1) of the Act to the assessee. Sheplaced reliance on the judgments of the Madras High Court inCommissioner of Income Tax v. GK Devarajulu, [1991] 191 ITR 211,Commissioner of Income Tax v. R. Vijayakumar, [1995] 214 ITR 483and of this Court in ITR No.58 of 1991 (The Commissioner of IncomeTax, Rohtak v. Shri Virender Natha Kataria) decided on 30.10.2006 insupport of her submissions. 5.On the other hand, learned counsel for the assesseesubmitted that the Tribunal had rightly granted exemption under Section54B(1) of the Act to the assessee and supported the judgment passedby the Tribunal. 6.We have given our thoughtful consideration to therespective submissions made by learned counsel for the parties andfind weight in the submissions made by the learned counsel for therevenue. 7.In order to adjudicate the controversy effectively, it would be advantageous to reproduce Section 54B(1) of the Act, which readsthus:- “54B.(1)Subject to the provisions of sub-section (2),where the capital gain arises from the transfer of a capitalasset being land which, in the two years immediatelypreceding the date on which the transfer took place, wasbeing used by the assessee or a parent of his foragricultural purposes (hereinafter referred to as the originalasset), and the assessee has, within a period of two yearsafter that date, purchased any other land for being used foragricultural purposes, then, instead of the capital gain beingcharged to income-tax as income of the previous year inwhich the transfer took place, it shall be dealt with inaccordance with the following provisions of this section, thatis to say,- (i)if the amount of the capital gain is greater thanthe cost of the land so purchased (hereinafterreferred to as the new asset), the differencebetween the amount of the capital gain and thecost of the new asset shall be charged undersection 45 as the income of the previous year;and for the purpose of computing in respect ofthe new asset any capital gain arising from itstransfer within a period of three years of itspurchase, the cost shall be nil; or (ii)if the amount of the capital gain is equal to orless than the cost of the new asset, the capitalgain shall not be charged under section 45;and for the purpose of computing in respect ofthe new asset any capital gain arising from itstransfer within a period of three years of itspurchase, the cost shall be reduced, by theamount of the capital gain.” A bare perusal of the aforesaid provision shows that it refers to the use of the capital asset being land by the assessee or hisparent for carrying on agricultural activity. The connotation of parentreferred therein would mean that the assessee would be an individualwho derives benefit under the aforesaid provision. 9.However, Section 54 (1) of the Act specifically provides thatthe assessee who is an individual or HUF would be entitled to benefit ofthe said provision in case the amount is invested in the asset specifiedtherein. Thus, it is held that an assessee who is a HUF would not beentitled to benefit under Section 54B(1) of the Act. 10.Considering similar issue, the Madras High Court in GKDevarajulu, R. Vijayakumar's cases (supra) and this Court in ShriVirender Natha Kataria's case (supra) had held that the benefit ofSection 54B(1) of the Act were inadmissible in the case of a HUF.11.In view of the above, the substantial question of law isanswered in favour of the revenue and against the assessee. Theappeal stands allowed. (AJAY KUMAR MITTAL) JUDGE (ADARSH KUMAR GOEL)JUDGE