Commissioner Of Income Tax,Ludhiana v. Jaswant Singh

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. --- Income Tax Appeal No. 670 of 2005Date of decision: 30.11.2010 == Commissioner of Income Tax,Ludhiana --- Appellant Versus Jaswant Singh --- Respondent --- CORAM:HON’BLE MR. JUSTICE ADARSH KUMAR GOEL HON’BLE MR. JUSTICE AJAY KUMAR MITTAL --- Present:Mr. Rajesh Katoch, Standing Counselfor the appellant-Revenue. Mr. Akshay Bhan, Advocatefor the respondent-assessee --- AJAY KUMAR MITTAL, J. This appeal under Section 260A of the Income-Tax Act, 1961(for short “the Act”) has been filed by the assessee against the orderdated 15.7.2005, passed by the Income Tax Appellate Tribunal Chandigarh Bench ‘B’ Chandigarh (in short “the Tribunal”) in ITA No.547/CHANDI/2003, relating to the assessment year 1998-99. The appeal was admitted on 13.12.2006 for determination of the following substantial question of law by this Court: “Whether exemption of capital gains under Section 54-B ofthe Act is allowable to the assessee in the absence ofcompletion of sale transactions?” The facts, in brief, necessary for adjudication, as narrated inthe appeal are that during the financial year 1997-98, relevant to theassessment year 1998-99, the appellant-assessee sold someagricultural land owned by him and his three brothers, and received asum of Rs. 16,42,562/- i.e. 1/4[th] share out of the joint land and Rs.17,57,644/- as sale consideration of his individual land. In response tothe notice under Section 148 of the Act issued by the assessing officer toassess his long term capital gain, the assessee did not file any return ofincome. The assessing officer vide order dated 28.3.2002 assessed thecapital gains to the tune of Rs. 28,37,472/-. The assessing officerobserved that deduction under Section 54B of the Act could not beallowed as the assessee did not deposit the sale consideration in thespecified account with the bank under the Capital Gains AccountScheme, 1988, before the due date for furnishing the return underSection 139(1) of the Act. The appeal carried by the assessee before theCommissioner of Income-tax (Appeals) {in short “the CIT(A)”}, wasallowed vide order dated 11.6.2003. While allowing the appeal, the CIT(A) observed that the assessing officer did not take into considerationthe fact that the amount received by the assessee on account of sale consideration in respect of the land sold had been utilized by theassessee for purchasing agricultural lands which was required to beconsidered for purposes of working out the benefit of deduction underSection 54B of the Act, and since the amount invested was in excess ofthe capital gains for purchasing agricultural lands, the requirements ofSection 54B of the Act stood complied with. The relevant observationsread thus: “3.2 As is evident from the above, the amounts utilizedtowards the purchase of agricultural lands have also to beconsidered for the purpose of working out the benefit ofdeduction u/s 54B. Since the amounts, far in excess of thecapital gains had been invested in the purchase or had beenutilized towards the purchase (in the shape of advances),nothing remained to be deposited in the specified account.The requirements of section 54B, therefore, stood compliedwith.” Aggrieved by the order of the CIT(A), the Revenue preferredappeal before the Tribunal. The Tribunal dismissed the appeal vide orderimpugned herein before this Court. We have heard learned counsel for the parties and have perused the record. The Tribunal while upholding the order of the CIT(A) hadheld that the assessee had purchased the new asset in the form ofagricultural lands or had made advance payment for the purchase of thenew asset before the expiry of the time due for furnishing the returnunder Section 139 of the Act and thereby the assessee had utilized the amount in excess of the capital gains. The observations of the Tribunalon the point under consideration are as under: Aggrieved by the order of the CIT(A), the Revenue preferredappeal before the Tribunal. The Tribunal dismissed the appeal vide orderimpugned herein before this Court. We have heard learned counsel for the parties and have perused the record. The Tribunal while upholding the order of the CIT(A) hadheld that the assessee had purchased the new asset in the form ofagricultural lands or had made advance payment for the purchase of thenew asset before the expiry of the time due for furnishing the returnunder Section 139 of the Act and thereby the assessee had utilized the amount in excess of the capital gains. The observations of the Tribunalon the point under consideration are as under: “The assessee purchased land for an amount of Rs.2,77,602/- vide two different registered deeds executed on29.8.1997 for Rs. 64,601/- and registration deed No. 10615for Rs. 2,13,001/- executed on 10.8.1998. The assesseealso utilized a sum of Rs. 8 lac by paying an advance on18.5.1998 to Smt. Ishar Kaur alias Kartar Kaur and Mithualias Malkiat Kaur against purchase of land. The assesseealso paid another sum of Rs. 1,50,000/- as advance to thesame vendors on 3.8.1998. The main contention of theassessee before us is that the entire amount of capital gainwas utilized for purchase of agricultural land within thespecified time and nothing survives for consideration ascapital gains. The learned first appellate authority opined thatsince the capitals gain have been invested in the purchase ofthe land, nothing remained to be deposited in the specifiedaccount and, thus, the requirement of Section 54B stoodcomplied with. 7. The only grievance of the revenue is that the amount wasnot deposited in the specified account in any bank orinstitution as per the scheme of Central Government.Section 54B (2) is very much clear which says that theamount of the capital gains which is not utilized by theassessee for the purpose of the new assets before the dateof filing of return under Section 139 shall be deposited byhim before furnishing such return. Undisputedly, the assessee purchased the new assets or made the advancepayment for the purchase of the new asset before the expiryof time for furnishing the return and was utilized by theassessee, so there is no question of attraction of this sub-section when the assessee had already utilized this amountwhere is the question of depositing the amount in thespecified account, as declared by the Central Government. Ifthis issue is analyzed from different angle whether theassessee is having income from any other sources ofincome. On this count also nothing contrary was brought onrecord by the revenue. The only source of income of theassessee is from agriculture. In that situation also theassessee is not supposed to pay tax. Undisputedly, theassessee utilized the entire amount of capital gain forpurchasing the agricultural land within the stipulated period,nothing survives for consideration as capital gain in thehands of the assessee. On the other hand, the AssessingOfficer has adopted arbitrary figures of sale proceeds and nosource was specified then the figures in the sale deeds areonly to the considered to be true. Since the assesseepurchased the agricultural land before the due date of filingof return on a total amount as shown in the differentregistered deeds, nothing remains for capital gains. 8. The condition of applicability of Section 54B (1) has alsobeen complied with by the assessee. While coming to thisconclusion we are further fortified by the decision of theHon’ble High Court of Madras pronounced in the case of CIT 8. The condition of applicability of Section 54B (1) has alsobeen complied with by the assessee. While coming to thisconclusion we are further fortified by the decision of theHon’ble High Court of Madras pronounced in the case of CIT vs. Jayalakshmi Rajendran (1985) 152 ITR 744 (Madras)wherein it was held that for satisfying the condition asmentioned in Section 54B (1), the purchase of any otheragricultural land must be through registered conveyance. Amere agreement to purchase is not sufficient. In the presentcase also the purchase of the new asset/agricultural land isthrough registered deed further supports the case of theassessee. While coming to this conclusion, we are furtherfortified by the decision pronounced by the Hon’ble HighCourt of Allahabad in the case of CIT vs. Janrudhan Das(1987) 163 ITR 806 (All.) and also from the decision of theHigh Court of Kerala pronounced in the case of P.K.Kesavan Nair Vs. CIT (1988) 174 ITR 253 (Ker.). This isalso not the case of the revenue that the land in questionwas not agricultural land or was not used for agriculturalpurposes so as to disentitle the assessee for benefit ofSection 54B. For this purpose, we are fortified by thedecision pronounced by the High Court of Allahabad in thecase of Handicrafts Industries vs. CIT (1995) 216 ITR 522,524 (All.) In view of these facts and judicial pronouncementswe are upholding the order of the learned CIT(A), the appealof the revenue is dismissed.” Both the appellate authorities have observed in clear termsthat the assessee utilized the amount of sale consideration received byhim in respect of sale of his land by purchasing the new assets andmaking advance payment for that purpose, well before the expiry of timedue for furnishing the return and, therefore, the assessee was entitled to the benefit of provisions of Section 54B of the Act. Learned counsel forthe Revenue could not point out any mistake of law or perversity in theaforesaid finding recorded by the CIT(A) and the Tribunal that maypersuade this Court to interfere therewith. In view of the above, the substantial question of law isanswered against the Revenue and finding no merit in the appeal, thesame is dismissed. (AJAY KUMAR MITTAL) JUDGE November 30, 2010*rkmalik* (ADARSH KUMAR GOEL) JUDGE