Lands Re-Purchased Not To Be Mandatorily Agricultural On The Date Of Re-Investment: ITAT Allows Capital Gain Exemption

The appellant/assessee has challenged the order of the lower authority for declining his claim under section 54B deduction claim of Rs. 2,49,85,220. The CIT (A) has rejected the assessee's deduction claim for the reason that his reinvestment made in Wagholil land had not been proved to have been made in purchasing agricultural land.

Section 54B deals with the exemption claimed in respect of capital gains arising on transfer of capital asset, being agricultural land (may be long-term or short-term). This benefit is available only to an individual or HUF.

The Assessing Officer's remand report filed before the CIT (A) had cleared all objections regarding the assessee's land sold at Bavdhan. It came on record that although the CIT (A) accepted the assessee to have carried out agricultural activities on the land purchased in later years, in light of form 7/12, He has, however, affirmed the assessment findings that the reinvestment in land was not agricultural at the time of purchase.

The ITAT noted that the reinvestment clause in section 54B of the Income Tax Act says that "the assessee has, within a period of two years after that date, purchased any other land for being used for agricultural purposes". The legislature has nowhere incorporated that the lands re-purchased in section 54B deduction claim have to be agricultural on the date of re-investment as is sought to be projected at the Revenue's behest.

The ITAT held that both the lower authorities had erred in law and on facts in disallowing the assessee's section 54B deduction claim.

Case Title: Shri Adit Rathi Versus I.T.O.

Citation: ITA No. 411/PUN/2020

Dated: 15.07.2022

Counsel For Appellant: Hari Krishan

Counsel For Respondent: S.P. Walimbe

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