Smt. Asha George vs ITO
Appellant had 1/4th share in 1.10 acres of land
in Ayyanthole Village. The same was sold for Rs. 44 lakhs on 14.11.2004. The
assessee received Rs.11 lakhs as her share. In her return, she computed her
capital gain at nil after claiming indexation on cost of acquisition and cost
of improvement and further claiming exemption under Section 54F on the basis of
a property purchased at Koothattukulam, a farm house with 1.92 acres of land
for Rs.11 lakhs on 28.3.2005. During the course of the assessment proceedings,
the appellant took up the contention that she is entitled to exemption under
Section 54B of the Act. The tribunal has arffirmed the findings of the
authorities that the appellant is not entitled to the benefit of Section 54B
for the reason that the property at Ayyanthole Village which she sold was not
used for agricultural purposes for a period of two years prior to the date of
the sale as required under Section 54B of the Act. It is the further finding of
the tribunal that the appellant is entitled only to take Rs.2 lakhs as the cost
of acquisition over and above Rs.1 lakh allowed as value of super-structure
under Section 54F of the Act.
Aggrieved by the order of ITAT, appeal before
Hon`ble High court.
Whether the
sale proceeds of the land at Ayyanthole were within the scope of Section 54B of
the Income Tax Act and subsequent
purchase of land (at Koothattukulam) in which a farm house is situated
satisfied the requirements of Section 54F and/or Section 54B and thus there was
no liability to pay any long term capital gains tax on the sale of land at
Ayyanthole, in the Assessment Year 2005-06 ?”.
Before high
court assessee submit that the approach of the tribunal in denying the
benefit of the exemption under Section 54B is unsupportable. There were materials
before the authorities indicating that the land at Ayyanthole was indeed being
put to agricultural use for a period of two years. In this regard, he drew our
attention to certain photographs showing coconut trees. He also relied on the
receipt for the water cess. Further more, he drew
support from the certificate of the village officer. It
is further pointed out that a receipt was produced from the Electricity Board
and it was contended that the connection was an agricultural one. He would
point out further that the tribunal and the authorities have taken into
consideration irrelevant facts. In this regard, he would point out that the
fact that the purchaser of the property at Ayyanthole had converted the land
and an apartment complex was set up, should not have weighed with the authority
in denying the benefit under Section 54B of the Act. The assessing officer also
finds that it cannot stand to reason that an agricultural property lying right
under the nose of the District Administration could be converted into a
commercial complex without any issues. According to the appellant, what is
relevant is the use to which the land was put as provided. Still further more,
he would submit that the fact that the appellant had not originally set up the
claim under Section 54B could not disentitle her from claiming the benefit
under Section 54B, if it is otherwise available. It is further contended that
the authorities have been influenced by the fact that no agricultural income
from the property at Ayyanthole was returned. The finding of the authorities is
that neither the appellant, nor her family members have
shown any agricultural income in their returns. It is stated that her father
was stated to be a business man dealing in supply of meat to the zoo and the
mother, a Nurse by profession who earns income from salary and, therefore, they
ought to have disclosed agricultural income, if there was any, in their
returns.
Further it was also as far as the land at
Koothattukulam along with the farm house admeasuring 1 acre 92 cents is
concerned, the finding of the tribunal estimating and limiting the value of the
plot on which the farm house is located and the value of the land appurtenant
thereto and thus the estimating the value of the plot and the land at Rs.2
lakhs and allowing the same in addition to the value of the super structure,
may not be the correct view. He would submit that the farm is connected with
the enjoyment of the house being an integral part and, therefore, the value of
the entire land should have been considered.
On behalf of revenue it was
contend that the findings of the tribunal are unexceptionable. No substantial
question of law has been made out. He would point out that a perusal of the
substantial questions of law would show that there is no substantial question
of law raised that the findings rendered are perverse so as to warrant
interference under Section 260A of the Act. He would further contend that no
reliance can be placed on the photographs. The photographs were not even
produced before the assessing officer. The order of the assessing officer is
dated 10.12.2009 and it is only before the appellate authority that some
photographs were produced. There is no material to indicate as to whether the
photographs related to the property in question. He would also reiterate that
the conduct of the appellant in not raising the claim under Section 54B of the
Act may be borne in mind and the claim under Section 54B of the Act is only
raised as an after-thought.
Hon`ble high court observed that the
order of assessment that the appellant’s late father had applied for sanction
for construction of a compound wall before the Thrissur Urban Development
Authority. The appellant had claimed in the return, exemption on the basis of
Section 54F of the Act. But, during the assessment proceedings, the appellant
relied on Section 54B of the Act. In other words, initially the appellant even
did not have a case that the land at Ayyanthole was used for agricultural
purposes. A perusal of the order of assessment would show that the appellant
had produced tax receipt of property and a receipt from the KSEB. The opening
and closing meter reading, as per the receipt, is the same. It is also found
that tax receipt does not throw light on the nature of the property. It does
not say that the tax is levied in respect of agricultural property. The
agricultural income been declared in the return, it would have been a
circumstance to assist the authorities to conclude that the appellant is
entitled to the benefit of Section 54B of the Act. It is true that for the
applicability of Section 54B, what the purchaser of the land does with it, may
not be relevant. If he puts a land falling under Section 54B of the Act for a
non-agricultural use, that cannot be a circumstance to deprive the previous
owner of his right to claim under Section 54B of the Act. Equally, the emphasis
under Section 54B is the use to which the land is put (In fact, the tribunal
has correctly held that it is the user of the land and not the nature of the
land that is relevant). In other words, it is not necessary that the land which
is transferred, must be an agricultural land as such. The fact that the land is
located in an urban area, cannot by itself be relevant to deny the benefit
under Section 54B. What is essential is that it must be used for agricultural
purposes for a period of two years prior to the date of the transfer.
Further the property in the hands
of the purchaser was used for putting up an apartment complex. Therefore, we
cannot certainly blame the officer for not conducting any inspection. At least,
the appellant has not posted us with sufficient materials with reference to which
we could have formed an opinion that the nature of the property continued to be
such that the officer could have conducted an inspection. The photographs were,
no doubt, produced before the appellate authority. But, as rightly pointed out
by the learned counsel for the Revenue, the photographs, we must remind
ourselves, could be relied on only if it is established that it related to the
property. Therefore, it may not be safe for us to overturn a finding of fact in
a proceeding under Section 260A of the Act which is premised on a substantial
question of law being made out. The other material produced by the appellant
before the assessing officer appear to be a self-defeating act, as the receipt
of the electric connection, though shown to be for agricultural one, related to
the meter which reveals that the opening and closing reading is the same. We
must remind ourselves that the requirement of Section 54B of the Act is that
the assessee must establish that the land was being used for agricultural
purpose for a period of two years prior to the date of the transfer. Certainly,
this material does not in any way establish the said facts.
As far as the certificate issued
by the Agricultural Officer, a copy of which was handed over to us is
concerned, we notice that it is seen issued in the year 2012. We do not know on
what basis the officer could have given such a certificate. Admittedly, the
land was already converted for the construction of an apartment complex. We
must also remind ourselves that unlike the decision reported in CIT v. Smt.
Savita Rani, where one of the materials was the inclusion of agricultural
income in the return, there is no such return filed. At any rate, we cannot on
a re- appreciation of all these materials, overturn the findings of facts
entered by the tribunal. Unless the finding of fact is perverse or contrary to
the weight of the evidence, the law does not permit us to re-appreciate the
evidence and interfere. It is no doubt true that no substantial question of law
about the finding be perverse is raised. We do not doubt our power to frame an
additional substantial question of law, provided one such question arose. But,
we are not inclined to think that the finding of fact rendered under Section
54B is perverse. We therefore repel the case under Section 54B of the Act.
Further as contended that the
officer should have granted, at any rate, the benefit of exemption under
Section 54F of the Act in regard to the value of the property, namely the
officer should have deducted the entire Rs.11 lakhs paid for purchasing 1 acre
92 cents with the farm house.
Hon`ble High court observed that Section 54F is intended to encourage
construction of or acquisition of residential house with the aid of the
proceeds from the transfer of any long term capital asset, which is not a
residencial house. The provision contemplates computing the cost of the
residential building, but the value of the plot on which the farm house stands
and the land appurtenant could also be considered. The tribunal has
categorically found that the appellant has not produced material to show that
the entire area of 1.92 acres should be considered as land appurtenant to it.
It is in such circumstances, the tribunal
made an estimation and directed that the value of the plot on which the farm
house is located and the land appurtenant be fixed as Rs.2 lakhs. We are
unable to accept the contention of the appellant that the value of the entire
land must be considered in arriving at the value of the residential building.
We find no illegality committed by the tribunal. It is not open to the
appellant to invoke Section 54B of the Act in regard to the rest of the land at
Koothattukulam. This is for the reason that the appellant has not been able to
satisfy the requirements of Section 54B as already noted by us in regard to the
land at Ayyanthole. Therefore, at any rate, there can be no basis for invoking
Section 54B of the Act for deducting the value of the land purchased at
Koothattukulam. Therefore, we reject the contention of the appellant.
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