6 Section 54B – Deduction u/s. 54B cannot be denied on the ground that entering into agreement to sell does not amount to `purchase’.

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[2017] 86 taxmann.com 217 (Chandigarh- Trib.)

     Anil Bishnoi vs. ACIT

      ITA No. : 1459 (Chd.) of 2016

      A.Y.: 2014-15    Date of Order:  27^th September, 2017

The word `purchase’ cannot
be interpreted and detached from the definition of word `transfer’ as given
u/s. 2(47) of the Act.

The assessee, during the
year under consideration, sold land for a consideration of Rs. 1,29,00,000 and
claimed deduction u/s. 54B claiming purchase of following agricultural lands –

(i)  Agricultural  land 
at  Kiratpur  Rotwara, 
Jaipur, of Rs. 28,84,500 through a registered sale deed dated 6.5.2013;

(ii) Agricultural   land  
at   Village   Dudu, 
Jaipur  for Rs. 1,00,00,000 through an agreement to sell dated 16.4.2014.

The Assessing Officer,
allowed deduction for purchase of land mentioned at S. No. (i) above but in
respect of land mentioned at (ii) above he asked the assessee to show cause why
deduction claimed should not be disallowed on the ground that the sale deed is
not registered, but only an agreement to sell is entered into. 

The assessee submitted that
the entire payment for purchase of land was made through cheques and the
possession was handed over to the assessee by the seller with all the rights to
use the said land or to sell it further. The name of the assessee had also been
entered in Khasra Girdawari, a document showing the possession and cultivation
of the land. The assessee also submitted that at the time of execution of the
agreement to sell, the assessee was not aware of the Stay Order to the sale of
land issued by ADM and hence, the sale deed could not be registered.

The AO held that the word
used in section 54B is `purchase’ and not `transfer’ as defined in S. 2(47).
The purchase, according to the AO, could be only through a registered sale
deed. He disallowed the claim for deduction u/s. 54B with reference to the land
for which only an agreement to sell was entered into.

Aggrieved, the assessee
preferred an appeal to the CIT(A) who upheld the action of the AO.

Aggrieved, the assessee
preferred an appeal to the Tribunal.

The Tribunal noted that the
assessee paid consideration through cheques and also obtained possession of the
property in question. The claim of deduction was denied on the ground that the
deed of purchase / sale had not been registered with the competent authority.

The Tribunal having noted
the ratio of the decisions of the Supreme Court in the case of Sanjeev Lal
vs. CIT (2014) 269 CTR 1 (SC); CIT vs. T. R. Arvinda Reddy (1979) 12 CTR 423
(SC) and the decision of the Bombay High Court in the case of CIT vs.
Dr. Laxmichand Narpal Nagda (1995) 211 ITR 804 (Bom.), held as follows –

If capital gains are deemed
to have been earned by the assessee on transfer of land as per the provisions
of section 2(47) of the Act, as per which registration of the sale deed is not
necessary, the consequences are that the seller of the assessee is said to have
transferred his right in property and consequently, those rights are acquired
by the transferee; if in the case of transferor, the same is to be treated as
sale, then, we do not find any reason to give a different meaning to the word
`purchase’. If someone has sold a property, consequently the other person has
purchased the said property.

If the transfer of property
is complete as per the definition of transfer u/s. 2(47) of the Act, the
assessee is made liable to pay tax on the capital gains earned by him, on the
same analogy, the transfer is also complete in favour of the purchaser also.
The provisions cannot be interpreted in a manner to say that transfer vis-à-vis
selling is complete, but vis-à-vis purchase is not complete in respect
of same transaction. In view of this, the word `purchase’ cannot be interpreted
and detached from the definition of word `transfer’ as given u/s. 2(47) of the
Act.

When the transfer takes
effect as per the provisions of section 2(47) of the Act, if a liability to pay
tax arises in the case of the seller, the consequent right to get deduction on
the purchase of property accrues in favour of the purchaser, if he otherwise is
so eligible to claim it as per the relevant provisions of the Act. The Tribunal
directed the AO to give the benefit of deduction u/s. 54B of the Act in respect
of the purchase of property at Village Dadu.

The Tribunal allowed the
appeal filed by the assessee.