Sudha Jajodia, Kolkata vs Department Of Income Tax

IN THE INCOME TAX APPELLATE TRIBUNAL, "A " BENCH, KOLKATA [Before Hon'ble Shri P. K. Bansal, AM & Hon'ble Shri Mahavir Singh ]

I.T.A No. 1023/Kol/2011 A.Y : 2007-08 A.C.I.T, Circle-39, Kolkata Vs. Smt. Sudha Jajodia PAN: AELPJ 4511N (Appellant) (Respondent)

For the appellant: Shri Pinaki Mukherjee, ld.DR For the respondent : Shri Subash Agarwal, Advocate, ld.AR Date of hearing: 29-05-2015

Date of pronouncement: 15 -06-2015

ORDER Per Shri P. K. Bansal, AM:

This appeal has been filed by the revenue against the order of CIT(A), Kolkata dated 28-01-2011 by taking following grounds of appeal:-

"1. The ld. CIT(A) has erred in law as well as in fact in deleting the addition of rs.33,84,855/- made on account of investment for leveling and filling of newly purchased agricultural land which is not in any case exempted u/s. 54B.

2. It is to be noted that the I.T Act, 1961, merely specifies transfer of "asset"which is agricultural land. No where it is mentioned that the land has to be highly fertile or barren. Therefoer cost being spent in making the land further arable or non arable is not to be taken in to considerable in the process of exemption from computation of Income Tax. For it is in no way related to the cost price of the agricultural land in question. Any expenditure being incurred on the land, post-conclusion of the sale of land cannot be included in the cost of land. Therefore, for the same reasons discussed in this para expenditure incurred for'" leveling and filling of land" cannot form a part of the cost price."

2. Brief facts relating to this ground are that the assessee has sold an1.343 acre of agricultural land for a consideration of Rs.2,02,00,000/- and the index cost thereof was calculated at Rs.23,15,145/-. Thus, the assessee earned long term capital gain of Rs.1,78,84,855. Out of the said sale proceeds the assessee purchased agricultural land having areas of 1223 sq. yard., 1222 sq. yard and 4840 sq. yard for consideration of Rs.22,50,000, rs.22,50,000/- and rs.100,00,000/- aggregating to Rs.1,45,00,000/-. The assessee also claimed that she spent Rs.34,00,000/- for making the said agricultural land in usable condition by spending on leveling and filling of the said lands. The assessee produced bills and vouchers for leveling charges of the land, which was not disputed by 2 ITA No. 1023/Kol/2011-A Smt. Sudha Jajodia

the AO. The assessee claimed deduction u/s. 54B in respect of leveling and filling charges also being part of cost of the new asset. While claiming exemption u/s. 54B of the Act, the AO did not agree with this contention of the assessee and he disallowed a sum of Rs.33,84,855/- u/s. 54B of the Act.

3. The assessee went in appeal before the ld.CIT(A). The ld.CIT(A) took the view that cost of leveling and filling charges are part of the cost of agricultural land for claiming the exemption u/s. 54B of the Act. He disposed of the appeal of assessee by observing as under:- Para 7.2 to 7.4 of the ld.CIT(A)'s order:-

"7.2 I have carefully gone through the order passed by the AO u/s. 143(3) on 30.12.2009 and the submissions filed by the ld.A/R of the appellant before me at the time of hearing wherein it has been argued that cost of filling and leveling charges in land are part of the cost of agricultural land for claiming the exemption u/s.54B. It has further been observed that costs of filling and leveling expenses are incurred by the appellant with the same financial year of purchasing the land.

7.3 On the careful reading of the Act and related materials on record, it can be argued that cost of purported land for the purpose of investment u/s.54B of the Act should include the capital cost incidental to the land and the same cannot be strictly taken as only the purchase price of the land as stated by the AO.

7.4 Therefore, I find no justification in disallowing the cost of leveling and filling expenses as investment not made for the purpose of claiming exemption u/s.54B. This ground of appeal is allowed."

4. We have heard the rival contentions and carefully gone through the orders of the tax authorities below. Now the only question before us is whether the expenditure incurred by the assessee for filling and leveling of the land can be part of the cost of land to be eligible for exemption u/s. 54B of the Act. The relevant section 54B(l) reads as under:-

54B.(1)] 2[Subject to the provisions of sub-section (2), where the capital gain arises] from the transfer of a capital asset being land which, in the two years immediately preceding the date on which the transfer took place, was being used by the assessee or a parent of his for agricultural purposes 3[(hereinafter referred to as the original asset)], and the assessee has, within a period of two years after that date, purchased any other land for being used for agricultural purposes, then, instead of the capital gain being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that is to say,--

(a) if the amount of the capital gain is greater than the cost of the land so purchased (hereinafter referred to as the new asset), the difference between the amount of the capital gain and the cost of the new asset shall be charged under section 45 as the income of the previous year; and for the purpose of 3 ITA No. 1023/Kol/2011-A Smt. Sudha Jajodia

computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase, the cost shall be nil; or

(ii) if the amount of the capital gain is equal to or less than the cost of the new asset, the capital gain shall not be charged under section 45; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase, the cost shall be reduced, by the amount of the capital gain.]

From reading of the above section, it is apparent that an individual or HUF assessee if transferred land which is being used by him/her or by his/her parent/HUF in the preceding two years for agricultural purpose and such individual or HUF if within the period of 2 years after the date of the purchase any land being used for agricultural purpose then the assessee shall be entitled to get exemption in accordance with sub clause (i) and (ii) in respect of the cost of the land so purchased. On perusal of said section, it is apparent that exemption u/s. 54B can be allowed in respect of the cost of land. It does not include the expenses, which have been incurred by the assessee for filling and leveling the land. We, therefore, do not agree with the findings given by the ld.CIT(A). We have gone through the decision of the Bombay Tribunal in the case of Saleem Fazelbhoy Vs. DCIT reported in 291 ITR 169(TBOM). In our opinion this decision will not support the case of the assessee on claim of exemption u/s. 54B of the Act. The assessee has incurred expenses for making newly purchased house to be habitable as house was not habitable without incurring the expenditure. Therefore, the tribunal took the view that the expenses incurred by the assessee for converting semi finished house to be habitable being part of the cost of purchase of the house. Otherwise also the 'word' used in section 54F is a residential house while u/s. 54B the 'word' used are 'cost of land' so purchased. Similarly, in the decision of SMC Bench of the Tribunal in the case of Mrs. Sonia Gulati Vs. ITO [2001] 115 Taxman 232 (Mum.) the asessee has incurred the expenditure to make a house to be in habitable. Similarly, in the case of ACIT, Cir-4391), New Delhi Vs. Shri Sanjeev Malhotra in ITA No.3530/Del/2009 A.Y 2004-05 the ITAT Delhi Bench noted that the assessee has paid Rs. 45.5 lakhs for undertaking the improvement to the residential house purchased by the assessee. All the work has been done by the seller of the property. Therefore, the cost so incurred was part of the cost of the house eligible for exemption u/s. 54F of the Act.

We therefore, set aside the order of the ld.CIT(A) and restore that of the AO on this issue.

4 ITA No. 1023/Kol/2011-A Smt. Sudha Jajodia

6. In the result, the appeal of revenue stands allowed as stated above.

Order is pronounced in the open court on 15-06-2015

Sd/- Sd/- ( Mahavir Singh ) ( P. K. Bansal ) Judicial Member Accountant Member Dated : 15-06-2015

**PRADIP(Sr.P.S.) Copy of the order forwarded to:

1. Appellant-ACIT, Cir-39, Poddar Court, 8th Fl., 18 Rabindra Sarani, Kol-1.

2 Respondent -Smt. Sudha Jajodia C/o M/s. S.Khetan & Co. 46, B.B Ganguly St, Kol-12.

3. The CIT(A) concerned

4. The CIT concerned

5. The D.R 6. Guard File

True Copy, By order Asstt. Registrar