ITAT Directs AO to Allow Sec. 54B Deduction as Registration of New Land was Pending Due to Court Permission

Case Details: Kristina Nathabhai Krichchan vs. Deputy Commissioner of Income-tax - [2023] 154 taxmann.com 102 (Surat-Trib.)

Judiciary and Counsel Details

• • Pawan Singh, Judicial Member & Dr. A.l. Saini, Accountant Member
  • P.M. Jagasheth, CA for the Appellant.
  • Ashok B. Koli, CIT (DR) for the Respondent.

Facts of the Case

The assessee claimed deduction under section 54B on transferring agricultural land and purchased another parcel of land. The Assessing Officer (AO) denied benefit under section 54B because the assessee could not furnish a purchase deed for so-called new agricultural land.

In response, the assessee submitted the reason for the non-furnishing purchase return that that two of the co-sellers were minor at the time of purchase of the said land, due to which application had been filed in the appropriate Court for permission to purchase land and sell land in their name.

On appeal, CIT(A) confirmed the action of AO. The matter then reached the Surat Tribunal.

ITAT Held

The Tribunal held that the registration of the purchased land was pending due to Court permission because two of the co-sellers were minors at the time of purchase of the said land. However, at present, both have become major, and they have executed a notarized declaration of accepting the transactions and confirmed the enforceability of the documents in the form of a Satakhat/sale agreement and possession letter signed by their guardians on their behalf. Thus, the document on which the assessee had purchased was valid and enforceable in law.

The assessee had claimed the amount already paid for the purchase of new agricultural land, which the above parties confirm, and also confirmed the enforceable transaction and documentation in the assessee’s favour. Thus, the assessee’s claim under section 54B was allowable as the transaction was enforceable in the eyes of the law.

Even in normal circumstances, executing an agreement to sell immovable property creates a right in personam in favour of the transferee. When such a right is created, the transferor is restrained from selling the said property to someone else because the transferee has a legitimate right to enforce the specific performance of said agreement to sell.

Therefore, the Assessing officer was directed to give the assessee the benefit of deduction under section 54B.

List of Cases Reviewed

• • Balraj v. CIT [2002] 123 Taxman 290/254 ITR 22 (Delhi) (para 11)
  • Anil Bishnoi v. Asstt. CIT [2017] 86 taxmann.com 217/167 ITD 381 (Chd. – Trib.) (para 12)
  • CIT v. T.N. Aravinda Reddy [1979] 2 Taxman 541/120 ITR 46 (SC) (para 13) followed.

List of Cases Referred to

• • Balraj v. CIT [2002] 123 Taxman 290/254 ITR 22 (Delhi) (para 11)
  • Anil Bishnoi v. Asstt. CIT [2017] 86 taxmann.com 217/167 ITD 381 (Chd. – Trib) (para 12)
  • CIT v. T.N Aravinda Reddy [1979] 2 Taxman 541/120 ITR 46 (SC) (para 13).