Advance payment for the purchase of agricultural land for sale Deductible proceeds under Section 54B of the Income Tax Act: ITAT

The Income Tax Appeal Tribunal (ITAT), Rajkot bench, ruled that the advance payment for the purchase of farmland from the proceeds of the sale of the land sold by it is eligible for the benefit of the deduction under section 54B of the Income Tax Act 1961.

The assessee, Shri Indranil Sanjaybhai, an individual, engaged in construction of residential units/apartments and transportation filed his tax return on 15.10.2010 showing income at Rs. 73,25,860/-. During the valuation process, the valuation officer denied the claim for deduction under Section 54B.

The Tribunal bench consisting of Accountant Member Shri Waseem Ahmed and Judicial Member Ms. Madhumita Roy observed that when the initial payment of Rs. capital gain of Rs. 2.90 crores before the due date for filing the income tax return under Section 139(1) of the Act.

Concluding the order in favor of the assessee, the Court considered that “Considering Circular No. 471 of the CBDT of 15.10.1986, Circular No. 672 of 06.12.1993 must be treated as a construction for the purposes of section 54/54F. Further, in view of Circular No. 672 issued by the CBDT, said amount paid out of the net consideration for the sale of the original asset should be treated as a purchase/construction. Further, although the above clarification relates to section 54F, the analogy in our considered opinion was correctly applied by the CIT(A) in the case at issue in view of the facts and circumstances which relate to it. Accordingly, the advance payment by the appellant for the purchase of farmland from the proceeds of the sale of the land he sold was properly found to qualify for benefit under section 54B of the law by Ld. CIT(A) without any ambiguity justifying an intervention.

Shri Vidyasagar S. Ubale appeared for the assessee.

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Shri Indranil Sanjaybhai vs DCIT

Counsel for the Appellant: Shri Mehul Ranpura

Counsel for the Respondent: Shri Vidyasagar S. Ubale


Amalia H. Mercado