Benefit u/s 54B can be claimed even if new agricultural land is purchased prior to transfer of previously owned agricultural land

The assessee before execution of the sale deed purchased the properties vide document No. 8547/2008 on 18.09.2008 for Rs. 47,53,223/-, document No. 8743/2008 on 04.10.2008 for Rs. 51,47,014/- and document No. 8295/2008 on 24.09.2008 for Rs. 28,68,302/- and the total amount paid by the assessee to various purchasers of the land amounting to Rs. 1 ,27,68,537/-. According to the Assessing Officer, the purchase consideration paid by the assessee is not eligible for deduction under section 54B of the Act. It is not the case of the Assessing Officer that the sale consideration received by the assessee under use for the purpose of purchase of the property. The only dispute is the assessee has purchased the property before transfer of the property. Therefore, the Assessing Officer has denied the claim of the assessee. From the record, we find that the assessee had entered into an agreement to sell the property for Rs. 11,00,00,000/-. As it is a fact that the sale deed was executed on 30.12.2008, but the assessee purchased three properties with the sale consideration received from M/s. Lotus Eye Care Hospital Ltd. The intention of the Legislature is that the assessee has to use the sale consideration received for the purpose of buying agricultural land. In the present case, the assessee sold agricultural land is not disputed by the Assessing Officer and also purchased agricultural land. The ld. CIT(Appeals) in his order has given a categorical finding that though the sale deed was executed on 30.12.2008, but the possession was given on 10.09.2008. He has also observed that the sale deed has to be executed on or before four months from the date of agreement. There are certain dispute between the assessee and the purchaser. Therefore, the execution of sale deed was delayed and the sale deed was executed in December, 2008. So far as the first objection raised by the ld. DR is concerned, the property was only transferred in December, 2008, therefore, the property purchased before that date is not eligible for claiming deduction under section 54B. In our opinion, this is only a hyper technical objection raised by the ld. DR, because, the assessee has received substantial amount from the purchaser before executing sale deed. So far as registration of the sale agreement is concerned, if both the parties proceeded to carry the execution of the sale as per the agreement whether it is registered agreement or not, there is no effect so far as transfer is concerned. Therefore, the case law relied on by the ld. DR is altogether on a different context and have no application to the fact of the present case. In view of the above, we find no infirmity in the order passed by the CIT(Appeals) and the ground raised by the Revenue is dismissed.

Source – Asstt. CIT Vs. Dr. S. Balasundaram (ITAT – Chennai), ITA No. 1832/Mds/2012, Date of pronouncement: 27.05.2013