• Notification Date: 21-01-2023
• Notification No: N/A

Beneficial Provision of Section 54B of Income Tax Act shall be Interpreted Liberally

The Income Tax Appellate Tribunal, Pune Bench, has recently held in an appeal filed before it, that the beneficial provision of section 54B of the Income Tax Act shall be interpreted liberally. The aforesaid observation was made by the Pune ITAT related to an appeal which was presented before it by the assessee, an HUF named Ramdas Pandharinath Kale, as against the order dated 17-12-2018, passed by the Commissioner of Income Tax (Appeals), Pune [CIT(A)], for the assessment year 2013-14. 

The facts of the case were that the assessee derived income from business, capital gains, and from other sources. And according to the AO, the assessee’s share declared at 21% from profit, was from the business i.e., housing project, under the name and style as “Shriram Residency”. The assessee had shown long-term capital gain of Rs.1,05,85,572/, and had claimed for Rs.25,00,000/- deduction u/s. 54F of the Income Tax Act. And in support of its claim, the assessee had also furnished a copy of the agreement for sale, dated 19-03-2016. However, according to the AO, the said agreement for sale was not registered. It was contended by the assessee that he had invested the same for the purchase of a new property and that in support of the same he had furnished a receipt for Rs.11,00,000/- from M/s. Aaryan Enterprises. But according to the AO, the assessee did not invest any new property within the stipulated time and therefore he denied the exemption u/s. 54F of the Income Tax Act, for the entire amount of Rs.25,00,000/-. Being agitated by the same, the assessee approached the CIT(A) who confirmed the same. And it is by being aggrieved by the order of CIT(A) in denying the exemption u/s. 54F of the Income Tax Act, and also for enhancement of income u/s. 54B, that the instant appeal has been preferred by the assessee before the Pune ITAT. The basic ground of the assessee’s appeal being the denial of deduction u/s. 54F of the Income Tax Act, S.S. Viswanethra Ravi, the Judicial Member of the Pune ITAT, after hearing the contentions of both sides and perusing the materials available on record, observed: “I find the Hon’ble High Court of Delhi in the case of Ravinder Kumar Arora, had held that the provisions of section 54 of the Income Tax Act are the beneficial provision, which should be interpreted liberally in favor of the deduction to the taxpayer, and that deduction should not be denied on the hyper-technical ground.” 

“There is no dispute with regard to reinvestment on agricultural land by the assessee in his individual capacity, the provisions u/s. 54 of the Income Tax Act being the beneficial provision which should be interpreted liberally in favour of the assessee seeking deduction u/s. 54B of the Act.”, he added. Thus, allowing the assessee’s appeal the Pune ITAT held: “Following the order of Surat Bench of Tribunal in the case of Babubhai Arjanbhai Kanani (HUF), I hold that the assessee is entitled to claim deduction u/s. 54B of the Income Tax Act and that the enhancement made by the CIT(A) is not justified. Thus, the order of AO is restored in allowing deduction u/s. 54B of the Income Tax Act to an extent of Rs.80,85,572/”.