Purchase of land before the sale of a fixed asset not eligible for income tax deduction: ITAT [Read Order]

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Fixed assets - ITAT - Taxscan

The Ahmedabad bench of the Income Tax Appeal Tribunal (ITAT) ruled that the capital gains exemption under section 54 of the Income Tax Act 1961 does not can be invoked in the event of purchase of land before the sale of the residential unit.

In the present case, the Income Tax Commissioner, while invoking his review competence under section 263 of the Income Tax Act 1961, expressed the view that under section 54B (1) of the Act, the deduction is only permitted when a capital gain is used. for the purchase of land after the transfer of a fixed asset. Accordingly, he proposed to revise the ordinance by considering that the deduction / examination in the measure of Rs.41,90,160 / – attributable to the land acquired before the transfer is allowed beyond the parameters set.

On appeal, the Court ruled that the controversy is clear and simple and that it cannot be the subject of any debate having regard to the written language of the law.

“The AO gave no reason as to how the purchase of land prior to the transfer of the asset qualifies for a deduction claim under section 54B (1) of the Act. Thus, as a corollary, the AO accepted the request for deduction inadvertently and without any thought in this regard. No evidence was presented before us to demonstrate that the matter was on the mind of the AO. An erroneous acceptance of the claim for deduction would not be inferred from the application of the spirit. Second, the eligibility for the deduction under section 54B of the Act in respect of land acquired before the transfer of the capital property clearly conflicts with the clear provision of the Act and is therefore not apparently not viable having regard to the expression of the provision of the law. . The legislature, in its own wisdom, used the expression before the transfer of long-term assets as well as after the transfer of fixed assets to the appropriate places, viz. Article 54 of the Law. The legislator’s intention is therefore quite clear. Therefore, the deduction claim accepted by the AO despite the unequivocal wording of the Act, in our view, is erroneous within the meaning of s. 263 of the Act. Such an error on the part of the OA caused definite damage to the interests of the tax authorities. Prof. CIT’s action therefore falls within the powers conferred by article 263 of the Law. Prof. CIT distinguished the case law cited which is found to be regular. We do not see any irregularity in the attribution of jurisdiction by Prof. CIT under Article 263 of the Law ”, declared the Tribunal.

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