Tax tribunal overturns exemption denial for farmer who sold ancestral land
The Income Tax Appellate Tribunal in Chandigarh ruled in favor of Tiwari, allowing both Section 54F and Section 54B capital-gains exemptions after confirming his properties were commercial and agricultural respectively.
In his tax return, Tiwari reported Rs 7.73 crore of long-term capital gains and sought exemptions of Rs 2.64 crore under Section 54F and Rs 3.73 crore under Section 54B. The assessing officer rejected the claims, leading to an addition of about Rs 6.36 crore. The commissioner of appeals granted limited relief for Section 54B but denied Section 54F, arguing Tiwari owned more than one residential house at the time of sale.
The ITAT Chandigarh directed a site inspection, which confirmed the Dhakoli-Zirakpur property was used for a restaurant and office, thus commercial, and verified the purchase deeds for two agricultural parcels. The tribunal concluded that the commercial property could not be counted as a residential house and that urban location alone does not negate agricultural character. Consequently, it deleted the disallowance under Section 54F and upheld the Section 54B exemption to the extent of the documented investment.
Why it matters
The ruling clarifies how property use, not just description or location, determines eligibility for capital-gains tax exemptions.
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