Amendment by the Finance Act 2012, to include HUF within the scope of Section 54B (relief) of the Income Tax Act, 1961 is clarificatory in nature: ITAT

Case details: Shri Sitaram Pahariya (HUF) v. ITO – [2021] 127 taxmann.com 618 (Agra - Trib.)

Judiciary and Counsel Details

• • Laliet Kumar | Judicial Member & Dr. Mitha Lal Meena | Accountant Member
  • Sunil Bajpai | CIT-DRfor the Respondent

Facts of the Case

Assessee, being a Hindu Undivided Family (HUF), filed its return of income declaring nil income. However, during assessment proceedings, Assessing Officer (AO) noted that assessee had declared nil income under the head capital gains on the sale of the property. Accordingly, AO denied exemption claimed by assessee under Section 54B and Section 54F and made additions to assessee’s income.

With respect to section 54B, AO held that deduction is not admissible for Assessment Year 2012-13 in the case of a HUF. The benefit was available only with effect from Assessment Year 2013-14 when the amendment was brought by the Finance Act, 2012.

On appeal, CIT(A) appeal granted exemption claimed under section 54F. However, upheld the disallowance of section 54B exemption. Aggrieved-assessee filed the instant appeal before the Tribunal.

ITAT Held

The Tribunal held that the bare reading of section 54B, prior to amendment, make it abundantly clear that the benefit of section 54B was available to ‘assessee or parents of his’. Assessee has been defined in section 2(7) means every person in respect of whom any proceeding under this Act has been taken for the assessment of his income. The person has been defined under section 2(31) which includes an individual, Hindu Undivided family, etc.

The conjoined reading of the above-said provisions makes it abundantly clear that an individual, Hindu undivided family, etc. is assessee for the purposes of the Income-tax Act. As the HUF can be an assessee, the assessee used in section 54B, can be interpreted to mean, even HUF besides being an individual, etc.

There were contrary views of various courts with regards to the allowability of section 54B deduction in case of person other than individuals. Thus, the controversy had been put to rest by the subsequent by the Finance Act 2012.

Therefore, the amendment brought on by the Finance Act 2012, in section 54B by replacing words ‘assessee or a parents of his’ with “the assessee being an individual or his parent, or a Hindu undivided family” was classificatory in nature and assessee would be eligible for deduction for Assessment Year 2012-13 as well.