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Issues involved: Interpretation of sections 54B(ii) and 2(47) of the Income-tax Act, 1961 regarding capital gains arising from the sale of agricultural lands and the definition of "transfer."
Judgment Summary: The case involved the interpretation of sections 54B(ii) and 2(47) of the Income-tax Act, 1961. The assessee had entered into an agreement of sale for agricultural lands and subsequently purchased other agricultural lands. The main question was whether the capital gains from the sale were exempt u/s 54B(ii) and if the agreement of sale constituted a "transfer" u/s 2(47). The Tribunal had ruled in favor of the assessee, considering the agreement of sale as a transfer of interest and granting exemption under section 54B(ii). However, the High Court disagreed with this interpretation. It held that the agreement of sale did not amount to a transfer of interest in agricultural lands as required by section 54B(ii). The Court emphasized that section 54B(ii) mandates the sale of agricultural land followed by the purchase of other agricultural land within a specific period. Since the assessee had not adhered to these conditions, the exemption claimed was not valid. The Court also clarified that the agreement of sale only gives a right to sue for transfer and does not constitute an actual transfer as per the Transfer of Property Act, 1882. In conclusion, the Court ruled against the assessee, stating that the conditions for exemption under section 54B(ii) were not met. The Revenue was awarded costs, and the questions were answered in the negative against the assessee. This judgment highlights the importance of strict adherence to statutory provisions when claiming exemptions under the Income-tax Act, ensuring that the specific conditions laid down in the law are met for eligibility.
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