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TMI Blog1988 (9) TMI 106X X X X Extracts X X X X X X X X Extracts X X X X ..... nvested in agricultural lands, the assessee was entitled to relief u/s. 54B of the IT Act. The ITO was of the view that the lands sold were not agricultural lands, and, therefore, he brought to tax the capital gains arising from the transfer of the lands and did not consider the claim for exemption. On appeal, the CIT(A) confirmed the assessment. 3. In the further appeal before us, it was contended on behalf of the assessee that the lands were agricultural lands as registered in the revenue records, though remaining fallow due to drought situation. It was further submitted that since the proceeds have been reinvested, the assessee was entitled to relief u/s. 54B. On the other hand, it was contended on behalf of the revenue, relying on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation as part of assets', but its actual condition and intended user which has to be seen for purposes of exemption from wealth-tax. One of the objects of the exemption is to encourage cultivation or actual utilisation of land for agricultural purposes. If there is neither anything in its condition, nor anything in the evidence to indicate the intention of its owners or possessors so as to connect it with an agricultural purpose, the land could not be 'agricultural land' for the purposes of earning an exemption under the Act. Entries in revenue records are, however, good prima facie evidence." Though the observations of the Supreme Court is with reference to the Wealth-tax Act, where agricultural land is not defined, it equally applies to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was used earlier. There is no evidence to show that the assessee by himself had decided to abandon the intention to cultivate the land even though the actual cultivation was not possible due to lack of water. That might have been the reason for selling the lands and might have fetched a higher price because of the intended user of the purchaser ; but, in our opinion, it does not in any way rebut the initial presumption that the property, classified as agricultural land in revenue records and accepted as agricultural land in the wealth-tax assessments, ceased to be such agricultural land before the transfer of such lands. 5. Section 2(14), which defines capital asset, was amended by the Finance Act, 1970 to include agricultural land si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mediately preceding the date of transfer was being used by the assessee or a parent of his for agricultural purposes, and the assessee has, within a period of two years after that date, purchased any other land (whether in the same area or elsewhere) for being used for agricultural purposes, then the capital gain will not be charged to tax to the extent that it has been utilised for acquiring the fresh land. Where the amount of the capital gain exceeds the cost of acquisition of the fresh land, only the excess will be chargeable to tax. The concession will, however, be fortified if the assessee transfers the fresh land acquired by him within a period of three years from the date of its purchase." It was argued on behalf of the revenue tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... put the land to use due to vagaries of nature and non-availability of resources. It can hardly be the fault of the assessee if rainfed lands are not actually put to use during the drought. We are, therefore, convinced that the assessee was entitled to relief u/s. 54B. 6. The assessee has also raised an alternative ground that the capital gains arising from the transfer of agriultural lands within the limits of a municipality would still be agricultural income and not liable to tax under the Income-tax Act. This contention is supported by the decision of the Bombay High Court in the case of Manubhai A. Seth v. N.D. Nirgudkar, Second ITO [1981] 128 ITR 87. Hence, in any view of the matter, the tax imposed on the capital gains arising from ..... X X X X Extracts X X X X X X X X Extracts X X X X
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