Section 54B relief may survive where an acted-upon agreement to sell and possession transfer precede registration of the old land deed.

Section 54B relief can be available where the transfer of agricultural land is treated as having occurred on an acted-upon agreement to sell, with consideration received and possession handed over, even if the registered sale deed is executed later. Applying section 2(47)(v) and (vi) of the Income-tax Act read with section 53A of the Transfer of Property Act, the Tribunal treated the later deed as performance of the earlier arrangement rather than the first transfer event. The purchase of new agricultural land was therefore linked to the transfer of the old land, and the timing of registration did not defeat the exemption.

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Issues: Whether the assessee was entitled to deduction under section 54B of the Income-tax Act, 1961 where the new agricultural land was purchased before the date of execution and registration of the sale deed for the old agricultural land, but after an agreement to sell, receipt of consideration by cheque, and handing over of possession.

Analysis: The arrangement was examined as a whole. The consideration for the old agricultural land had been fixed under the agreement to sell, cheques had been issued and encashed around that period, possession had been handed over, and a later correction deed and affidavit supported the earlier transfer arrangement. The subsequent sale deed was treated as a performance of the earlier agreement rather than as the first and only transfer event. The Tribunal also applied the statutory definition of transfer under section 2(47)(v) and (vi) read with section 53A of the Transfer of Property Act, 1882, and held that the object of section 54B is to grant relief where the assessee substitutes agricultural land by investing the sale consideration in new agricultural land. On these facts, the acquisition of the new land was held to be linked to the transfer of the old land, and the timing of the registered deed did not defeat the deduction.

Conclusion: The assessee was held entitled to deduction under section 54B of the Income-tax Act, 1961 in respect of the agricultural land purchased for Rs. 2,47,60,900/-, and the disallowance was set aside.

Ratio Decidendi: For section 54B, the relevant transfer may be treated as having taken place on the date of an acted-upon agreement to sell where consideration is received and possession is handed over, and the later registered sale deed does not by itself postpone the transfer for the purpose of the exemption.

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