Section 54B deduction upheld for contiguous agricultural land despite cultivation being limited to parts of the holding.

Section 54B relief was sustained because a contiguous agricultural holding need not be cultivated across every survey number or its full extent for the two years before transfer; cultivation on different portions during the relevant period satisfied the statutory use requirement, and the unexplained record showed that water shortage and related constraints prevented full cultivation. The site plan produced before the first appellate authority did not breach Rule 46A because it was only a map already forming part of the sale deed before the Assessing Officer and was used to show contiguity, not as new evidence. The Revenue's challenge failed and the appeal was dismissed.

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Issues: (i) whether the assessee was entitled to deduction under section 54B of the Income-tax Act, 1961 on sale of contiguous agricultural land, despite cultivation having taken place only on parts of the land in the two years immediately preceding transfer; and (ii) whether admission of the site plan before the first appellate authority offended Rule 46A of the Income-tax Rules, 1962.

Issue (i): whether the assessee was entitled to deduction under section 54B of the Income-tax Act, 1961 on sale of contiguous agricultural land, despite cultivation having taken place only on parts of the land in the two years immediately preceding transfer.

Analysis: Section 54B requires that the land transferred must have been used for agricultural purposes in the two years immediately preceding transfer. The land in question was a contiguous block though it was reflected in different survey numbers. The statutory condition does not require that every survey number or the entire extent be cultivated throughout both years. The record showed cultivation on different portions in the relevant years, and the reason for not cultivating the entire land, namely water shortage and related constraints, remained unrebutted.

Conclusion: The deduction under section 54B was rightly allowed and the Revenue's challenge failed.

Issue (ii): whether admission of the site plan before the first appellate authority offended Rule 46A of the Income-tax Rules, 1962.

Analysis: The so-called fresh material was only the site map forming part of the sale deed already placed before the Assessing Officer. It was relied upon to show contiguity of the land and was not a new piece of evidence requiring remand under Rule 46A. No procedural breach was established.

Conclusion: There was no violation of Rule 46A.

Final Conclusion: The assessee's claim for deduction was sustained, the procedural objection was rejected, and the Revenue's appeal was dismissed.

Ratio Decidendi: For section 54B, it is sufficient if a contiguous agricultural holding is used for agricultural purposes in the relevant period, even if cultivation is only on part of the land and not on every survey number or the whole extent, provided the inability to cultivate the entire land is satisfactorily explained.

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