Capital gains on agricultural land: substantive transfer, section 54B reinvestment, and cost of acquisition were all assessed on record.

In capital gains computation on agricultural land, the document states that an acted-upon agreement to sell, consideration, and subsequent delivery of possession support the substantive transfer, so later plot-wise sale deeds do not justify substituting value under section 50C where the land was sold as one holding. It further notes that section 54B relief may extend to reinvestment in agricultural land purchased in the names of the assessee's son and daughter, since the provision focuses on genuine use of sale proceeds for agricultural land and does not expressly require purchase only in the assessee's own name. On cost of acquisition, the assessee's unsupported valuation was partly rejected and the figure was revised upward only to a limited extent.

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Issues: (i) Whether the unregistered agreement to sell dated 20.03.2009 could be treated as invalid and whether the transfer of the agricultural land was to be taxed on the basis of the later plot-wise sale deeds and section 50C of the Income-tax Act, 1961; (ii) whether exemption under section 54B of the Income-tax Act, 1961 was allowable for purchase of agricultural land in the names of the assessee's son and daughter; (iii) whether the cost of acquisition adopted by the lower authorities was .

Issue (i): Whether the unregistered agreement to sell dated 20.03.2009 could be treated as invalid and whether the transfer of the agricultural land was to be taxed on the basis of the later plot-wise sale deeds and section 50C of the Income-tax Act, 1961.

Analysis: The agreement to sell was acted upon, consideration was received, and possession was later handed over to the purchaser. The subsequent plot-wise sale deeds executed in favour of third-party purchasers were found to be pursuant to the earlier arrangement and not independent transfers by the assessee. The bar in section 17(1A) of the Registration Act, 1908 was held to affect only the availability of section 53A protection and not the genuineness of the underlying contract for income-tax purposes. As the assessee had sold the land as one agricultural holding and not as separate plots, section 50C could not be applied by substituting the stamp value of the subsequent plot sales.

Conclusion: The transfer was held to have taken place under the agreement with the purchaser, and the addition made by applying section 50C on the basis of plot-wise sales was unsustainable. This issue was decided in favour of the assessee.

Issue (ii): Whether exemption under section 54B of the Income-tax Act, 1961 was allowable for purchase of agricultural land in the names of the assessee's son and daughter.

Analysis: The land sold was agricultural land and the sale proceeds were used for purchase of other agricultural land. The appellate authority had allowed the exemption only for purchases in the assessee's own name and his wife's name. The Tribunal adopted a liberal construction of section 54B, holding that the provision focuses on investment of the sale proceeds in agricultural land and does not expressly require that the new land be purchased only in the assessee's own name. The lands bought in the names of the son and daughter were therefore treated as qualifying investments.

Conclusion: The assessee was entitled to exemption under section 54B for the purchases made in the names of his son and daughter as well. This issue was decided in favour of the assessee.

Issue (iii): Whether the cost of acquisition adopted by the lower authorities was correct.

Analysis: The assessee failed to substantiate the claimed market value as on 01.04.1981 with supporting evidence. The lower authorities relied on comparable sale instances from nearby agricultural lands, but the Tribunal found the assessee's estimate excessive and adopted a higher figure than that taken by the Assessing Officer, while still not accepting the assessee's full claim.

Conclusion: The cost of acquisition was partly revised upward from the Assessing Officer's figure, and this issue was decided partly in favour of the assessee.

Final Conclusion: The addition towards long-term capital gains was reduced, exemption under section 54B was extended to the remaining eligible investments, and the matter of cost of acquisition was modified partly in the assessee's favour, resulting in partial allowance of the appeal.

Ratio Decidendi: For capital gains on agricultural land, the taxing authority must respect the substantive transfer and actual arrangement proved on record, and exemption under section 54B is to be applied to genuine reinvestment of sale proceeds in agricultural land without a hyper-technical insistence on title being taken only in the assessee's own name.

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