1997 (5) TMI 81 - AT - Income Tax

Tribunal grants IT Act exemption for reinvestment in agricultural land for 1981-82 assessment year

The Tribunal allowed the appellant's appeal, granting exemption under section 54B of the IT Act for the assessment year 1981-82. It held that the ... - Issues:Assessment of gain arising on the sale of land and denial of exemption under section 54B of the IT Act.Analysis:The appeal was against the assessment of gain on the sale of agricultural land and the denial of exemption under section 54B of the IT Act for the assessment year 1981-82. The appellant, along with his mother, purchased agricultural land and incurred expenses to make it fit for cultivation. The land was later sold to members of a backward class. The assessing officer treated the sale as an adventure in trade, resulting in the assessment of business income. The Dy. CIT(A) acknowledged that the appellant did not intend to carry on a trade but rejected the claim that it was a sale of agricultural land, leading to the denial of the exemption under section 54B.The appellant contended that the land was cultivated throughout and provided evidence to support this claim, including khasra girdauri, an affidavit, and submissions made before the AO. The appellant affirmed being an agriculturist and emphasized that the land was agricultural at the time of sale. The Revenue failed to provide evidence contradicting the agricultural nature of the land. The Tribunal noted that the land was purchased as agricultural, and agricultural operations were conducted before the sale. Despite the land being sold to different individuals, the Tribunal held that the claim for exemption under section 54B should be allowed liberally, as the appellant did not participate in dividing the land into plots.The Tribunal concluded that the appellant sold agricultural land and reinvested the proceeds in acquiring agricultural land, making the capital gain non-taxable under section 54B. The Tribunal directed the AO to revise the assessment accordingly, allowing the appellant's appeal and granting the exemption under section 54B of the IT Act for the assessment year 1981-82.