Agricultural land use under Section 54B can be proved by revenue records and corroborative evidence, securing the deduction.

Deduction under Section 54B depended on whether the transferred land had been actually used for agricultural purposes during the two years before transfer and whether the replacement land was purchased for agricultural use within the prescribed period. The majority treated sale deeds, revenue records, khasra girdawari entries, Section 81 orders and other corroborative material as sufficient to show agricultural character and use of the land, and held that nominal agricultural income did not displace that evidence; the inspector's contrary report was found inadequate. The assessee was therefore entitled to the deduction, while the dissent considered the factual evidence insufficient.

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Issues: Whether the assessee was entitled to deduction under Section 54B of the Income-tax Act, 1961 on capital gains arising from transfer of land and corresponding purchase of other land.

Analysis: The relevant condition under Section 54B is that the transferred land must have been used by the assessee or the parent for agricultural purposes during the two years immediately preceding the transfer and the new land must be purchased for agricultural use within the prescribed period. The majority found that the sale deeds, revenue records, khasra girdawari entries, orders passed under Section 81 of the Delhi Land Revenue Act, 1954, and the additional evidence showed that the lands were agricultural in character and were being used for agricultural activity. The majority also held that nominal agricultural income by itself did not dislodge the revenue records and other corroborative material. The contrary inspector's report was treated as insufficient to override the record evidence. The dissent took the view that the evidence did not establish substantive agricultural use and that the claim failed on the facts.

Conclusion: The assessee satisfied the requirements of Section 54B and was entitled to the deduction; the Revenue's objection to deletion of the disallowance was rejected.

Ratio Decidendi: For deduction under Section 54B, the decisive test is actual agricultural use of the land in the relevant period, to be determined from reliable contemporaneous and revenue records, and not merely from the nomenclature of the land or the quantum of agricultural income.

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