Section 54B exemption allowed despite no capital gains account deposit where agricultural land sale proceeds were timely reinvested.

Section 54B exemption was available where the sale consideration from agricultural land was actually invested in purchase of new agricultural land within the prescribed period. The Tribunal treated timely utilisation of the capital gain for acquiring the new asset as sufficient compliance, and held that failure to deposit the unutilised amount in the capital gains account scheme before the return-filing due date was not, by itself, fatal. On that basis, the disallowance by the Assessing Officer was deleted and relief to the assessee was sustained.

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Issues: Whether the assessee was entitled to exemption under Section 54B of the Income-tax Act, 1961 when the sale proceeds from agricultural land were invested in purchase of new agricultural land within the prescribed period, though the unutilised amount was not deposited in the capital gains account scheme before the due date for filing the return.

Analysis: The issue turned on the scope of Section 54B and whether the deposit requirement could defeat the exemption when the capital gain had in substance been deployed in acquiring new agricultural land within two years from the date of transfer. The record showed that the assessee had purchased agricultural lands out of the sale consideration within the stipulated period and the Revenue did not dispute the factual utilisation of the funds. The Tribunal noted that the absence of deposit in the capital gains account scheme was not fatal in the circumstances, and relied on the settled principle that where the statutory investment condition is met within time, the exemption cannot be denied merely for non-deposit before the return-filing date.

Conclusion: The assessee was entitled to exemption under Section 54B, and the disallowance made by the Assessing Officer was rightly deleted.

Final Conclusion: The Revenue's challenge failed, and the order granting relief to the assessee on the capital gains exemption was sustained.

Ratio Decidendi: Actual investment of the capital gain in the prescribed asset within the statutory period is sufficient to claim the exemption, and non-deposit in the capital gains account scheme does not by itself defeat the relief where the funds were duly utilised within time.

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