Agricultural land capital-gains exemption covers third-party cultivation when evidence establishes qualifying agricultural use and replacement land is timely acquired.

Exemption for capital gains on transfer of agricultural land under Section 54B applies where the land was used for agricultural purposes during the two years before transfer and replacement agricultural land was acquired within the prescribed period. Agricultural use may be established through revenue and registration records, subsidy receipts, orchard photographs and prior accepted agricultural-income disclosures. Personal cultivation is not required: cultivation by local villagers or other third parties constitutes agricultural use. The absence of produce-sale or cultivation-expense bills does not negate consistent evidence of cultivation. Comparable acceptance of an identical claim involving the same survey land may support the factual position where no material distinction exists.

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Issues: Whether exemption for capital gains on transfer of agricultural land was available where the land was cultivated through local villagers and replacement agricultural land was purchased within the prescribed period.

Analysis: The land's agricultural character was established through revenue records, registration details, agricultural subsidy receipts, photographs of mango orchards and agricultural income disclosed in earlier returns. Agricultural use need not involve personal cultivation by the assessee; cultivation through third parties constitutes use for agricultural purposes. The assessee's earlier returns showing agricultural income from the same land had been accepted, and an identical claim of the assessee's brother in respect of the same survey land and transaction was accepted without any material distinction in facts. Absence of bills for agricultural produce or cultivation expenditure did not displace the evidence that local cultivators undertook the operations.

Conclusion: The transferred land was used for agricultural purposes during the two years preceding its transfer, and the assessee was entitled to exemption under Section 54B of the Income-tax Act, 1961 upon purchase of replacement agricultural land.

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