TaxTMI 
TaxTMI 
TaxTMI 
1992 (2) TMI 178
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....as taken on 10- 12-1984 of which the payments to the vendors of the land amounted to Rs. 7,14,700 up to 3-8-1987. Another land at Mhasrul in survey No. 32-2/4 & 2/2 was agreed to be purchased on 9-4-1985 with possession on the same date for a cost of Rs. 16,000. Another agricultural land at survey No. 53A/1 at Anandwalli was agreed to be purchased on 11-2-1988 of which possession was taken on the same date for Rs. 2,27,500. It is pertinent to point out that except the land at Ambad purchased by the assessee, conveyance deed has not been obtained by the assessee in respect of other three lands till the date on account of disputes and non-agreement among the family members of the vendors and the dispute is pending in the Court on account of which the conveyance deeds of lands were not executed by the vendors. 2. In this context, the ITO passed a very short order treating the capital gains arising on the sale of Anandwalli land as short term capital gains on the basis that the land was a short term capital asset or it was held for not more than 36 months. Therefore, he assessed the entire capital gains arising on the sale of the land to short term capital gains. 3. On appeal, the CI....
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....dgment of the Bombay High Court in the case of CIT v. Smt. R. R. Sood capital gains was short term capital gains and not long term capital gains as claimed by the assessee. 4. The CIT(A) was satisfied that the distinction between short term capital gains and long term capital gains has no significance and the lands, possession of which was taken over by the assessee were used for agricultural purposes only. However, the condition that the new agricultural lands should have been purchased within a period of 2 years after the date of sale for being used for agricultural purposes was not satisfied by the assessee. According to him, certain amounts were invested by the assessee in the new lands even prior to the date of transfer, i.e. on 17-2-1986, though the requirement of section 54B is that the investment should be made within a period of 2 years after the date of transfer. In fact even the investment of Rs. 6.06 lakhs made by the assessee after the date of conveyance deed for Anandwalli property, namely, 17-2-1986, the condition of section 54B was not satisfied, because the sale deeds for those lands were not registered yet, and therefore, it could not be said that the assessee ha....
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....erty and the delay in registration was immaterial, the Andhra Pradesh High Court held that the assessee was entitled to exemption from capital gains under section 54(1) of the Income-tax Act, 1961. Applying the aforesaid decision to the case of the assessee, it was contended that the assessee also invested substantial portion of the capital gains arising out of the transfer of the land on several new lands, possessions of which have been taken over by the assessee on the date of entering into agreements in respect of these lands. The learned counsel for the assessee also relied on the decision of the Bombay Bench 'D' of the Income-tax Appellate Tribunal in the case of V.M. Dujodwala v. ITO [1991] 36 ITD 130 wherein similar view has been taken. Referring to the paper compilation, he pointed out that from the details of payments made by the assessee in respect of new lands an amount of Rs. 2,15,471 was invested up to 16-2-1986, i.e., before the sale deed of Anandwalli property was registered on 17-21986 and therefore, in accordance with the spirit of the Circular No. 359, dt. 10-5-1983 cited earlier, the learned counsel for the assessee urged that this amount should also be considere....
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....gricultural purposes in the two years preceding the date of transfer and therefore it contemplates assets held for less than 36 months as well as assets held above 36 months. Therefore, it is clear that this section contemplates capital gains arising on transfer of both short term as well as long term capital assets. In any case, the CIT(Appeals) has conceded this point in his appellate order and therefore, it is academic to go into the question. 9. Another aspect that is required to be considered is that the section contemplates user of agricultural land in the two years immediately preceding the date of transfer and therefore, the reference is to the years and not during the whole period of two years as viewed by the authorities. In other words, if the asset has been used for the whole of the immediately preceding year and some days of the year earlier to the preceding year, still the requirement of section 54B would be satisfied. Applying the definition of short term capital asset with reference to the word " held ", it could be said that any asset held in the two years immediately preceding the date of transfer would be eligible for relief under section 54B on the capital gain....