TMI Blog1987 (3) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... lands were agricultural lands on the date of acquisition ? (3) Whether the benefit under section 54B of the Income-tax Act, was allowable in computing the capital gains in the event the acquisition was completed on March 12, 1970 ? The lands of the assessees in R. C. Nos. 16 of 1982 and 18 of 1982 are situated in Hakimpet village, which is included within the municipal limits of Hyderabad City. The lands of the assessee in R. C. No.11 of 1982 are situated in Guddimalkapur village, which is situated within 8 kilometres of the local limits of the Hyderabad Municipal Corporation. These lands were requisitioned by the defence authorities under the provisions of the Requisitioning and Acquisition of Immovable Property Act, 1952. A few years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 45 of the Income-tax Act levies capital gains tax. It says: "Any profits or gains arising from the transfer of a capital asset effected in the previous year shall, save as otherwise provided in sections 53, 54, 54B and 54D, be chargeable to income-tax under the head 'Capital gains', and shall be deemed to be the income of the previous year in which the transfer took place." Section 47 sets out certain transactions which shall not be regarded as transfer. There was no clause (viii) in this section prior to April 1, 1970. By the Finance Act, 1970, the definition of "capital asset" was amended so far as it exempted agricultural lands in India. Clause (iii) in the said definition, after amendment, reads as follows "(iii) agric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no capital gains tax was leviable on the transfer of such lands. By the Finance Act, 1970, however, agricultural land situated within the limits of a municipality, or within 8 kilometres of the limits of any municipality, was made "capital asset" with effect from April 1, 1970. (The agricultural land not falling within items (a) and (b) of sub-clause (iii) of clause (14) of section 2 continued to be not "capital asset" for the purpose of the Act.) Since the said amendment is brought into force on and from April 1, 1970, it is applicable to the assessment year 1970-71. Clause (viii) of section 47, however, exempted sale of agricultural lands effected before March 1, 1970 (the date of introduction of the Finance Bill in Parliament), which mea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the acquisition notification was published in the Official Gazette only on March 12, 1970, and that is the date of transfer, as held by this court in the decision referred to above. We must, therefore, answer the first question referred to us saying that the acquisition of the lands cannot be said to have been completed before March 1, 1970. The next contention of the assessees was that these lands were "agricultural lands" on the date of acquisition. Their contention was that, when these lands were requisitioned, they were agricultural lands, under actual cultivation by them, and that the mere fact that after requisitioning the same, the defence authorities did not cultivate the said lands but put them to non-agricultural use, does no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hin the said financial year. In the present case, however, there is no dispute that the financial year 1969-70 would be the "previous year" for the assessment year 1970-71 in the case of all the assessees herein. If so, it would follow that the capital gains made by these assessees during the said previous year, i.e., during the financial year 1969-70, would be assessable to capital gains tax in the assessment year 1970-71. It is in this connection that clause (viii) in section 47 becomes relevant and meaningful. According to clause (viii) of section 47, any transfer of agricultural land effected before March 1, 1970 (the date on which the Finance Act, 1970, was introduced in Parliament) would be exempt from capital gains tax. In other word ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e simple ground that these lands were not being used by the assessee, or a parent of his, for agricultural purposes in the two years immediately preceding the date on which the transfer took place, as required by the said section. Unless this requirement is satisfied, the assessee cannot claim the benefit provided by section 54B, even though he may have purchased another agricultural land within two years of the transfer. Now, admittedly, in all these cases, the land concerned was not used by the assessee or his parent, for agricultural purposes. It was under requisition by the defence department and in their possession. For this reason, question No. 3 is to be answered in the negative, i.e., against the assessees and in favour of the Reven ..... X X X X Extracts X X X X X X X X Extracts X X X X
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