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2019 (12) TMI 537 - GUJARAT HIGH COURTLTCG - withdrawal of exemption u/s 54B - lock in period - sale of agriculture land - purchased a new agriculture land (not being a capital asset) - sale of new land within one year after purchase - Held that:- After acquiring the new agricultural land (be it a rural agricultural land), if the new rural agricultural land is transferred within a period of three years from the date of purchase, then the tax exemption allowed earlier would be liable to be withdrawn. In such a case, the assessee is required to pay tax on the exemption claimed earlier. We fail to understand why lot of emphasis has been put on the fact that as the rural agricultural land does not constitute a capital asset, the capital gain tax is not levied on the sale of such rural agricultural land. There need not be any debate on this issue. No capital gains will arise on the sale of the agricultural land situated in a rural area as it is specifically excluded from the definition of the term 'capital asset'. However, the capital gains will arise on the sale of the agricultural land situated in a non-rural area. In the case on hand, we are concerned with the capital gains with respect to the first transaction, i.e. the sale of urban agricultural land. We are not concerned with the second transaction of the sale of the rural agricultural land. In such circumstances, after acquiring the new agricultural land (rural or urban), if the new agricultural land is transferred within a period of three years from the date of the purchase, then the tax exemption allowed earlier (i.e. with respect to the first transaction of sale or urban agricultural land) would be withdrawn. In such a case, the assessee would be required to pay tax on the exemption claimed earlier. Decided against the assessee.
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