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2019 (12) TMI 960 - AT - Income TaxLTCG - Exemption u/s 54B in respect of gains on sale of agriculture land - AO observed that, the said lands are not only the non-agricultural land but also they are not used for agricultural purposes by the assessee for full 2 years period as required u/s 54B - AO taxed entire such gains and agricultural income as “business income” - Preliminary issue and admission of additional evidence HELD THAT:- The motive of increasing the value of the capital assets should not be confused with the business linked profit motive. Business should not only have the profit motive but also should have the stock-in-trade. The book entries, which happen at the time of purchase of asset, reflects that the intention of the asset is to hold the asset as fixed asset/investment and not the asset for sale for profit. Such business assets are held by the firm where the assessee is the partner. In our view, the assessee’s arguments have the merits. Therefore, assessee’s claim of offer the gains earned on the disinvestment of the fixed assets, under the head ‘capital gains’ like in earlier and later years, is proper and is confirmed in principle; but for the additional evidences. However, the Assessing Officer is required to examine the additional evidences furnished by the ld. AR for the assessee as per the set principles of natural justice. Deduction claim u/s 54B - In the present case, there is no dispute about the time-line provided for purchase of eligible lands and the agricultural nature of the same. The dispute is only on the condition of 2 years of land use for agricultural purposes for immediately preceding two years from the transfer date of the lands sold. Thus, while the revenue is in favour of the two calendar years, the assessee argues that the agricultural use of lands for two crop seasons in two years fulfils the specified conditions mentioned in section 54B(1) of the Act. it is evident that the condition of two years of agricultural use of lands stands met if the said lands are used for an year preceding to the date of transfer of land and also same days of the year preceding to the said preceding year. In other words, two crop seasons in the two years preceding to the date of transfer, meets the legal requirement of law in section 54B of the Act. However, this aspect of the provisions was not examined by the Assessing Officer. Therefore, considering the principles of natural justice, Assessing Officer is directed to examine the facts relating to the crop seasons of Rice, to apply the said order of the Tribunal in the case of Ramesh Narhari Jakhadi . [1992 (2) TMI 178 - ITAT PUNE] the extent of reimbursement of gains in the eligible lands etc. In the absence of any contrary evidence, Assessing Officer shall accept the contents of 7/12 extract in its entirety. Assessing Officer shall also restrict the deduction u/s 54B of the Act to the extent of reinvestment of gains earned on sale of eligible lands and in the eligible agricultural lands only.
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