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TMI Blog2013 (12) TMI 194X X X X Extracts X X X X X X X X Extracts X X X X ..... nvolved in these appeals is with regard to allowability of deduction u/s. 54B of the Income-tax Act, 1961. As the facts in all the appeals are common, we consider the facts as narrated in ITA No. 613/Hyd/2010. Brief facts of the case are that the assessee herein is an individual deriving income from other sources. He has filed a return of income for assessment year 2006-07 admitting income of Rs. 30,32,038 and agricultural income of Rs. 1,45,000. He also claimed exemption of capital gain u/s. 54B of the Act on the sale of land on the reason that he has invested the capital gain derived from sale of agricultural land in another agricultural land. The Assessing Officer disallowed the claim of the assessee on the reason that the land which was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er hand, the learned AR submitted that in the sale deed land is referred as agricultural land. The lands are appearing as agricultural lands in Pattadar Passbooks and in the returns of income were filed earlier claiming agricultural income. Copy of Pahani from MRO office is submitted evidencing cultivation of subabul. Copy from the website of Google Earth to demonstrate that in 2004 the land was tilled for raising crop and was barren. A photograph downloaded from Google Earth later on indicated standing crops. Photograph of the assessee with subabul plantation after cultivation shows the land is put to agricultural use. In CPDCL sanction order, even though the assessee name is not appearing, it is in the name of Smt. G. Bhagyavathi & others ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e agricultural income in earlier years. The contention of the DR is that the use of the land for agricultural purposes by the assessee or his parents has to be ignored on the ground that in the sale deed it was mentioned that the vendor declared that there were no trees, fish ponds, mines etc., in the scheduled land. However, it was clarified by the assessee that he has been growing subabul plantation in the said land and has been carrying on agricultural activities by growing Jowar from 1995 and the same was stopped since three years by shifting to subabul cultivation due to water scarcity and produced the photograph of such cultivation. The assessee also produced the details of expenditure for raising the subabul plantation in its computa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the exemption is to encourage cultivation or actual utilisation of land for agricultural purposes. If there is neither anything in its condition, nor anything in the evidence to indicate the intention of its owners or possessors so as to connect it with an agricultural purpose, the land could not be 'agricultural land' for the purposes of earning an exemption under the Act. Entries in revenue records are, however, good prima facie evidence." 7. Though the observations of the Supreme Court is with reference to the Wealth-tax Act, where agricultural land is not defined, it equally applies to Income-tax Act, where also agricultural land has not been denned. We must, therefore, determine the character of the land in question applying the tests ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s arising from the transfer of these lands would become assessable because the lands in question must be regarded as capital asset within the meaning of Section 2(14). However, the Finance Act, 1970 also introduced Section 54B granting exemption in case the proceeds of sale of agricultural lands are reinvested in the purchase of other agricultural lands. The Finance Bill did not contain this section and, therefore, we do not have any Notes on Clauses in respect of this section. However, after the Finance Act introduced this section, the CBDT has explained its meaning by Circular No. 45, dated 2-9-1970. It states: "The effect of the amendments to Section 2(14) and Section 47, as stated above, will be that capital ga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs prior to the sale and it would not be sufficient that if the lands are found to be agricultural lands, though remaining fallow. We do not think that Parliament could have intended to impose such a restriction on the relief Under Section 54B. As pointed out by the Supreme Court, one of the objects of the exemption is to encourage cultivation. Therefore, it stands to reason that an assessee, who is unable to cultivate the land in his possession, should be encouraged to replace it with land which he can cultivate. That is why the Finance Act, 1970, while bringing to tax agricultural lands within the limits of a municipality, simultaneously granted relief Under Section 54B for reinvestment of the proceeds. The expression "used for agricultur ..... X X X X Extracts X X X X X X X X Extracts X X X X
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