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TMI Blog2022 (3) TMI 1074X X X X Extracts X X X X X X X X Extracts X X X X ..... ng term capital gains on sale of agricultural land at Gat No. 55/1B, Chunchale, Dist. Nashik without appreciating that the said disallowance was not justified in law and on the facts of the case." 2. The brief facts in this case are that the assessee an individual is deriving income from long term capital gain. The assessee filed a return of income declaring total income of Rs. 12,36,594/- on 19-3-2015. The case was selected for scrutiny under CASS. The ld. A.O scrutinised the return of income and made an addition of Rs. 90,27,008/- on account of long term capital gain and assessed the income of the assessee at Rs. 1,02,63,600/-. In the revised Ground No. 1, the assessee is aggrieved by the decision of the ld. CIT(A) in not allowing deduction u/s 54B of the Income-tax Act, 1961 (hereinafter referred to as "the Act" for short) against long term capital gain on sale of agricultural land at Gat No. 55/1B at Chunchale Taluka, Dist. Nasik. The relevant provision of section 54B of the Act which deals with capital gain on transfer of land used for agricultural purposes not to be charged in certain cases is mentioned as follows for ready reference. "54B[(1)] Subject to the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iod specified in subsection (1) then,- (i) The amount not so utilised shall be charged u/s 45 as the income of the previous year in which the period of two years from the date of the transfer of the original asset expires; and (ii) The assessee shall be entitled to withdraw such amount in accordance with the scheme aforesaid." 3. That, as per the aforesaid provision twin conditions have to be fulfilled in order to get the deduction; (i) transfer of a capital asset being land which, in the two years immediately preceding the date on which the transfer took place was being used by the assessee for agricultural purposes; (ii) the assessee within a period of two years after that date purchased any other land for being used for agricultural purposes. In the case of the assessee, the ld. A.O is not disputing the fulfilment of the second condition. The ld. A.O has denied deduction u/s 54B of the Act to the assessee only on the ground that the first condition of the said provision is not fulfilled i.e. the assessee was not carrying on any agricultural activities on the said land two years immediately preceding the date of transfer of the said land. At para 9 onwards, the ld. A.O obser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2011-12. That, thereafter on 12-5-2011, the assessee had entered into an agreement for sale with the purchaser and after that the assessee had obtained permission from the Forest Department dated 1-6-2011 and had cut various trees that were growing on the land which were in F.Y. 2011-12 relevant to the present assessment year i.e. 2012-13. Therefore, as evident from 7/12 extracts it clearly mentions that there were 350 Saagwan (Teak) trees including Jackfruit trees that were grown on the agricultural land. Therefore, the observation of the ld. A.O that as per 7/12 extracts of the said land no agricultural operations were carried out since F.Y. 2008-09 i.e. for the period of four years prior to the date of sale is incorrect observation of fact. These 7/12 extracts were placed before the ld. A.O. It is evident that the assessee planted teak trees, jackfruit trees coconut true on the said land in the F.Y. 2006-07. That 350 teak wood trees were grown on the land, therefore, most part of the land was acquired by teak wood from the said F.Y. 2006-07 onwards. This 7/12 extracts was duly attested by the concerned Talathi of Chunchale village which itself speaks that there were 350 Saagwan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , casuarina plantations, tendu leaves, horra nuts etc." 6. In this decision of the Hon‟ble Supreme Court, it was analysed that whatever crops are produced on the land through agriculture, it would include all products including growing vegetables, fruits, trees, etc. All these are products raised from the land and are within the term "agriculture" which cannot be confined only to production of growing food products for human being and beast and it must be understood as comprising all products of land which has some utility for consumption or trade and commerce and would include also forest products such as timber, sal and piyasal trees, etc. From this decision, it is clear that agricultural produce on a land includes plantation and growing of trees also. 7. The ld. A.R. also referring to the findings of the ld. CIT(A) denying deduction u/s 54B of the Act submitted that there are various wrong observations of facts made by the first appellate authority. At para 5.17 of the CIT(A)‟s order, he writes that the assessee has not declared any agricultural income nor any evidence has been produced by the assessee either before the ld. A.O or before the ld. CITA(A). However, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fer of the said land. Nothing more is required. We also find that the decisions relied on by the ld. CIT(A) in his order pertains to sec. 2(14) of the Act, which is in the context of agricultural land in terms of capital asset, whereas the present issue before us is with regard to allowing of deduction u/s 54B of the Act. In this case of the assessee, regarding pre-requisite of sec. 54B of the Act, the Department is not disputing the second part i.e. the assessee, within a period of two years after the date of transfer has purchased another land for being used for agricultural purposes. The ld. A.O has made the addition only on the ground that the first requirement of section 54B of the Act i.e. the assessee has not conducted any agricultural activities two years prior to the sale transaction of the land. We have examined 7/12 extracts vis-à-vis the judgment of Hon‟ble Supreme Court (supra) and find that the agricultural produce includes the trees grown on the land which has some value for the assessee. In this case, 350 teak trees were grown on the land which has a substantial commercial value and from F.Y. 2006-07 to 2011-12, these plantations were there on the land ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee that the land was not used for agricultural purposes, two years prior to the sale transaction and we have already examined this requirement has been fulfilled in the case of the assessee. Beyond this, nothing else is required to get the deduction u/s 54B of the Act when the second condition is not at all disputed by the Department. Even the Hon‟ble Punjab and Haryana High Court in the case of CIT Vs. Smt. Savita Rani (2004) 270 ITR 40 (P&H) has categorically held that the exemption u/s 54B is available to the seller of a capital asset being land, however, the said land against which the benefit is sought must have been used by the assessee for agricultural purposes for the two years immediately preceding the date of sale. Having satisfied this condition, we are of the considered view that the assessee is entitled to the deduction u/s 54B of the Act and accordingly we reverse the finding of the ld. CIT(A) and allow Ground No. 1 of the assessee. 10. In Ground No. 2 of the revised ground, the assessee is aggrieved with the action of the ld. CIT(A) in not allowing deduction of Rs. 7,31,847/- towards indexed cost of improvement u/s 55 of the Act while computing the long te ..... X X X X Extracts X X X X X X X X Extracts X X X X
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