No exemption u/s 54B if new agricultural land was purchased prior to sale of old agriculture land

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No exemption u/s 54B if new agricultural land was purchased prior to sale of old agriculture land 

Facts:

 1. The assessee entered into an agreement to sell his agricultural land on 29-12-2011 and received a part of sale consideration. 

2. Subsequently, another agreement was executed for sale of said land on 11-6-2013 and, therefore, the first agreement was no more in existence. 

3. Assessee filed his return of income claiming deduction under section 54B in respect of the agricultural land purchased in year 2012 vide agreement dated 16-5-2012. 

4. The revenue authorities rejected assessee’s claim on the ground that deduction under section 54B of the Income-tax Act, 1961 (‘Act’) is allowable only if the agricultural land is purchased after the sale of existing agricultural land. However, in the instant case, agricultural land was purchased in year 2012, i.e., prior to sale of existing agricultural land. 

The Tribunal held in favour of revenue as under: 

1. The provisions of section 54B of the Act set out the conditions for allowing the deduction in respect of the capital gain arising from transfer of agricultural land if the assessee has purchased within a period of two years, any other land for being used for agricultural purposes. 

2. Hence, the Legislature has not intended to allow the claim in respect of the land purchased prior to date of sale of original asset as in the case of deduction under sections 54 and 54F of the Act. 

3. Further, it was not the case of the assessee that sale deed was executed on the basis of the first agreement dated 29-12-2011 as the assessee himself had declared the transfer of the land in question vide agreement dated 11-6-2013.

4. Therefore, it was held that the land was purchased by the assessee vide agreement dated 16-5-2012 which was prior to the sale declared by the assessee vide agreement dated 11-6-2013. Consequently, no exemption shall be allowable under section 54B of the Act

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