The Assessing Officer says my land was not agricultural land at all — it is inside municipal limits, next to a commercial area, and the buyer bought it to build on. Does that defeat s.54B?
No. Section 54B gives relief on the transfer of 'a capital asset being land'; it does not confine the benefit to agricultural land as a category. The only question is whether the assessee or his parent actually used that land for agricultural purposes in the two years immediately preceding the sale, and where khasra girdawari, the Patwari's record and agricultural income declared in the returns of the two preceding years all show that use, the land's location and the buyer's intended use are irrelevant.
Decided by the High Court (N.K. Sud J (the retrieved header names only one judge although the operative paragraphs are in the first person plural)) on 2002-05-22, reported as Punjab and Haryana High Court; appeal against the order of the Income Tax Appellate Tribunal, Chandigarh Bench dated 7 September 2001. Reported at [2003] 133 Taxman 712 (Punj. & Har.), printed as an equivalent citation in the report retrieved. No case number appears in that text.. It bears on section 54B of the Income Tax Act 1961, in Capital Gains, Capital Gains Exemptions and Evidence & Burden of Proof matters.
This reframes the argument most assessees lose. Assessing Officers habitually attack the character of the land — municipal limits, high price per acre, godowns on part of the holding, a purchaser who plainly intends to develop — and assessees habitually answer on that ground and lose it. The Court's point is that the department is arguing the wrong issue: those factors go to whether land is 'agricultural land' outside s.2(14), not to s.54B, which asks only about actual use in the two preceding years. It is also a clean statement of what evidence works: revenue records plus the department's own assessments of the assessee's agricultural income, which the Court held the department cannot disown after having assessed it.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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For assessment year 1991-92 the assessee, an individual, sold 15 kanals 18 marlas out of her share in 23 kanals 17 marlas of land by three registered sale deeds for Rs 1,80,000, Rs 2,35,000 and Rs 2,64,000. She claimed s.54B, having invested in further agricultural land on 8 January 1991 (7 kanals 17 marlas, Rs 80,000), 19 February 1991 (1 kanal 2 marlas, Rs 11,000), 5 August 1991 (20 kanals 2 marlas for Rs 8,00,000 jointly with co-owners, her 161/402 share amounting to Rs 3,50,412) and an advance of Rs 2,00,000 on 23 September 1991. She produced registered deeds and khasra girdawari; the Assessing Officer also obtained khasra girdawari from the Patwari and had the site inspected. He rejected the claim on five grounds: the land lay within the municipal limits of Jagadhari adjoining a commercial area; the assessee had jointly bought a large holding in 1976 and built seven godowns on part of it in 1977-78; only poplar plantation stood on the land till 1988-89 and thereafter only fodder grass and vegetables in the kharif season with the land fallow in rabi, as a fill-gap arrangement; the purchaser had bought for non-agricultural purposes at a price no bona fide agricultural buyer would pay; and the agricultural income declared was only Rs 2,500 in each of the current and preceding years. The CIT(A) upheld him on 24 October 1994. The Tribunal allowed the assessee's appeal.
The Revenue's appeal was dismissed in limine. Section 54B is not restricted to agricultural land: the exemption is available to the seller of 'a capital asset being land', and the operative condition is that the land was used by the assessee or her parent for agricultural purposes in the two years immediately preceding the date of sale. On the Assessing Officer's own findings that condition was satisfied — poplar plantation to 1988-89, fodder grass and vegetables in kharif, khasra girdawari showing agricultural operations up to the sale, and agricultural income declared and assessed in the two preceding years. Once that is so, the land's situation in a commercial area, its partial non-agricultural use and the purchasers' intended use are irrelevant. No substantial question of law arose.
The Court set out s.54B(1) and reduced it to two conditions, only the first of which was in dispute (para 6). It then made the decisive move of reading the words of the section literally: 'The exemption is available to the seller of "a capital asset being land". It does not restrict the benefit to the agricultural land only.' That disposed of the whole of the department's case on the character of the land and made it unnecessary to go into the authorities the Assessing Officer and CIT(A) had relied on. On the facts, the Court found the user condition satisfied out of the Assessing Officer's own findings, supported by the khasra girdawari and by the department's own records of assessed agricultural income. It held the Revenue could not, having assessed that income, turn round and say it was not genuine without evidence (para 7). Finally it treated the Tribunal's conclusion as a finding of fact resting on cogent and relevant material supported by the revenue record (paras 7 and 8).
The exemption is available to the seller of "a capital asset being land". It does not restrict the benefit to the agricultural land only. However, the land against which the benefit is sought must have been used by the assessee or his parent for agricultural purposes in the two years immediately preceding the date of sale.
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Handle my notice → Ask a CA on WhatsAppNo. Section 54B gives relief on the transfer of 'a capital asset being land'; it does not confine the benefit to agricultural land as a category. The only question is whether the assessee or his parent actually used that land for agricultural purposes in the two years immediately preceding the sale, and where khasra girdawari, the Patwari's record and agricultural income declared in the returns of the two preceding years all show that use, the land's location and the buyer's intended use are irrelevant. This was decided by the High Court (N.K. Sud J (the retrieved header names only one judge although the operative paragraphs are in the first person plural)) and bears on section 54B of the Income Tax Act 1961. It is reported as Punjab and Haryana High Court; appeal against the order of the Income Tax Appellate Tribunal, Chandigarh Bench dated 7 September 2001. Reported at [2003] 133 Taxman 712 (Punj. & Har.), printed as an equivalent citation in the report retrieved. No case number appears in that text.. This reframes the argument most assessees lose. Assessing Officers habitually attack the character of the land — municipal limits, high price per acre, godowns on part of the holding, a purchaser who plainly intends to develop — and assessees habitually answer on that ground and lose it. The Court's point is that the department is arguing the wrong issue: those factors go to whether land is 'agricultural land' outside s.2(14), not to s.54B, which asks only about actual use in the two preceding years. It is also a clean statement of what evidence works: revenue records plus the department's own assessments of the assessee's agricultural income, which the Court held the department cannot disown after having assessed it. If it applies to you, the first step is this: Reframe the reply to the show-cause notice: the statutory question under s.54B(1) is user for agricultural purposes in the two preceding years, not the classification of the land.
For assessment year 1991-92 the assessee, an individual, sold 15 kanals 18 marlas out of her share in 23 kanals 17 marlas of land by three registered sale deeds for Rs 1,80,000, Rs 2,35,000 and Rs 2,64,000. She claimed s.54B, having invested in further agricultural land on 8 January 1991 (7 kanals 17 marlas, Rs 80,000), 19 February 1991 (1 kanal 2 marlas, Rs 11,000), 5 August 1991 (20 kanals 2 marlas for Rs 8,00,000 jointly with co-owners, her 161/402 share amounting to Rs 3,50,412) and an advance of Rs 2,00,000 on 23 September 1991. She produced registered deeds and khasra girdawari; the Assessing Officer also obtained khasra girdawari from the Patwari and had the site inspected. He rejected the claim on five grounds: the land lay within the municipal limits of Jagadhari adjoining a commercial area; the assessee had jointly bought a large holding in 1976 and built seven godowns on part of it in 1977-78; only poplar plantation stood on the land till 1988-89 and thereafter only fodder grass and vegetables in the kharif season with the land fallow in rabi, as a fill-gap arrangement; the purchaser had bought for non-agricultural purposes at a price no bona fide agricultural buyer would pay; and the agricultural income declared was only Rs 2,500 in each of the current and preceding years. The CIT(A) upheld him on 24 October 1994. The Tribunal allowed the assessee's appeal. The matter was decided on 2002-05-22 by the High Court (N.K. Sud J (the retrieved header names only one judge although the operative paragraphs are in the first person plural)). On those facts the High Court held as follows. The Revenue's appeal was dismissed in limine. Section 54B is not restricted to agricultural land: the exemption is available to the seller of 'a capital asset being land', and the operative condition is that the land was used by the assessee or her parent for agricultural purposes in the two years immediately preceding the date of sale. On the Assessing Officer's own findings that condition was satisfied — poplar plantation to 1988-89, fodder grass and vegetables in kharif, khasra girdawari showing agricultural operations up to the sale, and agricultural income declared and assessed in the two preceding years. Once that is so, the land's situation in a commercial area, its partial non-agricultural use and the purchasers' intended use are irrelevant. No substantial question of law arose.
The Court set out s.54B(1) and reduced it to two conditions, only the first of which was in dispute (para 6). It then made the decisive move of reading the words of the section literally: 'The exemption is available to the seller of "a capital asset being land". It does not restrict the benefit to the agricultural land only.' That disposed of the whole of the department's case on the character of the land and made it unnecessary to go into the authorities the Assessing Officer and CIT(A) had relied on. On the facts, the Court found the user condition satisfied out of the Assessing Officer's own findings, supported by the khasra girdawari and by the department's own records of assessed agricultural income. It held the Revenue could not, having assessed that income, turn round and say it was not genuine without evidence (para 7). Finally it treated the Tribunal's conclusion as a finding of fact resting on cogent and relevant material supported by the revenue record (paras 7 and 8). In the words reproduced by the source cited on this page: "The exemption is available to the seller of "a capital asset being land". It does not restrict the benefit to the agricultural land only. However, the land against which the benefit is sought must have been used by the assessee or his parent for agricultural purposes in the two years immediately preceding the date of sale."
It was decided by the High Court on 2002-05-22 and is reported as Punjab and Haryana High Court; appeal against the order of the Income Tax Appellate Tribunal, Chandigarh Bench dated 7 September 2001. Reported at [2003] 133 Taxman 712 (Punj. & Har.), printed as an equivalent citation in the report retrieved. No case number appears in that text.. Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 54B, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The Revenue's appeal was dismissed in limine. Section 54B is not restricted to agricultural land: the exemption is available to the seller of 'a capital asset being land', and the operative condition is that the land was used by the assessee or her parent for agricultural purposes in the two years immediately preceding the date of sale. On the Assessing Officer's own findings that condition was satisfied — poplar plantation to 1988-89, fodder grass and vegetables in kharif, khasra girdawari showing agricultural operations up to the sale, and agricultural income declared and assessed in the two preceding years. Once that is so, the land's situation in a commercial area, its partial non-agricultural use and the purchasers' intended use are irrelevant. No substantial question of law arose. It arises in Capital Gains, Capital Gains Exemptions and Evidence & Burden of Proof matters, on section 54B of the Income Tax Act 1961, and was decided by N.K. Sud J (the retrieved header names only one judge although the operative paragraphs are in the first person plural). Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Assemble the three items that worked here — khasra girdawari for the whole of the two preceding years, the Patwari's record (obtain it yourself; the Assessing Officer will obtain his own copy), and the agricultural income returned in the two preceding years. Where the department has accepted and assessed agricultural income in earlier years, say so expressly: para 7 holds that having assessed the income, the department cannot then contend it was not genuine without evidence. Meet the location and buyer's-intent points by refusing to engage them on their own terms — the Court held them 'totally irrelevant considerations for the purposes of application of section 54B'. Get the findings recorded as findings of fact at the Tribunal: the appeal here was dismissed in limine because no substantial question of law arose. Check the statutory text for the year in hand. The section as reproduced in this 2002 judgment reads 'was being used by the assessee or a parent of his'; the HUF was brought in only by the Finance Act 2012, from AY 2013-14.
Validity check could not be completed. Validity check could not be completed. I did not search for later treatment of this decision and did not check whether it has been followed, distinguished or doubted. Note that the section it construes is the pre-2012 text ('the assessee or a parent of his'); the Finance Act 2012 added the HUF with effect from AY 2013-14, which does not affect the reasoning but changes who may claim. Note also that the requirement of use for the whole of the two-year period was later stated more strictly by the same High Court in CIT v Dinesh Verma (2015), which is a separate entry in this batch; nothing in Savita Rani is inconsistent with it, but a reader relying on the fill-gap and fallow-season facts here should read para 12 of Dinesh Verma alongside. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The sale dates as recorded are internally inconsistent: three registered sale deeds are said to be dated 16-6-1990, 23-6-1992 and 26-6-1990, all in the financial year 1990-91 relevant to assessment year 1991-92 — the 1992 date cannot be right and is presumably 1990. The report as retrieved names only N.K. Sud J in the header while the operative paragraphs use 'we', so the coram may be incomplete in the source. No case number appears in the retrieved text, but the report does carry the equivalent citation [2003] 133 Taxman 712 (Punj. & Har.). A second, independent indiankanoon report of the same judgment exists at https://indiankanoon.org/doc/770511/ and would be a genuine corroborator if one is wanted. The judgment is headed 'ORDER' rather than 'JUDGMENT'. This document was fetched once; the transcription showed the ordinary marks of raw text but was not independently re-fetched. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The Revenue's appeal was dismissed in limine. Section 54B is not restricted to agricultural land: the exemption is available to the seller of 'a capital asset being land', and the operative condition is that the land was used by the assessee or her parent for agricultural purposes in the two years immediately preceding the date of sale. On the Assessing Officer's own findings that condition was satisfied — poplar plantation to 1988-89, fodder grass and vegetables in kharif, khasra girdawari showing agricultural operations up to the sale, and agricultural income declared and assessed in the two preceding years. Once that is so, the land's situation in a commercial area, its partial non-agricultural use and the purchasers' intended use are irrelevant. No substantial question of law arose.
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