Law:

Section:

Section 54B of the Income-tax Act, 1961 - Capital gains - Transfer of land used for agricultural purposes - Assessment year 1978-79 - Assessee's agricultural land was acquired by State Government under Land Acquisition Act by notification dated 6-6-1977 - Possession of land was taken over on 26-6-1977, but assessee received compensation on 12-7-1977 - Assessee purchased another agricultural land on 15-6-1979, i.e., within two years of receipt of compensation and claimed that in view of section 54B, he was not liable to pay capital gains - However, Assessing Officer did not accept that claim on ground that land was purchased by assessee beyond period of two years of date of acquisition - Whether period of two years, for purpose of exemption under section 54B, would commence from date of receipt of compensation and not from date of acquisition of agricultural land - Held, yes - Whether therefore, assessee having invested compensation within two years from date of receipt of same he was entitled to get benefit of section 54B - Held, yes FACTS The assessee's agricultural land was acquired by the State Government under the Land Acquisition Act by notification dated 6-6-1977. Its possession was taken over on 26-6-1977, but the assessee received the compensation on 12-7-1977. The assessee purchased another agricultural land from the compensation received on 15-6-1979, i.e., within two years of receipt of compensation and claimed that in view of section 54B, he was not liable to pay capital gains. However, same was not accepted by the Assessing Officer who took the view that the land was purchased by the assessee out of the compensation amount beyond the period of two years of date of acquisition. On appeal, the Commissioner (Appeals) held that even when the possession was taken over on 26-6-1977, there was no liability to pay capital gains in view of section 54B(2) as initial amount of compensation was received on 12-7-1977 and capital gains could arise only on that date and not earlier to it. He further held that the tube-wells, trees, etc., were parts of the agricultural land purchased by the assessee. The Tribunal upheld the order of the Commissioner (Appeals). On…

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