Arun Agarwal Vs ITO (ITAT Jodhpur)
Income Tax Appellate Tribunal (ITAT) Jodhpur ruled in favor of the appellant, Arun Agarwal, allowing the capital gains exemption under Section 54B of the Income Tax Act, 1961. The case revolved around the sale of agricultural land, where the assessee claimed exemption by investing in new agricultural land and depositing funds in the Capital Gains Account Scheme. The Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) [CIT(A)] had earlier disallowed the exemption, contending that only a small portion of the land was used for agriculture. However, ITAT overturned this decision, recognizing that partial agricultural use is sufficient to claim exemption under Section 54B.
The dispute primarily concerned whether the land sold by Arun Agarwal qualified as agricultural land under Section 54B. The assessee provided evidence, including reports from local revenue officials (halka Patwari and Tehsildar), showing that a portion of the land was used for growing Guar crops. Despite the AO’s claim that fruit plantation was not substantiated and only a small area was cultivated, ITAT noted that continuous and complete agricultural use is not a statutory requirement. The tribunal relied on the precedent set by the Punjab and Haryana High Court in CIT vs. Dinesh Verma (2015) 60 taxmann.com 461, which held that partial agricultural use of land in the preceding two years is sufficient to claim exemption under Section 54B.
