Exemption u/s 54B can be claimed for long term & short term assets; land purchased has to be in the name of assesse

Brief of the case:

Punjab & Haryana High court held in CIT vs Shri Dinesh Verma that exemption u/s 54B could be claimed for short term & Long term assets because there was no such provision u/s 54B which denies exemption for short term assets. So land sold within the two years could be claimed as exemption though short term gain. Further the new land purchased for the use of agriculture purpose had to be in the name of assesse because as per provision of sec 54B new asset had to be purchased by the assesse who had sold the same. So asset purchased under any other name was not allowed.

Moreover the land should be used for agriculture purpose for last 2 years before it was being sold by the assesse. Law nowhere mentions that land should be continuously used for 2 years.

Facts of the case:

The assesse had sold land used for agriculture purpose for Rs 46,00,000/- after using for 2 years and purchased another land for agriculture purpose for Rs 44,76,000/ in his name and for rest amount in his wife name within the next 2 years as required and claimed exemption u/s54B for whole amount. The AO denied the exemption on the basis that exemption was not available for short term assets. Moreover AO was of the view the exemption was only available to the assesse if he had purchased land in his own name only.

Contention of the assessee:

Assessee was of the view that there was no such provision under sec 54B which denies deduction for short term capital asset. It would be available for both types of capital gains. Moreover assessee was of the view that assesse had utilized full amount if sales proceeds for purchasing the above though some part had been taken in the name of his wife. The main intention of the law was to spend the whole sale proceeds irrespective of the fact that the land had been purchased in whose name.

Contention of the revenue:

Revenue was of the view that the exemption u/s 54B was available only for long term asset not short term asset so above exemption u/s 54B to assessee was not available because the asset of the assesse was short term asset. Moreover revenue was of the view that land should be continuously used for agricultural purposes for 2 years without any break.

Further revenue was of the view that the new land to be used for agricultural purpose should be purchased in the name of assesse only.

Held by High Court:

High Court held that there was nowhere mentioned in the sec 54B that exemption to be available for long term capital asset not for short capital asset. It was just written “Capital Asset”, So it could be any asset. So exemption would be available to the assesse. Further it held that it was not mentioned that the land should be used continuously for 2 years fully without any break, So the land should be used for any point of time during the period of 2 years. The contention of the revenue regarding this was not tenable.

Further the new land purchased for claiming exemption u/s 54B should in the name of the assesse who had sold it, it could not be in any other name. So as the assesse had taken part land in his wife name so exemption would be available only for that part only which had been purchased in his own name .