COMMISSIONER OF INCOME TAX Vs. JAYALAKSHMI RAJENDRAN

JUDGEMENT

(1.) REFERENCE has been made on the following questions at the instance of the Revenue :

(2.) THE assessee had entered into an agreement of sales dated July 29, 1971, on four-rupee stamp paper, agreeing to sell 3.68 acres of agricultural lands in Krishnanarayanapuram in favour of one Shri M.H.M. Yacob. Accordingly, the assessee executed a sale deed covering an extent of 34 cents and 38 square feet for a consideration of Rs. 67,650 to the nominees of Shri Yacob. On the strength of the above said sale, capital gains were computed at Rs. 32,500. It appears that the assessee had purchased agricultural lands for a sum of Rs. 1,87,600 by means of a registered sale deed dated September 2, 1971. During the course of the assessment proceedings, it was contended on behalf of the assessee that under s. 54B(ii) of the I.T. Act, the assessee is entitled to claim exemption with respect to the amount for which she has purchased agricultural lands. THE assessing officer did not accept the said contention and levied tax on the capital gains as calculated by him. THE appeal preferred by the assessee to the Assistant Commissioner met with success and, hence, the Revenue took up the matter, on appeal, to the Tribunal. THE Tribunal in its order dated March 31, 1977, accepted the contention of the assessee taking the view that even though the purchase of the agricultural lands by the assessee on September 2, 1971, was long prior to the sales effected by the assessee, the agreement of sale amounted to transfer of interest, in the sense that it amounted to a restriction on the right of the assessee to dispose of her lands in view of the agreement of sale. On the said view, the Tribunal upheld the claim of the assessee to exemption under s. 54B(ii) of the I.T. Act. Hence, the Revenue has sought the reference.

(3.) THE words "in the two years immediately preceding the date on which the transfer took place, was being used by the assessee or a parent of his for agricultural purposes, and the assessee has, within a period of two years after that date, purchased any other land for being used for agricultural purposes", clearly implies the transfer of agricultural land before the purchase of some other agricultural land by way of substitution and the above words do not at all contemplate a restriction of the right to alienate agricultural land by the assessee as a transfer. What is intended is outright sale of agricultural land for the purpose of claiming exemption under s. 54B.