COMMISSIONER OF INCOME TAX Vs. NARAYANASWAMY T

JUDGEMENT

(1.) THE assessee was a member of a HUF till May 1974, when a partition took place between him and the other members of his family. In that partition, certain agricultural lands were allotted to the assessee. Subsequently, the lands were acquired by the Government in February 1975. With the compensation received, the assessee purchased two other pieces of agricultural lands on February 9, 1977, and claimed that a sum of Rs. 78,929 incurred for the purchase of the fresh agricultural lands should be set off against the capital gains arising out of the acquisition of the agricultural lands received by him on partition. THE ITO found that the assessee had satisfied the condition that fresh lands has been purchased within two years from the sale of the other lands. But he was of the view that the assessee is not entitled to claim set off of the sum of Rs. 78,929 from the capital gains as he has not held the lands for agricultural purposes for two years preceding the acquisition. Accordingly, he rejected the relief claimed by the assessee.

(2.) ON appeal by the assessee, the AAC held that the assessee is entitled to claim a set-off for the value of the fresh lands purchased from the capital gains arising out of the sale of the lands by way of acquisition on the ground that the assessee had satisfied both the conditions, namely : (1) that he has utilised the sale proceeds of the lands for purchasing fresh hands within a period of two years from the date of the acquisition; and (2) that he has held the lands for agricultural purposes two years prior to the acquisition. The AAC had, in fact, found on the material that before the acquisition, the assessee held the lands for agricultural purposes for a period of one year and before that he has possessed the lands for agricultural purposes as a coparcener of the family for more than a year and, therefore, the assessee was entitled to the relief claimed. The Revenue took the matter in appeal before the Tribunal and the only objection raised by the Revenue was that the lands having been held by his HUF prior to the partition, the assessee cannot be taken to to have possessed the lands for agricultural purposes during the period when the HUF was in possession. However, the Tribunal has agreed with the view of the AAC and held that the possession by the HUF of which the assessee was a coparcener should be taken to be also the possession by the coparcener and, therefore session by the HUF of the properties for agricultural purposes one year prior to the partition should be taken to be the possession by the assessee as a coparcener of the lands for agricultural purposes and, therefore, the conditions laid down in s. 54B of the I.T. Act, 1961, should be taken to have been fulfilled in this case. In that view, the Tribunal also rejected the appeal filed by the Revenue.