The central legal point established in the judgment is the requirement that the land must have been used for agricultural purposes in the two years immediately preceding the date of sale to claim the benefit of Section 54B of the Income Tax Act, 1961.

N.K.Sud, J.

1. The revenue has filed this appeal against the order of the Income Tax Appellate Tribunal, Chandigarh Bench, Chandigarh (hereinafter referred to as the Tribunal) dated 7-9-2001 accepting the claim of the assessee under section 54B of the Income Tax Act, 1961 (hereinafter referred to as the Act).

2. The assessee, an individual, sold 15 kanals 18 marlas of land out of her share in 23 kanals 17 marlas land during the financial year 1990-91, relevant to the assessment year 1991-92. The sale was effected vide three registered sale deeds dated 16-6-1990, 23-6-1992 and 26-6-1990, for Rs. 1,80,000, Rs. 2,35,000 and Rs. 2,64,000, respectively. While filing her return of income, she claimed exemption from levy of capital gains under section 54B of the Act on the ground that the land sold by her was agricultural land and the sale proceeds were invested in the purchase of agricultural land within two years as under :

On 8-1-19917 K. 17 M. vide Registration Deed No. 1001 for Rs, 80,000 + Registration expenses; On 19-2-19911 K. 2 M. vide Registration Deed No. 1209 for Rs. 11,000 + Registration expenses; On 5-8-199120 K. 2 M. vide Registration Deed No. 4500 for Rs. 8,00,000 jointly with other co-owners, out of which the assessee had 161/402 share, which amounted to Rs. 3,50,412 plus Registration expenses; On 23-9-1991An advance of Rs. 2,00,000 to Sh. Sam Sunder etc. for purchase of agricultural land.

In support of her claim, she produced registered deed, khasra girdawari, etc. The assessing officer also obtained khasra girdawari; from the Patwari and got the site inspected. The assessing officer rejected the claim of the assessee holding that the land sold by the assessee was not agricultural land. He based his decision on the following factors :

(i) the land was situated within the municipal limits of Jagadhari adjoining a commercial area;

(ii) the assessee had jointly purchased a huge chunk of land in 1976 and had constructed seven godowns in the year 1977-78 on a part thereof;

(iii) only Poplar plantation stood on the land till 1988-89. Further only fodder grass and vegetables were grown in the Kharif season while the land remained fallow in the Rabi season. This also had been done as a fill-gap arrangement to ensure that the land did not remain unutilised or idle awaiting user or sale for non-agricultural purposes;

(iv) the purchaser had purchased this land for non-agricultural purposes. No bona fide purchaser of agricultural land would have paid such a high price for agricultural purposes; and

(v) the agricultural income declared by the assessee for the current year as well as for the preceding assessment year was merely Rs. 2,500 each. The assessing officer, therefore, concluded that the land in question not being agricultural land, exemption under section 54B of the Act was not available to the assessee.

3. On appeal, the findings of the assessing officer were upheld by the Commissioner (Appeals) vide order dated 24-10-1994.

4. On further appeal, the Tribunal accepted the claim of the assessee by holding that the transaction in question duly fulfilled the conditions specified for relief under section 54B of the Act.

5. Mr. R.P. Sawhney, learned counsel for the revenue, contends that the findings recorded by the assessing officer about the location of the land and its partial user for non-agricultural purposes in 1977-78 clearly shows that the land in question was not agricultural land. He further submits that no one could possibly use the land located in a commercial area for agricultural purposes. Even the vendees to whom the land had been sold by the assessee had put it to non-agricultural user.

6. After hearing the learned counsel for the revenue and perusing the order of the authorities below, we find no merit in this appeal. The sole question for determination is whether the assessee is entitled to relief under section 54B of the Act or not. Sub-section (1) of section 54B of the Act, which is relevant for ou