1. Statutory Provisions

Section 54B of the Income-tax Act, 1961 provides relief to individual or HUF taxpayers from capital gains arising on the transfer of agricultural land used for agricultural purposes.

Key Conditions:
Eligible Assessee: Individual or HUF.

Asset Sold: Agricultural land (short-term or long-term).

Usage: The land must have been used for agricultural purposes by the assessee or parent for at least 2 years immediately preceding the date of transfer.

Reinvestment: Capital gains must be reinvested in another agricultural land within:

2 years from the date of transfer.

Amount of Exemption: To the extent of amount invested in new agricultural land.

Holding Period of New Land: No explicit holding period, but if sold within 3 years, exemption is withdrawn.

2. Procedural Requirement:

As per post-Finance Act, 2019 amendments, the exemption is contingent on filing return within due date under Section 139(1).

For Assessment Years prior to AY 2020–21, judicial interpretation varies.

3. Judicial Precedents Supporting Assessee

A. Claim Without Return Filed or Late Return
1. Sri Thimme Gowda Shekar v. ITO (ITAT Bangalore, AY 2006–07)
Held: Exemption under Section 54B can be claimed even without return filing, provided conditions are met.

Rationale: For AYs before Finance Act 2019, no statutory bar existed against late claim.

2. ABCAUS 3077 (ITAT case)
Exemption granted even when no claim was made in original or revised return.

Held that the AO must allow legitimate claims during assessment, even if not declared earlier.

B. ITAT Indore Bench – Favourable Trends
1. Siddhulal Patidar v. ITO (ITA 110/Ind/2023)
Facts: Investment made before sale deed execution, land purchased in son’s name.

Held: Still qualifies for Section 54B exemption, as intent and use were proven.

2. Rajendra Singh Yadav v. ITO (ITA 152/Ind/2024)
Facts: Joint sale of agricultural land and reinvestment into agricultural land.

Held: Exemption upheld – Tribunal emphasized substance over form.

3. Badrilal Mukati v. PCIT (ITA 870–874/Ind/2019)
Held: Exemption under Section 54B allowed post reassessment on merits.

4. Conclusion & Practical Perspective

Before AY 2020–21: Courts and Tribunals, including ITAT Indore, have adopted a liberal approach toward procedural lapses such as late filing or technical errors.

Substantive Compliance: If the land was used for agriculture and the capital gain was reinvested as per law, exemption is often allowed.

Post AY 2020–21: More stringent approach due to amendment making return filing under Section 139(1) mandatory.