COMMISSIONER OF Income Tax vs BALDEV INDER SINGH (DECD.)

N. K. Agrawal J.

The following question has been referred, for opinion, by the Income Tax Appellate Tribunal (for short "the Tribunal"), at the instance of the department u/s 256(1) of the Income Tax Act, 1961 (for short "the Act")

Assessment year 1980-81

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in approving the order of the Commissioner (Appeals) holding that the income, arising from the compensation received by the assessee in respect of agricultural lands situated in Gumtala urban and sub-urban areas acquired by the State Government, was not taxable to Income Tax under the head ''Capital gains'' ?"

The assessee derived income by way of capital gain following the transfer of agricultural land by him. The assessing officer took the view that the capital gain was chargeable to tax. The Tribunal, however, can celled the levy of tax on the ground that income, arising out of the sale of agricultural land, was exempt from tax.

A similar controversy was examined by this court in Tuhi Ram Vs. Land Acquisition Collector and Another, , wherein it was held that, in the light of the amendment of sub-clause (iii) of clause (14) of section 2 of the Act by the Finance Act, 1970, and after the insertion of the Explanation below clause (1A) of that section by the Finance Act, 1989, with retrospective effect from 1-4-1970, agricultural land, situated within the limits of any municipality having a specified population or situated within a specified distance not exceeding eight kilometres from the local limits of such municipality, shall be covered by the amended definition of "capital asset". Any income by way of capital gains, arising on the transfer of such agricultural land, shall be subjected to tax.

For the reasons recorded in Tuhi Ram Vs. Land Acquisition Collector and Another, , this reference is disposed of with answer to the question in the negative, i.e., in favour of the department and against the assessee.