COMMISSIONER OF INCOME TAX Vs. KAMLA S ASRANI MRS

JUDGEMENT

(1.) BOTH these IT applications seek to raise a common question as to whether the income derived by the assessees by way of capital gains from the sale of agricultural land can be considered as income from agriculture and, therefore, not taxable as capital gains. The assessee in IT Application No. 47 of 1990 owns certain lands within the municipal limits of Rajkot, State of Gujarat. She sold a part of the lands to a co operative housing society. In respect of the capital gains arising from the sale of these lands, the assessee claimed that the lands were agricultural lands and hence capital gains from the sale of these lands were not taxable under the IT Act, 1961. The capital gains arose in the asst. year 1980 81. The dispute between the assessee and the Department was ultimately taken before the Tribunal. The Tribunal, relying upon the decision of our High Court in the case of Manubhai A. Sheth vs. N. D. Nirgudkar, ITO (1981) 22 CTR (Bom) 41:(1981) 128 ITR 87 (Bom), held that the capital gains were not taxable under the IT Act as they constitute agricultural income. The Tribunal declined to refer the following question to us on the ground that the question is squarely covered by the decision of our High Court in 128 ITR 87 :

(2.) IN IT Application No. 48 of 1990, the assessee had agricultural lands at Malegaon. These lands were laid out as plots as per permission obtained from the Collector. The lands were acquired by the State and an award was made on January 30, 1981, granting to the assessee and others a total compensation of Rs. 4,04,869. The assessee's share in this compensation was 50per cent. The assessee claimed exemption from capital gains on the ground that this was agricultural income, relying upon the decision of our High Court in Manubhai A. Sheth vs. N. D. Nirgudkar, ITO (supra). The disputes between the assessee and the Department were carried to the Tribunal. The Tribunal upheld the claim of the assessee relying upon the above decision. The application of the Department to raise the following question and refer it to us has been rejected by the Tribunal on the ground that the issue is covered by the above decision:

(3.) SEC . 2(1A), which defines "agricultural income", has, however, now been amended by adding an Explanation to it by the Finance Act, 1989, with retrospective effect from April 1, 1970. Under this Explanation, it is provided as follows :