Commissioner of Income Tax vs A.S. Iqbal (legal heir of late A.B. Syed Mohammed)

K.S. Paripoornan, J.—At the instance of the Revenue, the Income Tax Appellate Tribunal has referred the following question of law for the decision of this court :

"Whether, on the facts and in the circumstances of the case, was the Tribunal right in law in holding that no tax on capital gains was leviable on the sale of the land in question ?"

The respondents are assessees to Income Tax. We are concerned with the assessment year 1974-75. The Income Tax Appellate Tribunal upheld the plea of the assessees that no capital gains tax is leviable on the sale of agricultural land. Thereafter, at the instance of the Revenue, the question of law formulated hereinabove, has been referred for the decision of this court.

We heard counsel. The Appellate Tribunal relied on the decision of the Bombay High Court in Manubhai A. Sheth and others Vs. N.D. Nirgudkar, 2nd Income Tax Officer, A-II Ward, Bombay and another, , to hold that the assessee is not liable to capital gains tax on the sale of the agricultural land. A Bench of this court in the decision reported in CIT v. T. K. Sarala Devi [1987] 167 ITR 136 dissented from the Bombay High Court view and held that capital gains tax on the sale of agricultural land is exigible.

In the tight of the above Bench decision of this court, we are of the view that the decision of the Appellate Tribunal is erroneous in law. We, therefore, answer the question referred to us in the negative, in favour of the Revenue and against the assessee.

A copy of this judgment under the seal of this court and the signature of the Registrar shall be forwarded to the Income Tax Appellate Tribunal, Cochin Bench.