Commissioner of Income Tax vs Hatinder Kumar

Jawahar Lal Gupta, J.—Are the profits and gains made by the assessee on account of sale of agricultural land exigible to the levy of income tax under the heading ''Capital gains'' ? The Assessing Officer had disallowed the claim for exemption of the price of land made by the assessee. The order was affirmed by the Commissioner (Appeals), Chandigarh. However, the Tribunal relying upon the decision of their Lordships 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, held that the income was not exigible to the levy of income tax. Aggrieved by the order, the revenue filed a petition u/s 256(1) of the income tax Act, 1961. The Tribunal has referred the following question for the opinion of this Court:

Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the capital gains arising from the sale of land actually put to agricultural use wherever located are not liable to tax ?

Mr. R.P. Sawhney, the learned counsel for the revenue, contends that in view of the decision of this Court in Tuhi Ram Vs. Land Acquisition Collector and Another, and that of their Lordships of the Supreme Court in Union of India and Others Vs. S. Muthyam Reddy, , the view taken by the Tribunal cannot be sustained.

Income derived from sale of agricultural land is not ''agricultural income''. Thus, it would be exigible to the levy of tax under the head ''Capital gains''. Respectfully following the views taken in the aforesaid two cases, we answer the question in favour of the revenue and against the assessee. Since no one has put in appearance on behalf of the assessee, we make no order as to costs.