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Issues Involved:
The issue involved in this case is whether the land in question is considered a capital asset under the Income-tax Act, 1961. Summary: In the assessment year 1974-75, the Income-tax Officer added a sum as capital gains due to the acquisition of the assessee's property under the Kerala Land Acquisition Act, 1961. The assessee contended that the property, used for agricultural purposes, had been notified under section 3 of the Kerala Land Acquisition Act in 1964, when such property was not considered a capital asset under the Income-tax Act. The Appellate Assistant Commissioner rejected this contention, leading to further appeal by the assessee. The Tribunal rejected the argument that the land acquired was not a capital asset, emphasizing that the land was acquired in the relevant accounting year when the award was made. The Tribunal referred to a Bombay High Court decision stating that capital gains from the sale of agricultural land are considered agricultural income and not chargeable under the Act. The Tribunal's reasoning was based on the assumption that proceeds from the sale of land constitute income derived from land. However, legal precedent establishes that profits or gains from the sale of land are considered income, not income derived from the land itself. The sale of land results in capital gain, which is chargeable under the Act. The court disagreed with the Bombay High Court's reasoning and cited previous decisions to support the conclusion that sale proceeds are capital receipts, not revenue receipts. Therefore, the sale proceeds in this case were considered capital receipts and not revenue receipts, leading to the judgment in favor of the Revenue and against the assessee. The court directed the parties to bear their respective costs in the tax referred case and ordered the forwarding of a copy of the judgment to the Income-tax Appellate Tribunal, Cochin Bench.
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