TMI Blog1977 (9) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... In Income-tax Reference No. 109 of 1969 (CIT v. All India Tea Trading Co. Ltd. [1978] 113 ITR 545 (Cal)] it has been held by this court that the compensation for the aforesaid requisition received by the assessee was agricultural income and was not includible in the computation of its total income. We are now concerned with the question as to whether Rs. 1,39,208.41, being the compensation paid to the assessee for the acquisition of those lands minus Rs. 4,749, being the cost of those lands, is assessable in the hands of the assessee as capital gains under s. 12B of the Indian Act, 1922, read with s. 2(4A) of that Act. The ITO assessed the aforesaid sum of Rs. 1,34,459 under the head " Capital gains ". The assessee appealed. The AAC found that the lands were agricultural lands and the income derived therefrom was agricultural income. He accordingly held that those lands were not capital assets and excluded Rs. 1,34,459 from the assessment. The department appealed. In view of the aforesaid facts found by the Tribunal, it agreed with the AAC and sustained the deletion. The Commissioner then raised the following question in his application under s. 66(1) of the Act : "Whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concluding that the compensation for acquisition was exempt from capital gains; and (vi) The Tribunal has said "what is material is whether the lands give rise to agricultural income" but the material factor is whether the assessee derived any agricultural income from those lands. Therefore, the Tribunal having proceeded on a wrong view of law, this matter, in any event, should go back to the Tribunal for its decision afresh on the basis of a finding as to whether the assessee had derived any agricultural income from those lands in the relevant previous year and also on the basis of the law to be laid down by this court. In support of his contention noted in point (v), Mr. Sengupta repeated the arguments made before us in the aforesaid Income-tax Reference No. 109 of 1969 [CIT v. All India Tea Trading Co. Ltd. [1978] 113 ITR 545 (Cal)] and also cited the cases which were cited in that reference. But in view of our judgment dated September 9, 1977, in the said reference, the contention of Mr. Sengupta must fail and it is unnecessary for us to discuss his arguments including the cases already discussed by us in that judgment. Mr. Pranab Pal, learned counsel for the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and built a house on a part of the said land. He did not use the remaining land for agricultural purposes nor derive any agricultural income from it. He sold the house with the remaining land at a profit. As the said land ceased to be an agricultural land, it was held by the Madras High Court that the profit arising from its sale was assessable to tax under the head " Capital gains ". This case however, does not apply to the instant case before us, for it was decided on different facts. In Wilfred Pereira Ltd. v. CIT [1964] 53 ITR 747 (Mad), the assessee was paid compensation for the acquisition of a fallow land which was purchased by the assessee. The compensation exceeded the price of the said land and it was held by the Madras High Court that the assessee was liable to pay capital gains, because the said land was not an agricultural land at the time of its acquisition. This case was also decided on different facts and, therefore, reliance on it was also misplaced by Mr. Sengupta. Mr. Sengupta, however, placed reliance on certain observations made in the earlier case of Mohamed Othuman Sahib [1957] 31 ITR 480 (Mad), in support of his contention that those lands were not agr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 145 (Ker) does not assist the revenue in this reference. In CIT v. Chhotanagpur General Trading Co. Ltd. [1971] 79 ITR 161 (Cal), the assessee was a lessee of certain agricultural lands and used them for agricultural purposes and derived agricultural income from them. Some portions of those lands were compulsorily acquired by the Government of Bihar. The assessee also transferred its leasehold interest in some other portions of those lands. It was held by this court that the surplus arising from those transactions was not taxable under the head " Capital gains ", because those lands were used for agricultural purposes and the income derived therefrom was agricultural income. In the aforesaid case, the assessee was in possession of those lands at the relevant time as a lessee. Those lands were also held by the assessee as such lessee at the relevant time. It is beyond dispute that where compensation is paid for acquisition of a non-agricultural leasehold land both to the lessor and lessee in accordance with their respective interests in such land, such compensation is assessable to capital gains in their respective lands, although the actual or physical possession remained with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of any agricultural income in one or more years from an agricultural land would not make it a non-agricultural land and that no wealth-tax was payable on those lands which were found to be agricultural lands although they were situated in the Madras City and were surrounded by factories and buildings. Having discussed all the cases cited at the Bar, we will now summarise our opinions in the following terms : (i) The words " held by an assessee " in s. 2(4A) of the 1922 Act include physical, actual, constructive and also symbolic possession of a property of any kind ; (ii) A land is an agricultural land if it is used for agricultural purposes and, briefly speaking, an income derived from such land by agriculture is an agricultural income ; (iii) Though ownership is a property any land from which the income derived is an agricultural income is not a capital asset ; (iv) If no agricultural income can be derived by an assessee from an agricultural land in the accounting year or for some time for any reason beyond his control, such land does not automatically cease to be an agricultural land ; (v) Where the assessee is the owner of an agricultural land and he uses it for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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