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2007] 292 ITR 481 [2008] 169 TAXMAN 255 (MAD.) HIGH COURT OF MADRAS M.S. Srinivasa Naicker v. Income-tax Officer P.D. DINAKARAN AND MRS. CHITRA VENKATARAMAN, JJ. TAX CASE (APPEAL) NOS. 139 TO 141 OF 2003 JANUARY 29, 2007 Section 2(14) , read with section 45, of the Income-tax Act, 1961 - Capital gains - Capital asset - Assessment year 1993-94 - Whether chargeability to tax under section 45 arises only if on date of sale, land in question retains its character as a capital asset which means that an asset, which does not answer definition of a capital asset and which is an agricultural land falling within definition of section 2(14), would automatically be outside scope of section 45 - Held, yes - Whether where, admittedly, land in question was under agricultural operations till date of sale, it would not shed its character as agricultural land merely because purchaser intended to use same for non-agricultural purposes and profit on sale of such land could not be assessed as capital gain treating said land as non-agricultural land - Held, yes FACTS The assessee sold certain land and claimed that said land being agricultural land, the profit on sale thereof could not be subjected to any liability under the provisions of capital gains. The Assessing Officer though noted the facts in favour of the assessee that the land was registered as agricultural land and the land revenue was paid; and that there was, in fact, cultivation till the date of sale, yet, held that the assessee was liable to pay tax on the gains on the sale of land as the purchaser had purchased the same for non-agricultural purposes and, thus, the land had lost its agricultural character. On appeal, the Commissioner (Appeals) sustained the order of the Assessing Officer. On further appeal, referring to the provisions contained in section 2(14)(ii), the Tribunal confirmed the order of the lower authorities holding that the land in question was not agricultural land. On appeal : HELD It was an admitted fact that till the assessee sold the land, agricultural operations, in fact, were carried out by the assessee. The assessing authority, in its order, stated that the land was actually under cultivation…

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