Law:

Section:

Section 54B of the Income-tax Act, 1961 – Capital gains – Transfer of land used for agricultural purposes – Assessment year 1967-68 – Assessee purchased agricultural lands and gave part of land on lease for extracting Gypsum Stones – Subsequently, a part of said land was sold – ITO held that difference in sale price and cost price of land was liable to be taxed as capital gain on ground that due to leasing of lands for purpose of extracting gypsum, lands had lost characters of agricultural lands – Certificate issued by Tahsildar showed that lands were arable lands and fit for cultivation even after mining operations were overs and that purchasers was using same for agricultural purposes – Whether once land was proved to be agricultural land, unless contrary evidence was available, it would have to be presumed that land continued to be agricultural land and did not change its character - Held, yes (Matter remanded back for fresh consideration) FACTS The assessee company purchased difference lots of agricultural lands and since the date of purchase the lands were being used for agricultural purposes. In 1959, the assessee-company gave part of land on lease for extracting gypsum stones. During the assessment year 1967-68, the assessee sold part of the land. The ITO sought to tax the difference in the sale price and the cost price as capital gain. The assessee contended that the lands were agricultural lands ; that they were purchased as agricultural lands and they have been cultivating them and earning income ; that even the mining of gypsum was only for the purpose of making the lands fit for better cultivation as gypsum would be on the surface only and that they also sold the lands as agricultural lands. The purchaser also gave an affidavit to the effect that they purchased the lands for the purpose of agriculture and they were doing agriculture after the purchase. The Deputy Tahsildar's certificate showed that the lands were arable lands and fit for cultivation even after mining operations were over and that the purchaser was using the same for the purpose of agriculture. The ITO held that though originally the lands were agricultural lands and were purchased…

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