Law:

Section:

Section 2(14)(iii) of the Income-tax Act, 1961 - Capital asset - Agricultural land - Assessee's land, used for sowing seeds to control quality, sold for Rs. 1,62,000 - ITO negatived assessee's claim for immunity from capital gains tax as impugned land was agricultural land - Whether impugned land was agricultural land outside the scope of capital asset under section 2(14) and excess realisation was not chargeable to capital gains - Held, on facts, yes Facts The assessee was a sterling company incorporated in United Kingdom and had branches in India. Its business was of growing vegetables and flower seeds and selling the same. A plot of land owned by it was utilised as a trial ground where samples of seeds purchased by it for resale were sown to maintain a record of the resultant crop with a view to keep control over the quality of seeds. In the assessment year 1963-64, this plot of land was sold to G for Rs. 1,62,000. In its original return, the assessee showed a capital gain of Rs. 98,405 in respect of the said sale of the plot of land. Subsequently, it claimed that the said sale did not yield any taxable capital gains as the impugned land did not constitute any capital asset within the meaning of the definition of "capital asset" in section 2(14) . The ITO, however, assessed the capital gains at Rs. 98,405. On appeal, the AAC held the plot of land to be agricultural land outside the purview of the definition of "capital asset". He, however, held that a portion of the gains was attributable to such assets as office room, store room, servants quarters, tubewells and boundary walls, etc., and, accordingly, estimated the capital gains at Rs. 10,000. On further appeal by the revenue, the Tribunal confirmed that the impugned land was agricultural land and not a "capital asset", holding that the nature and not the purpose of the operations carried out was the determining factor. On reference : Held Agriculture in its primary sense meant the cultivation of the field and was restricted to the cultivation of the land in the strict sense of the term, meaning thereby tilling of the land, sowing of the seeds, planting and similar other operations on the land. These were…

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