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Section 2(14)(iii) of the Income-tax Act, 1961 - Capital asset - Agricultural land - Whether section 2(14)(iii) is applicable to State of Karnataka also and its validity has to be upheld - Held, yes FACTS The assessees, as owners of different pieces of lands situated in Karnataka, received different amounts as compensation on their acquisition by the Government. Before the ITO, they claimed that the compensation received by them was from agricultural lands or lands used for agricultural purposes and was, therefore, not chargeable to capital gains tax. The ITO rejected their contention. On appeal, the AAC, however, accepted the assessee's claim holding that section 2(14)(iii) which subjected agricultural lands referred to therein to capital gains tax, was inoperative in the State of Karnataka. While doing so the AAC relied on a decision of the Bombay High Court in Manubhai A. Sheth v. N.D. Nirgudkar, Second ITO [1981] 128 ITR 87. On the revenue's appeal, the Tribunal also upheld the AAC's order. On reference: HELD In Writ Petition No. 4309 of 1981 the Karnataka High Court dissented from the view expressed inManubhai A. Sheth's case (supra) by the Bombay High Court and upheld the validity of section2(14)(iii). If section 2(14)(iii) was valid, the assessments made by the ITO in the present case were valid in all respects. Accordingly, the Tribunal was not justified in taking the contrary view. CASE REVIEW B.S. Jayachandra v. ITO [1986] 161 ITR 190 (Kar.) followed and relied upon. Manubai A. Sheth v. N.D. Nirgudkar [1981] 128 ITR 187 (Bom.) dissented. CASES REFERRED TO Manubhai A. Sheth v. N.D. Nirgudkar, Second ITO [1981] 128 ITR 187 (Bom.) and Patil Vijaykumar v. Union of India [1985] 151 ITR 48 (Kar.). K. Srinivasan and H. Raghavendra Rao for the Applicant. K.B. Basavarajan for the Respondent. ORDER Puttaswamy, J.-In these references made under section 256 of the Income-tax Act, 1961 ('the Act'), the Tribunal, at the instance of the revenue has referred the following common question of law for the opinion of this Court but in respect of different assessees: "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in…

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