Law:

Section:

Section 45, read with section 256, of the Income-tax Act, 1961 - Capital gains - Chargeable as - Assessment years 1975-76 to 1977-78 - Whether once sale value of trees in question was treated and assessed as agricultural income under provisions of Agricultural Income-tax Act, same could not be treated as capital receipts and charged as capital gains - Held, yes FACTS The assessee-company was carrying on business in the manufacture and sale of tea. Its assessments for the assessment years in question were completed. Subsequently, the ITO had information that the assessee had failed to include receipts from the sale of albezia trees sold during the assessment years in question. He was of the view that albezia trees were shade trees and hence receipts arising on their sale was liable to be taxed as capital gains. He, therefore, reopened the assessment invoking section 147 and brought to tax the receipts from the sale of albezia trees as capital gains. On second appeal before the Tribunal, it was contended by the assessee on the basis of the finding rendered by the Agricultural ITAT in the assessee's own case that the sale proceeds from the albezia trees represented agricultural income and hence could not be taxed under the head 'Capital gains'. The Tribunal allowed the appeals of the assessee and deleted the capital gains assessed to tax by the ITO. The reference application filed by the revenue was also rejected. On application under section 256(2): HELD Once the sale value of the trees was treated and assessed as agricultural income under the provisions of the Agricultural Income-tax Act, the same could not be treated as capital receipts and charged as capital gains. In view of the decision of same High Court in Balamore Estates (P.) Ltd. v.State of Tamil Nadu [1987] 163 ITR 195, it was not possible to direct the Tribunal to refer the said question as the view taken by the Tribunal in the instant case was in accord with the view taken by the High Court in the above decision. The petition, was therefore, dismissed. Note: The case was decided in favour of the assessee. CASE REVIEW Balamore Estates (P.) Ltd. v. State of Tamil Nadu [1987] 163 ITR 195 (Mad.) followed…

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