Law: Income Tax Act, 1961

Section: 2(1),2(14),10,28,45

Income-tax-----Agricultural income---Business---Capital gains---Single transaction of purchase of agricultural land in October 1966, and sale, in January, 1967--¬Profits constituted agricultural income---Not assessable capital gains---No proof by Revenue that land formed part of business assets of assessee---Profits not assessable as business income---Indian Income Tax Act, 1961, Ss.2(1), 2(14), 28, 45 (Prior to amendment with effect from April 1, 1970). The assessee, an association of persons, purchased a plot of agricultural land in October 1966 and sold it in January, 1967. The assessee claimed exemption in respect of the profit arising out of this deal on the ground that the subject-matter of the transaction being agricultural land, the profits therefrom were not assessable. The Income Tax Officer held that the transaction constituted an adventure in the nature of trade and the income therefrom amounting to Rs.37,700 was taxable as profits and gains of business. The Tribunal accepted the assessees contention. On a reference: Held, that the income derived by the assessee from the sale of agricultural land was agricultural income. Manubhai A. Sheth v. N.D. Nirgudkar (1981) 128 ITR 87 (Bom.) fol. Income from the transfer of agricultural land effected before the 1st day of March, 1970, could not be subjected to- tax as capital gains. The onus of proving that the land formed part of the business assets of the assessee was on the Department and in the absence of evidence to that effect the presumption was that the land was held as capital asset by the assessee and the income from transfer thereof was not income from business. JUDGMENT DR. B.P. SARAF, J.---At the instance of the Commissioner of Income Tax, the following two questions have been referred to us by the Income Tax Appellate, Tribunal, Nagpur Bench, Nagpur for our opinion: "(1) Whether the Income Tax Appellate Tribunal is correct in holding that income arising out of purchase .and sale of agricultural lands which constitutes a business of the assessee, is also income from agriculture and as such is not taxable at all? (2) Whether, on the facts and in the circumstances of the case, the decision of the…

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