COMMISSIONER OF INCOME TAX Vs. FAGOOMAL LAKSHMICHAND

JUDGEMENT

(1.) On a requisition by the High Court under S.256 (2) of the Income Tax Act, 1961, the Income Tax Appellate Tribunal, Cochin Bench, referred to us the following question:

(2.) The assessee is a registered firm. The assessment year is 1965-66, the accounting year being the year ended on 31-5-1964. The assessee purchased 2 acres 15 cents of land on 14-7-1961 in Ward No. 1, Block 5 of the Calicut Corporation. As the property had no approach to any road, a narrow piece of land for providing a passage was subsequently purchased by the assessee. The total amount including the incidental charges expended by the assessee for the purchase of the land was Rs. 14,607/-.

(3.) The assessee's land was subsequently acquired under the Land Acquisition Act by award dated 23-3-1964. The total sum received by the assessee by way of compensation under the Act was Rs. 69,952.03. The Income Tax Officer in completing the assessment for the relevant year held that the assessee had gained a sum of Rs. 57,461/- which was chargeable to income tax under the head 'Capital gains'. This sum was determined by deducting from the total amount awarded, a sum of Rs. 12,485/-, which, according to the Officer, represented the proportionate cost of purchase of the land in 1961 after allowance was made for the cost of passage. On appeal, the order of the Income Tax Officer was confirmed by the Appellate Assistant Commissioner. However, on further appeal by the assessee, the Tribunal held that the land in question was agricultural property and that the surplus amount received by the assessee upon acquisition of the property was not liable to be taxed as capital gains. Hence the present reference.