CHANDULAL LALLUBHAI Vs. COMMISSIONER OF INCOME TAX GUJARAT

JUDGEMENT

(1.) THE Tribunal, Ahmedabad Bench 'B', has referred a question of law for our opinion at the instance of the assessee. The assessee consists of the HUF of Chandulal Lallubhai. The relevant assessment year was 1969 -70, the accounting year being S. Y. 2024. The assessee moved the Tribunal to refer a question of law arising from the Tribunal's order in ITA No. 1141 (Ahd.) of 1972 -73, which was part of the consolidated order in ITA Nos. 1141 and 1478 (Ahd)/1972 -73, decided on 25th Jan., 1974. The assessee had sold 1,150 sq. yds. of land out of 7,744 sq. yds. in survey No. 71, 3,719 sq. yds. out of 7,926 sq. yds. in survey No. 72/2/2, and 1,331 sq. yds. out of 3,420 sq. yds. in survey No. 191. All these lands were situated in Vastrapur -Paldi area of Ahmedabad city and total consideration which the assessee received for sale of these lands to Saptkiran Co -opt. Housing Society, amounted to Rs. 2,17,000. The question that arises for our consideration in the present reference is whether capital gains in respect of the surplus realised by the assessee in the aforesaid sale for Rs. 2,17,000 is taxable as capital gains.

(2.) IN order to appreciate the nature of the controversy in the present proceedings, it is necessary to have a look at certain relevant facts leading to the present proceedings. During the accounting year, the assessee had sold the under mentioned lands situated in Vastrapur -Paldi area of Ahmedabad city for Rs. 2,17,000 to Saptkiran Co -operative Housing Society : The assessee's contention is that the lands sold by him during the accounting year, precisely on 1st Jan., 1969, were agricultural lands and as such the profits made on their sale were not liable to be taxed as capital gains. The sale document which is on the record of this case recites that on 1st Jan., 1968, the assessee had sold the lands in question to Saptkiran Co -op. Housing Society, Survey No. Area of the land owned by the assessee Area sold during the accounting year Sur. No. 71 7,744 sq. yds. 1,150 sq. yds. Sur. No. 72 /2/2 7,926 sq. yds. 3,719 sq. yds. Sur No. 191 3,420 sq. yds. 1,331 sq. yds. . 19,090 sq. yds. 6,200 sq. yds. referred to as the purchaser, and Kiran Corporation through its partners who were the confirming party. The document of sale further recites that originally the assessee had purchased survey Nos. 71 and 72/2/2 on 9th Jan., 1943, from their respective owners. It is an admitted fact on the record of this case, that at the -time when the two survey Nos. were purchased by the assessee, they were agricultural lands. It appears that, subsequently, survey No. 71 situated at Vastrapur in the Ahmedabad city taluka was sought to be acquired by the State of Gujarat, for the purpose of the Gujarat Housing Board. Land acquisition proceedings were initiated in 1959. They were challenged by the assessee by filing Civil Suit No. 1444 of 1959 in the civil Court of Ahmedabad. In the said suit, the assessee had sought for a declaration that the acquisition notifications were invalid. In the aforesaid suit, compromise was reached between the plaintiff -assessee and the State Govt. on 5th July, 1963, and on that basis, the suit was withdrawn on 12th July, 1963. After the withdrawal of the aforesaid suit, the Additional Land Acquisition Officer declared his award on 29th Nov., 1963, for acquiring survey No. 71 under the Land Acquisition Act. In pursuance of the said award, actual possession of the land bearing survey No. 71 came to be handed over by the owners on 6th Aug., 1963, to the Gujarat Housing Board at the instance of the Gujarat Government. It is the case of the assessee that out of the acquired survey No. 71, a portion of land admeasuring 1,150 sq. yds. continued to be in the possession of the assessee as result of the compromise between the parties. So far as survey No. 72/2/2 situated adjoining to the aforesaid survey No: 71 of Vastrapur was concerned, that land continued to remain with the assessee 'all throughout from the date on which it was purchased by the assessee in 1943.

(3.) THE document of sale further reveals that land bearing survey No. 191 situated at Paldi -sim, Ahmedabad city taluka and which did not belong to the assessee was also sought to be acquired for the purpose of the Gujarat Housing Board by the State Govt. and so far as the said survey No. 191 was concerned, the award was declared by the Additional Land Acquisition Officer on 13th Aug., 1960, and in pursuance of the said award, the land bearing survey No. 191 was acquired and possession of the said land was given to the Housing Board by the owner thereof. Actual possession of the land bearing survey No. 191 has been handed over by its owner on 14th July, 1959, to the Government even prior to the award dt. 13th Aug., 1960. Thus, the Govt. of Gujarat had acquired survey No. 71 of village Vastrapur which belonged to the assessee and survey No. 191 of village Paldi for the purpose of the Gujarat Housing Board. It is pertinent to note that survey Nos. 71 and 72/2/2 both of village Vastrapur and survey No. 191 of the sim of village Paldi were situated adjoining one another.