WILFRED PEREIRA LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS is a reference under section 66(1) of the Indian Income-tax Act. The following question stands referred to us :

(2.) THE assessee is a limited company incorporated under the Indian Companies Act, 1913., It is carrying on business as chemists and druggists. On December 2,1950, it purchased 1.77 acres of vacant land from one Ettiappa Pillai for Rs. 2,178 in the village of Mullam, near Aiyanavaram. It is stated that the object was to grow herbs and plants for medicinal purposes and to construct a warehouse for stocking its goods. THE land was, however, compulsorily acquired by the State Government for purposes of the Integral Coach Factory on 7th September, 1957, and the assessee obtained a sum of Rs. 14,580 as compensation. THE assessee, therefore, made a profit out of the purchase of this land in a sum of Rs. 12,402. In respect of the accounting year ended 31st January, 1959. the excess receipt of Rs. 12,402 was shown in section D of the return with the following description :

(3.) HOLD the land of agricultural purposes, and did not derive any agricultural income therefrom, the land was not excluded from the definition of "capital asset" by clause (iii) of section 2(4A), and the profit made in respect of the land was assessable to tax as capital gains under section 12B of the Income-tax Act. On the facts of that case, the Division Bench held that the land was not a land from which agricultural income was derived on the crucial date. We are unable to say that the Division Bench took the view that, unless the assessee were to show actual perception of profits in the byear in question, the land could not be treated as agricultural land. we are however, clear that, on the facts of the present case, the land was purely a vacant site, on which no agricultural operations were ever conducted. In this view of the matter, the land is certainly a "capital asset" as defined under the Act.