COMMISSIONER OF INCOME TAX Vs. MANICKAM L S

JUDGEMENT

(1.) AT the instance of the Department in the case of the two assessees, who are brother, Sri. L. S. Manickam and L. S. Saravanabhavan, the Tribunal referred the following common question for the assessment year 1974-75 for out opinion under section 256(1) of the Income-tax Act, 1961 :

(2.) THE assessee, Sri L. S. Manickam, sold 26 cents of land claimed to be agricultural lands situated in the town limit in Annathanapatti village for Rs. 11,310 as per the sale deed dated February 3, 1974. THE assessee also sold 97 sends of agricultural lands in the rural limit (panchayat area) of the aforesaid village for Rs. 41,195 as per the sale deed, dated February 6, 1974. Sri L. S. Saravanabhavan sold 37 cents of land claimed to be agricultural lands situated in Annathanapatti town and 97 cents situate in Annathanapatti village within eight kilometers from Salem municipal limit and so, all the lands are only capital assets coming within the ambit of section 2(14)(iii) of the Income-tax act, 1961. THE Income-tax Officer computed the capital gains on sale by the first assessee at Rs. 23,533 and in respect of the second assessee at Rs. 26,640. Both the assessees filed appeals before the Appellate Assistant Commissioner, who confirmed the computation of capital gains as fixed by the Income-tax Officer. On further appeals before the Appellate Tribunal, the Tribunal following a decision of the Bombay High Court in the case of Manubhai A. Sheth v. N. D. Nirgudkar [1981] 128 ITR 87 held that the sale proceeds of agricultural lands are not amenable to capital gains tax. However, the Tribunal remitted the cases to the Income-tax Officer to find out whether the lands were used for agricultural purposes at the time of sale and further directed to follow the decision of the Bombay High Court cited supra for the applicability of section 2(14)(iii) of the Act.