LILAVATI M AMIN Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS is a reference under S. 256(1) of the IT Act, 1961. The assessment year involved is 1967 68 for which the previous year ended on 31st March, 1967. The following question has been referred to us by the Tribunal :

(2.) THE reference pertains to land situate in the City of Ahmedabad within the municipal limits. The land formed a part of a larger piece of land bearing Survey No. 3/1 admeasuring 1 acre 34 gunthas and Survey No. 1 admeasuring 1 acre in Changispur area of the City of Ahmedabad Municipal Corporation. The then owner of this land entered into an agreement to sell this land to one Ramanlal Lalbhai Seth and others. The purchasers under the contract represented themselves as well as several other persons including the assessee. All these persons purchased this land collectively. The actual conveyance was executed on 10th Jan., 1945.

(3.) FOR the asst. year 1966 67, the assessee submitted a return of income in which the assessee disclosed in Part II of the return, inter alia, a sum of Rs. 99,800 as sale proceeds of agricultural property at Ahmedabad and stated that the amount was not taxable because the land was agricultural land and therefore any gains made on the sale of the land were not taxable to capital gains tax in view of the definition of "capital asset" as given in S. 2, Sub S. (14), of the IT Act, 1961. The ITO considered the transaction of sale and the capital gains arising therefrom as income arising from an adventure in the nature of trade. He brought the amount to tax as income from business. The AAC, however, held that the ITO's finding was incorrect. He said that this income was not in connection with any adventure in the nature of trade nor was it capital gains subject to tax because it was in respect of agricultural land. Being aggrieved by the order of the AAC, the Revenue preferred an appeal before the Tribunal. The Tribunal upheld the contention of the AAC that this was not income arising by reason of adventure in the nature of trade. The Tribunal, however, held that the land could not be considered as agricultural land and hence the capital gains arising from the sale of this land were subject to income tax. The Tribunal restored the matter to the ITO to determine the fair market value of the property as on 1st Jan., 1954, in order to compute the quantum of capital gains. From this decision of the Tribunal, the above question has been referred to us.