SULEKHA SANDIP PARIKH Vs. NADKARNI S N

JUDGEMENT

(1.) THIS petition under article 226 of the Constitution arises out of proceedings under the Income -tax Act, 1961 (hereinafter 'the Act').

(2.) ONE Dhanvantrai Keshavlal Shah and his wife Prabhavati, petitioner No. 3, were members of the Keshavlal Ratanji Hindu undivided family (hereinafter 'the K. R. HUF') which owned agricultural land bearing Town Planning Survey No. 353 at Ghatkopar within the municipal limits of Greater Bombay. This land was sub -divided into six plots bearing Nos. 353/1 to 353/6. Five of these were sold in the previous years relevant to the assessment years 1963 -64 and 1964 -65. That this was agricultural land was accepted by the Department and capital gains arising from the above sales were not subjected to tax. The remaining plot No. 353/6 was sub -divided into sub -plots. On partition of the K.R. HUF, some of these sub -plots were allotted to the Hindu undivided family of Dhanvantrai. During Samvat year 2026 there was a partial partition of the Hindu undivided family of Dhanvantrai, whereafter the sub -plots, including sub -plots Nos. 353/B/5, 353/B/22 and 353/B/33, were held by Dhanvantrai in his individual capacity. As before, these continued to be agricultural lands, and, according to the petitioners, used for agricultural purposes.

(3.) DURING the previous year relevant to the assessment year 1971 -72, Dhanvantrai sold another sub -plot bearing No. 353/B/22 which had been allotted to him on partition of his own Hindu undivided family. This resulted in capital gains. Under section 45 of the Act, transfer of any capital asset is subject to income -tax if the said transfer results in any capital gains. However, up to the assessment year 1969 -70, agricultural land was excluded from the definition of 'capital asset' under section 2(14) of the Act. In the circumstances, agricultural land transferred in the previous year relevant to the assessment year 1971 -72 would not have been treated as capital asset up to and inclusive of the assessment year 1969 -70. However, the Finance Act, 1970, amended section 2(14) of the Act by bringing within the definition of 'capital asset' agricultural lands in India and situate within the area comprised within the jurisdiction of a municipality cantonment board and which had a population of not less than 10,000 according to the last preceding census. In Samvat year 2026, the agricultural land of Dhanvantrai was, therefore, prima facie liable to be treated as agricultural land not excluded from the definition of capital assets.