COMMISSIONER OF INCOME TAX Vs. JAGDISH SINGH

JUDGEMENT

(1.) AT the instance of the Revenue, the following question of law has been referred to this Court by the Tribunal, Amritsar Bench, Amritsar (hereinafter referred to as the Tribunal) for its opinion :

(2.) ASSESSEE is an individual by status and was owning land jointly with Shri Manmohan Singh, Smt. Lachhman Kaur, Smt. Shubh Lata and one other measuring 1829 Marlas within the municipal limits of Phagwara. This land was sold in July, 1980, to M/s Sukhjit Starch & Chemicals (P) Ltd. Phagwara, for a consideration of Rs. 11,00,000. The transaction of sale fell in assessee's asst. yr. 1981-82. The ITO treated the land to be capital asset because it fell within municipal limits of Phagwara. Assessee and his co-owners claimed that no capital gain liable to tax was earned on the sale of agricultural land as the income earned was earned on the sale of agricultural land as held by the Bombay High Court in Manubhai A. Sheth & Ors. vs. N.D. Nirgudkar, ITO & Ors. (1981) 22 CTR (Bom) 41 : (1981) 128 ITR 87 (Bom) : TC 20R.604. The ITO rejected the plea of the assessee and other co-owners by observing that the Bombay High Court decision had not been accepted by the Department and an appeal had been preferred to the Supreme Court. He proceeded to compute the capital gains in accordance with law and brought to tax an income of Rs. 2,35,790. Similar assessments were framed in the case of other co-owners as well. Assessee's appeal before the CIT(A) was accepted. The CIT(A) followed the view of the Bombay High Court in Manubhai's case (supra) and held that the ITO was not legally justified to assess the income arising from the acquisition of land, which was admittedly put to use for agricultural purposes under the head 'capital gains' and deleted the addition of Rs. 2,35,750 made by the ITO.

(3.) MR . B.S. Gupta, Senior Advocate, appearing for the Revenue, relying upon a judgment of this Court in Tuhi Ram vs. Land Acquisition Collector & Anr. (1992) 105 CTR (P&H) 378 : (1993) 199 ITR 490 (P&H) : TC 20R.585, contended that the sale of agricultural land situated within the municipal limits would come within the ambit of a capital asset and the transfer of the same would attract the capital gains.