1984 (8) TMI 16 - HC - Income Tax

Summary

Issues involved: Five questions of law referred u/s 256(1) of the Income-tax Act, 1961 for the assessment year 1963-64.

Question 1: Whether the compensation received for the acquisition of lands is assessable as business profits?
- Previous decision: The land remained agricultural till acquisition, thus not business profits.
- Current decision: Compensation not assessable as business profits.

Question 2: Whether the compensation received is agricultural income exempt from tax?
- Previous decision: Compensation not taxable as income or capital gains.
- Current decision: Compensation not agricultural income, exempt as capital gain.

Question 3: Whether the character of lands changed to capital asset due to Land Acquisition Act notification?
- Academic nature, notification u/s 4 doesn't change land character.
- Compensation received post-acquisition determines taxability.

Question 4: Whether income from property assessable under 'Property' head?
- Affirmative decision in favor of the Department.

Question 5: Whether claim for repairs and depreciation rightly restricted?
- Does not arise due to previous decision on Question 4.

The judgment emphasizes that the compensation for land acquisition is not taxable as business profits but exempt as a capital gain arising from agricultural land. The notification u/s 4 of the Land Acquisition Act does not alter land character, with taxability determined by compensation received post-acquisition. The decision on previous questions is upheld, with parties to bear their own costs.