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Issues involved:
The judgment involves the assessment of capital gains arising from the sale of a rubber estate, specifically focusing on whether the standing rubber trees in the estate constitute a capital asset and are liable to be taxed under section 45 of the Income-tax Act, 1961. Details of the Judgment: *Issue 1: Assessment of Capital Gains* The Income-tax Officer bifurcated the transaction as sale of land and sale of trees separately, assessing capital gains on the sale of rubber trees. However, the Appellate Assistant Commissioner accepted the contention that the standing rubber trees are part of the agricultural land and do not constitute a capital asset, thus no capital gain is assessable. *Issue 2: Appeal before the Appellate Tribunal* The Revenue contended that the rubber trees in the estate constitute a capital asset and capital gains arise on their transfer. The Tribunal found that what was sold under each document was only agricultural land with standing trees, relying on the principle that until trees are cut, they form part of the land sold. *Issue 3: Legal Interpretation* To determine if capital gain is exigible on the trees, it must be shown that they constitute a capital asset under section 2(14) of the Income-tax Act. The judgment emphasizes that standing trees are immovable property and integral to the land until cut, citing relevant case law to support the position that the sale of trees along with agricultural land does not involve a separate transfer of a capital asset. *Conclusion* The High Court held that the sale of the rubber estate should not be considered as a separate sale of land and trees for the purpose of taxing capital gains. The judgment answers the referred question in the negative, directing the parties to bear their respective costs and forwarding a copy of the judgment to the Income-tax Appellate Tribunal, Cochin Bench.
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