1988 (11) TMI 126 - AT - Income Tax

Summary

Issues:
1. Whether the addition of Rs. 3,000 made by the ITO on account of capital gains arising from the sale of trees was justified.
2. Whether the receipt from the sale of trees should be considered as capital gains and thus not taxable.

Analysis:
Issue 1:
The Appellate Tribunal ITAT DELHI-A heard an appeal contesting the order of the CIT(A) regarding the addition of Rs. 3,000 made by the ITO on account of capital gains from the sale of trees. The assessee, an HUF, sold fruit trees of ancestral land for Rs. 20,000, claiming the sale proceeds were not taxable as the trees were of spontaneous growth and were not intended to grow again. The ITO included Rs. 3,000 as capital gains based on instructions from the IAC. The CIT(A) vacated the addition, agreeing with the assessee's argument that the receipt was of capital nature and not includible.

Issue 2:
The Tribunal considered whether the inclusion of Rs. 3,000 as long-term capital gains was justified. Referring to the case of N.T. Patwardhan, where the Delhi High Court held that receipts from the sale of trees were capital in nature, the Tribunal found the CIT(A)'s approach to be correct. Additionally, in the case of Kailas Rubber and Co. Ltd., the Supreme Court held that sale proceeds of old rubber trees were capital receipts and not taxable as agricultural income. The Tribunal concluded that the assessee's case was supported by legal precedents and, therefore, dismissed the appeal, stating that no interference was warranted in the present case.