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Issues Involved:
1. Computation of capital gains on the sale of agricultural land. 2. Determination of whether the agricultural land is a capital asset u/s 2(14) of the Income-tax Act. 3. Timing of the transfer for capital gains tax purposes. Summary: Issue 1: Computation of Capital Gains on the Sale of Agricultural Land The appeal by the Revenue for the assessment year 1978-79 challenges the order of the Commissioner of Income-tax (Appeals) regarding the computation of capital gains on the sale of agricultural land. The land in question, situated in Palamaner town, was acquired by the Government of Andhra Pradesh for constructing an RTC depot, with compensation determined at Rs. 1,78,251. Issue 2: Determination of Whether the Agricultural Land is a Capital Asset u/s 2(14) of the Income-tax Act The Assessing Officer (AO) issued a notice u/s 148, considering the land as a capital asset u/s 2(14) of the I.T. Act, as it was situated in an area with a population exceeding 10,000. The AO argued that the term "municipality" includes any area with a population of more than 10,000, even if it is governed by a Panchayat. The AO computed the net capital gain at Rs. 1,25,190. The CIT (Appeals) disagreed, relying on the Andhra Pradesh High Court decision in J. Raghottama Reddy v. ITO, and did not address whether the land was a capital asset u/s 2(14) as it was situated in a Gram Panchayat. The Tribunal held that agricultural land situated in a village or under a Gram Panchayat does not qualify as a capital asset u/s 2(14) unless it is within the jurisdiction of a municipality, municipal corporation, or cantonment board with a population of not less than 10,000. The Tribunal cited the Supreme Court decision in G. M. Omer Khan v. Addl. CIT, which clarified that the population criterion applies to municipalities, not areas within them. Therefore, the land in Palamaner, governed by a Panchayat, does not fall within the definition of a capital asset. Issue 3: Timing of the Transfer for Capital Gains Tax Purposes The assessee argued that even if the land were considered a capital asset, the transfer occurred on 9-5-1980, the date of the award, and not within the assessment year 1978-79. The Tribunal agreed, referencing the Andhra Pradesh High Court decision in S. Appala Narasamma v. CIT, which held that the date of the award is the material date for capital gains tax purposes. Conclusion: The Tribunal dismissed the Revenue's appeal, upholding the CIT (Appeals) order but for different reasons, concluding that the agricultural land in question does not qualify as a capital asset u/s 2(14) of the I.T. Act, and even if it did, the transfer did not occur within the relevant assessment year.
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