1991 (8) TMI 147 - AT - Income Tax

Summary

Issues:
- Whether capital gains on the sale proceeds of agricultural lands are exempt from tax.
- The impact of the retrospective amendment on the definition of agricultural income.
- The interpretation of the definition of agricultural income in relation to capital gains tax.

Analysis:

Issue 1:
The appeals revolve around the exemption of capital gains on the sale of agricultural lands. The assessee claimed exemption based on a decision stating that such gains are not taxable. The counsel relied on previous cases to support this claim.

Issue 2:
The Departmental Representative argued that a new Explanation inserted in the IT Act with retrospective effect from 1st April, 1970, clarified that revenue from the transfer of certain lands is not considered agricultural income. This amendment superseded previous rulings and allowed for the taxation of capital gains on such land.

Issue 3:
The Tribunal analyzed the definition of agricultural income and the power of Parliament to tax such income. It referenced previous judgments to explain that the mere classification of land as a capital asset does not grant the authority to tax it as agricultural income. However, the retrospective amendment effectively allowed for the taxation of capital gains from the sale of agricultural lands.

Conclusion:
The Tribunal concluded that the amended definition of agricultural income, reflecting back into the Constitution, satisfied the conditions for taxing profits from the sale of agricultural lands. Therefore, capital gains tax was deemed applicable on the sale of agricultural lands within specified areas. As a result, the appeals of the Revenue were allowed.