1987 (8) TMI 152 - AT - Income Tax

Summary

Issues Involved:
1. Date of Sale of Land
2. Nature of Land (Agricultural or Otherwise)
3. Cost of Land and Cost of Improvement
4. Levy of Interest under Section 139(8)

Detailed Analysis:

1. Date of Sale of Land:
The primary issue was whether the sale of the land occurred in 1972 or 1975. The revenue contended that the sale took place in 1972, as per the sale deed dated 7th August 1972, registered on 13th September 1972. The deed mentioned that the transfer was effective in 1972, with a note stating that if Rs. 40,350 was not paid by 30th November 1972, the sale would be effective only upon payment. The assessee argued that the sale was conditional, completing only on 15th October 1975, when the final payment was made and possession was given. The Tribunal considered the intention of the parties and the lack of evidence of any dispute or modification of the sale conditions. It concluded that the sale was completed on 13th September 1972, as the property was registered in favor of the Society, and there was no evidence of the condition being acted upon.

2. Nature of Land (Agricultural or Otherwise):
The Tribunal examined whether the land was agricultural and thus exempt from capital gains tax. The land was used for agricultural purposes and fell within municipal limits due to expansion under the Master Plan. The Tribunal referenced several rulings supporting the view that the character of agricultural land does not change merely because it falls within municipal limits. Given the divergent views on this matter, the Tribunal favored the assessee, holding that the income from the sale of agricultural land is agricultural income and exempt from capital gains tax under Section 2(1)(b) of the IT Act.

3. Cost of Land and Cost of Improvement:
The assessee raised issues regarding the cost of the land as of 1-1-1954 and the cost of improvements up to 1970. The Tribunal noted that the CIT (A) had not provided a finding on these issues, and thus, they did not arise out of the Tribunal's order. Consequently, these grounds were not addressed in detail.

4. Levy of Interest under Section 139(8):
The assessee also contested the levy of interest under Section 139(8). The Tribunal held that since the income from the sale of the agricultural land was exempt, there would be no levy of interest under Section 139(8), as it is a consequential matter.

Conclusion:
The Tribunal concluded that the sale of the land was completed on 13th September 1972, and the income from the sale was agricultural income, exempt from capital gains tax. The issues regarding the cost of the land and improvements were not addressed due to the lack of findings from the CIT (A). The levy of interest under Section 139(8) was negated as the income was exempt. The departmental appeal and the cross-objection were allowed in part.