1990 (12) TMI 189 - AT - Income Tax

Summary

Issues Involved:
1. Eligibility of capital gains tax on agricultural land.
2. Proportion of capital gains taxable in the hands of the assessee.
3. Inclusion of solarium in the consideration for land acquisition.
4. Determination of the fair market value date for computing capital gains.
5. Levy of interest under Section 139(8) in reassessment proceedings.

Issue-wise Detailed Analysis:

1. Eligibility of Capital Gains Tax on Agricultural Land:
The assessee contended that no taxable capital gains arose from the compensation received for the acquired agricultural land, relying on the Bombay case of Manubhai A. Seth. The ITO, however, held that the capital gains were chargeable to tax, citing the Gujarat case of Ambalal Mangalal. The CIT(A) upheld the ITO's decision, stating that capital gains on agricultural lands are exigible to tax. The Tribunal agreed with the CIT(A), noting that the matter had been settled by the 1989 amendment to Section 2(1A) of the Act, thus declining to interfere.

2. Proportion of Capital Gains Taxable in the Hands of the Assessee:
The assessee argued that only 1/3rd of the capital gains should be taxable in his hands, as the land was inherited equally by him, his mother, and his sister. The ITO rejected this claim, stating that the compensation was awarded solely to the assessee. The CIT(A) reversed this decision, holding that the properties were inherited equally, and only 1/3rd of the capital gains could be charged to the assessee. The Tribunal did not specifically address this issue further, implying agreement with the CIT(A)'s decision.

3. Inclusion of Solarium in the Consideration for Land Acquisition:
The CIT(A) held that the solarium awarded under the Land Acquisition Act is part of the consideration paid for the land acquired. The Tribunal upheld this view, referencing decisions from the Kerala and Gujarat High Courts, thus declining to interfere.

4. Determination of the Fair Market Value Date for Computing Capital Gains:
The assessee argued that the market value as of 28th Feb., 1970, should be considered for computing capital gains, as agricultural land was treated as a capital asset from that date. The CIT(A) accepted this argument, relying on the Tribunal's decision in Gurjit Singh Mansahia. However, the Department contended that the fair market value as of 1st Jan., 1964, should be used. The Tribunal agreed with the Department, stating that the scheme of the Act allows for the fair market value as of 1st Jan., 1964, and not any other date. The Tribunal set aside the CIT(A)'s order on this issue and restored the ITO's decision.

5. Levy of Interest under Section 139(8) in Reassessment Proceedings:
The assessee argued that interest under Section 139(8) could not be charged in reassessment proceedings, and the CIT(A) accepted this claim, following the Andhra Pradesh High Court's decision in CIT vs. Padma Timber Depot. The Department contended that interest was rightly levied, citing the Madras case of K. Gopalswami Mudalier. The Tribunal, however, followed its earlier decision in the case of G. Bell & Co., deciding the matter in favor of the assessee and declining to interfere.

Conclusion:
The Tribunal dismissed the assessee's appeal and partly allowed the departmental appeal, upholding the chargeability of capital gains tax on agricultural land, the inclusion of solarium in the consideration, and the use of the fair market value as of 1st Jan., 1964, for computing capital gains. The Tribunal also upheld the CIT(A)'s decision on the proportion of capital gains taxable in the hands of the assessee and the non-levy of interest under Section 139(8) in reassessment proceedings.