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Taxation of income derived from the sale of water from a pond located in agricultural land. Analysis: 1. The assessee appealed against the order of CIT (Appeals) regarding the taxation of income from selling water from a pond in agricultural land. The facts revealed that the assessee owned agricultural land with a pond that was used by a company to stock water for their factory. The company paid the assessee a fixed amount annually for drawing water from the pond, and conditions were set to ensure no interference with agricultural operations. 2. The assessee argued that the water in the pond should be considered immovable property, thus making the income from its sale akin to agricultural income. However, it was contended that since only water was sold and not the pond itself, the income could not be classified as capital receipt. The legal representative cited various cases to support the argument, but the CIT (Appeals) distinguished them based on the specific facts of the present case. 3. The representative further contended that the exploitation of water should be treated as a capital receipt if the agricultural land is considered capital. The Gujarat High Court's decision in a similar case was referenced, but the court noted the distinguishable nature of earth and water as resources. Additionally, a Madras High Court decision was cited to differentiate between recurring and non-recurring receipts. 4. The Departmental Representative relied on a Supreme Court judgment regarding income from the sale of natural resources. The judgment emphasized that income from the sale of resources like water should be treated as regular income and not agricultural income. The Tribunal concurred with the Assessing Officer and CIT (Appeals), concluding that the income from selling water from the pond should be taxed as regular income due to the absence of a capital asset being sold or transferred. 5. After a detailed examination of the facts, the Tribunal upheld the decision to tax the income generated from selling water from the pond as regular income. The absence of a sale or transfer of a capital asset, along with the recurring nature of the income, led to the dismissal of the appeal. The Tribunal ruled that the sale proceeds of water could not be considered a capital receipt, and the appeal was consequently dismissed.
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