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TMI Blog1990 (6) TMI 98X X X X Extracts X X X X X X X X Extracts X X X X ..... n before the ITO was that the land sold was agricultural land and therefore, no profit arising on its sale were taxable. It was also contended that in any case if it was to be treated that the land had been converted into a trading asset before its sale then the market value of the land on the date of such conversion should be deducted from the sale price to arrive at the extent of capital gains. There was some controversy about whether the capital gain would be treated as a short term capital gain or long term capital gain. The ITO took the view that since the assessee had deposited 20 times of the land revenue on5-8-1972to acquire bhumidhari rights the capital gain was only a short term capital gain. The contention of the assessee that no capital pin arises from the sale of agricultural land as well as the alternative contention that the market value of the land on the date of conversion were also rejected. 4. On appeal, do learned AAC cancelled the assessment holding that capital gain arising from the sale of agricultural land was not taxable and hence no action u/s 148 should have been taken against the assessee. In Manubhai A. Sheth v. N.D. Nirgudkar, Second ITO [1981] 128 I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... within the meaning of Section 2(1)(a). Though the Hon'ble Karnataka High Court has expressed its dissent from theBombayjudgment, it is not clear whether the dissent is restricted to the legislative competence of Parliament regarding the insertion of sub-clause (iii) of Section 2(14) or it extends to the definition of agricultural income as well. 6. Thus we have two different opinions available on the point. No decision of the jurisdictional High Court, i.e., the Hon'ble Allahabad High Court on the point has been pointed out to us. When two different views are possible, a view which is favourable to the subject has to be taken. According to the view taken by Hon'ble the Bombay High Court the profit arising from sale of agricultural land is agricultural income. On the other hand, according to the Karnataka High Court it is not so because of the amendment of Section 2(14). We would, therefore, follow theBombayjudgment which is favourable to the assessee. 7. In the case before us it is not disputed that the land in question situate within the Municipal limits ofMeerutwas agricultural land and was used for agricultural purposes till the sale. It is also admitted that the land was a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e statute book on the basis of a ruling of the Bombay High Court which had its operation only in the State of Maharashtra. . In Patil Vijaykumar v.UnionofIndia[1985] 151 ITR 48/20 Taxman 363 (Kar.), we have clarified the legal position of a declaration of an all India Act by a different High Court. We do hope and trust the Tribunal and the Appellate Assistant Commissioner will follow our ruling in Patil Vijaykumar's case [1985] 151 ITR 48." In the case of Patil Vijaykumar v. Union of India [ 1985] 151 ITR 48/20 Taxman 363 the a High Court has held that the decision rendered by the High Court is binding on that High Court or the Tribunal's functioning in the territorial area over which it exercises jurisdiction and not on other High Courts or the other Tribunals. While doing so, their Lordships dissented from the view expressed by the Bombay High Court in the case of CIT v. Smt. Godavaridevi Saraf [1978] 113 ITR 589. 3. I am, therefore, of the view that the law having made capital pins chargeable on the sale of such agricultural lands, the orders of the revenue authorities have to be upheld. 4. In the result, I allow the revenue's appeal on this issue. ORDER UNDER SECTION 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ltural income or not among the High Courts. In Manubhai A. Sheth's case, the Bombay High Court held that the sale of agricultural land would be revenue derived from the land within the meaning of Section 2(1)(a) of the Income-tax Act, 1961 which defines agricultural income. Going through the reasons that prevailed with the Bombay High Court in holding that the capital gains arising on sale of agricultural land would be revenue income derived from the land suffice it to say that the Bombay High Court was trying to reconcile the amended Section 2(14)(iii) by enlarging the definition of the capital asset to include agricultural lands situate within the municipal limits. Since agricultural income was patently exempt from income-tax according to the judgment of Bombay High Court, the profits or capital gains arising on sale of agricultural land would also be entitled to exemption. This was the view held by the learned Judicial Member in his order. Although his attention was drawn to. the other views expressed by the Karnataka High Court, he preferred to follow the Bombay High Court on the principle that whenever two opinions are possible, the one that is in favour of the assessee should ..... X X X X Extracts X X X X X X X X Extracts X X X X
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