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TMI Blog1991 (8) TMI 146X X X X Extracts X X X X X X X X Extracts X X X X ..... ssees sold agricultural land situated within a distance of 8 km. from Rajahmundry Municipality to various persons and claimed exemption from capital gains. According to learned counsel, in view of the decision of J. Raghottama Reddy v. ITO [1988] 169 ITR 174 (AP), capital gains on the sale proceeds of agricultural lands is not exigible to tax. It was further submitted that even after the amendment made in the definition of 'agricultural income' with retrospective effect from 1-4-1970 by the Direct Tax Law Amendment Act, 1989, the ratio laid down in J. Raghottama Reddy's case holds good. To support his contention, he relied on a decision of the Tribunal in Kota Venkata Ramachander Rao v. ITO [IT Appeal No. 389 (Hyd.) of 1986.] 3. (i) Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Varghese [1990] 186 ITR 736 (Ker.). 4. We have heard rival submissions in the light of material placed before us and precedents relied upon. In the case of J. Raghottama Reddy, profits derived from the sale of agricultural land was construed to be 'revenue' derived from such land within the meaning of section 2(1)(a) of the Act and was treated as 'agricultural income'. Hon'ble High Court has held that Parliament could not have taxed the profits and gains arising from the transfer of a land used for agricultural purposes whether such land is assessed to land revenue in India or is subject to a local rate assessed and calculated by the Officer of the Government-notwithstanding that such land is situated within the limits of a municipality ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anner and that would then be the meaning of that term not only for the purpose of such enactments, but also for the purpose of the Constitution. That evidently, is for the purpose of avoiding conflict as to the legislative powers of the States in regard to 'agricultural income'. (ii) In the case of K.C. Thomas v. Agrl. ITO [1973] 91 ITR 438 (Ker.), the Hon'ble High Court negatived the argument on behalf of the petitioner that it is not open to Parliament which enacted Taxation Laws (Amendment) Act, 1970 (Act 42 of 1970) to define 'agricultural income' in such a way as to depart from the definition of that term in which Indian Income-tax Act, 1922 as it stood on January 26, 1950. This was so because there is no express prohibition in the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id down in the case of J. Raghottama Reddy, that for the purpose, the definition of agricultural income itself had to be amended which would then have reflected back into Entry 82 of List-I was taken into consideration by the Legislature. Accordingly, the definition of agricultural income was amended. It can, therefore, be said that the amended definition have reflected back into Entry 82 of List-I of the Constitution. Having regard to the fact that section 2(1A) of the Income-tax Act, 1961 was amended with retrospective effect from 1-4-1970, we are of the opinion that conditions contained in J. Raghottama Reddy's case for bringing into tax the profits from the sale of agricultural lands are being satisfied and accordingly capital gains tax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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