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TMI Blog1986 (11) TMI 120X X X X Extracts X X X X X X X X Extracts X X X X ..... f this land, one acre of land was sold for Rs. 1,09,150 in the first year. The ITO sought to tax this sale for capital gains accruing as a result thereof. The assessee in the first case, namely, Shri G.L. Kabra contended that agricultural land could not be called to be 'capital asset' in view of the decision of the Gujarat High Court in the case of Sercon (P.) Ltd. v. CIT [1981] 6 Taxman 340. The ITO was, however, of the opinion that the dissolution deed clearly showed that the agricultural land was situated within the municipal limit of Piparia town. The population of Piparia was also more than 10,000 according to the latest census. Therefore, agricultural lands in dispute were capital assets within the meaning of section 2(14)(iii) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee to show, as to why the income arising out of the sale of lands be not determined and included in their hands as income under the head 'Profits and gains of business or profession' instead of income under the head 'Capital gains' and the deduction granted by the ITO under section 80T of the Act be not withdrawn. The assessees filed their objection and urged that the notice of enhancement given under section 251(1)(a) is illegal and unwarranted. The AAC, however, rejected this contention, set aside both the assessment orders and restored the matter back to the file of the ITO with the direction that he should examine this issue afresh and record a finding whether an income arising from sale of agricultural land was assessable under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner (Appeals), as the case may be, has unlimited powers to set aside the assessment and refer the case back to the ITO for making a fresh assessment in accordance with the directions given by him and after making such further inquiries as may be necessary, but the order of the AAC should be on the basis of the material on the record and ordinarily the AAC is not expected to direct the ITO to collect fresh material for the purpose of enhancing the assessment which in normal course of events would be done by the Commissioner on proceedings under section 263 of the Act. It goes without saying that the effect of taxing the income of the assessee as business income instead of capital gains as has been proposed by the ITO definitely amounted to e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eir business activities. They were not carrying on any other business. Therefore, the mere fact that they sold the land in plots instead of selling it at a stretch does not lead me to the automatic conclusion that it was part of their business activities. Whether a person is carrying on a business or not would have to be seen with reference to all over circumstances of the case. If certain land falls to my share and instead of selling it at a stretch, I think I can secure larger consideration, if I sell it in plots, it does not necessarily mean that I start carrying on the business of developing and selling the land. It still will be sale of my capital assets, because the original assets were capital and they were never converted into busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceding census. Now the assessee has not seriously disputed that the lands in question are situated within the municipal limits of Piparia town and the population of the town is more than 10,000 according to the last census. The case relied upon by the assessee in Subhadra's case dealt with sale of agricultural land, which was sold as agricultural land for agricultural use. Now agricultural land for the purpose of wealth-tax may fall within the municipal limit but unless its use is actually converted, it would be considered as agricultural. As against this for the purpose of capital asset the movement the assessee decides to hold the land as for any purpose other than agricultural and the land is situated within municipal limit, it would na ..... X X X X Extracts X X X X X X X X Extracts X X X X
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