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TMI Blog1986 (11) TMI 122X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Pvt. Ltd. vs. CIT (1981) 23 CTR (Guj) 303. The ITO was, however, of the opinion that the Dissolution Deed clearly showed that the agricultural land was situated within municipal limit of Pipariya town. The population of Pipariya was also more than 10,000 according to the latest census. Therefore, agricultural lands in dispute were capital assets within the meaning of s. 2(14)(iii) of the IT Act. He, therefore, brought to tax a sum of Rs. 33,715 which accrued to the first assessee in the first year. On the same basis, he brought to tax the ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ains" and the deduction granted by the ITO under s. 80T be not withdrawn. The assessees filed their objection and urged that the notice of enhancement given under s. 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 the head "Business" or the head "Capital gains". Thereafter, the ITO was directed to pass fresh order after giving an opportunity of being heard to the assessee. On the same line of reasoning, he dismissed the appeals of the assessee in the later year. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material on the record and ordinarily 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 CIT in proceedings under s. 26B of the IT 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 enhancement, since the effect thereof would be todeny some of the exemptions available to the assessee under s. 80T of the IT Act. In any case the order of the AAC is bad on the ground that there was nothing more left for enquiry by the ITO, because on the same material in the later year the AAC has dismissed the appeals of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 business assets. In this behalf, I may point out that this agricultural land was sold without obtaining any sanction of any competent authorities for converting them to non-agricultural use and for this reason also the action of the assessee in selling the land in plots would not amount to carrying on of any business. The orders of the AAC in the first two ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Serial No. 3 above dealt with sale of agricultural land, which was sold as agriculture 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 naturally become capital asset in his hand even according to the decision relied by the assessee. It is not disputed in the present case that the assessee converted the land into plots and sold and intention of the purchasers was to use the plots for non-agricul ..... X X X X Extracts X X X X X X X X Extracts X X X X
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