1956 (12) TMI 45

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..... these lands totalled ₹ 3,400. Even by April, 1944, the assessee entered into an agreement with the Muslim Educational Society, Melapalayam, to construct buildings on the land for use as a school. Construction commenced in 1944 and was completed in 1946 at a cost of ₹ 33,167. The committee occupied the buildings even before they were completed and paid rent which was eventually raised to ₹ 100 a month. The Committee decided to buy the property, and after some negotiations the assessee sold the land with the buildings thereon to the Committee for ₹ 80,000 on 5th June, 1946. The Departmental Authorities treated ₹ 43,433, the difference between the sale price and what the assessee had expended, as a capital gain .....

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..... 54] 26 I.T.R. 758 where the validity of section 12B was upheld. What is taxable under section 12B of the Act is Profits or gains arising from the sale.....of a capital asset. Capital asset has been defined in section 2(4A). Capital asset means property of any kind held by an assessee, whether or not connected with his business, profession or vocation, but does not include................(iii) any land from which the income derived is agricultural income. Agricultural income has been defined in section 2(1) of the Act. The contention of the assessee was that all the land, except that actually occupied by the building in use as a school house, was held by him as agricultural land, and that any profit made by the sale of such agr .....

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..... ous owners of the lands cultivated them and derived agricultural income therefrom could not be relevant. Therefore the nature of the lands before the assessee purchased them cannot help in deciding the question at issue. It is clear that more than two years before the assessee sold the land, and even before he purchased the last of the plots to complete the holding of 2 acres 54 cents, the assessee had decided to put the land to use for a school house, on the construction of which he embarked after his agreement with the Committee in April, 1944. Building operations commenced soon thereafter. It is difficult to conceive of any cultivation operations being carried on by the assessee in any extent of the land after the construction had com .....

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