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C.I.T. versus M.R. TALREJA

High Court of Judicature at Allahabad

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C.I.T. v. M.R. Talreja - INCOME TAX REFERENCE No. 171 of 1988 [2004] RD-AH 1629 (6 December 2004)


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Court  No.37

Income Tax Reference No.171 of 1988

Chief Commissioner of Income Tax  Vs. Shri Meghraj Talreja, Raebareli.

Hon'ble  R.K. Agrawal, J

Hon'ble P. Krishna, J

The Income Tax Appellate Tribunal, Allahabad  has referred the following question of law under section  256 (1) of the Income Tax Act 1961 (hereinafter referred to as the Act)  for opinion to this Court:-

"Whether, on the facts and in the circumstances of the case, the Tribunal was, in law, justified in holding that the claim of exemption on capital gains of Rs.29,727/- was allowable?"

Briefly stated the facts giving rise to the present Reference are as follows:-

The reference relates to the assessment year 1981-82. The respondent assessee  is assessed to tax under the Act as individually.  During the assessment year in question  the accounting period of the assessee relevant to this assessment year ended on 31.3.1981. The relevant assessee has sold the agricultural land on 31.3.1981 for Rs.55,770/- and  the respondent assessee earned a net surplus of Rs.29,727/- on account of the sale of  land. The land was situated within the municipal limits of Rai Bareli.  Relying  on the decision of the Bombay High Court in the case of  Manubhai  A. Seth and others vs. ITO  (1981) 128 ITR 87,  the respondent assessee claimed that Income-tax was not leviable on the capital gain arising from the sale of agricultural land. The ITO, however, rejected the claim of the assessee which order was upheld by the Appellate Assistant Commissioner. However, in further appeal, the Tribunal following  the decision of the Bombay High Court in the above mentioned case, allowed the appeal of the assessee.

We have heard Shri Shambhu Chopra, the learned standing counsel for the Revenue. Nobody has appeared on behalf of the respondent assessee. The learned standing counsel for the Revenue submitted that under section 2 (14) of the Act  capital assets have been defined  to include agricultural land situated within the jurisdiction of  Municipality by whatever name called and therefore it being capital asset was liable to capital gains on its sale. He referred to the following decisions:-

1. (1993) ,204 ITR 63 : Sarifabibi Mohmed Ibrahim  and others Vs. C.I.T.

2. (1996), 220 ITR  43: CIT vs. Gemini Picture Circuit Pvt. Ltd.

3. (2001), 247 ITR 150:  Singhai Rakesh Kumar vs. Union of India and others.

In the case of Singhai Rakesh Kumar (Supra) the Apex Court has held that the gains arising from transfer of lands falling under section 2 (14) (iii)(ia) and 2 (14) (iii) (b)  is assessable as capital gains  from 1.4.1970. In this view of the matter we are of the considered opinion  that the Tribunal was not justified in granting  exemption on the agricultural land situated within the Municipal Limits  of Rai Bareilly from capital gains.

We accordingly answer of the question of law referred to us in negative i.e. in favour of the Revenue and against the assessee. However, there shall be no order as to costs.




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