Commercial treatment of land defeats agricultural character, making sale proceeds taxable income where facts show trading use.

Land sold through a commercial arrangement was held not to retain its agricultural character at the time of transfer, because the facts showed stock-in-trade treatment, absence of agricultural operations, use of square-yard measurements, and partnership terms consistent with a trading venture. On that factual basis, the sale proceeds were treated as taxable income rather than agricultural income. The constitutional challenge to the Explanation in section 2(1A) of the Income-tax Act was not examined because the character of the land itself was ative, and the assessment was sustained on merits.

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Issues: Whether the land sold by the assessee retained the character of agricultural land so as to fall within agricultural income and escape taxation, or whether it had lost that character and was liable to be assessed as taxable income.

Analysis: The decisive enquiry was the real character of the land at the time of transfer. The Court examined the surrounding facts, including the manner in which the land was brought into the partnership, its treatment as stock-in-trade, the use of measurements in square yards, the absence of agricultural operations, and the trading account and partnership objects indicating a commercial venture in land. On that factual assessment, the land was found not to have retained the character of agricultural land. In that view, the challenge based on the constitutional vires of the Explanation inserted in section 2(1A) of the Income-tax Act was not required to be examined.

Conclusion: The land was not agricultural land at the relevant time and the income from its sale was taxable. The challenge to the assessment therefore failed.

Final Conclusion: The writ petition was not maintainable on the merits urged and the impugned tax action was sustained.

Ratio Decidendi: The true nature of land for income-tax purposes is determined by its actual character and use at the time of transfer, and where the surrounding facts show a commercial exploitation of land as stock-in-trade rather than agricultural use, the sale proceeds are taxable and do not qualify as agricultural income.

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