Capital gains tax applies to land no longer held for agriculture; constitutional challenge to the charging provision failed.

Section 12B imposing tax on capital gains was treated as valid because its constitutional challenge had already been upheld by the Supreme Court, leaving no basis to dispute the provision. The assessment of capital gains on the land sale was also sustained because the assessee did not prove agricultural use or agricultural income. The land had been used for building activity and for a school, so it did not fall within the agricultural exclusion in section 2(4A) and the gain remained taxable under section 12B.

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Issues: (i) Whether section 12B of the Indian Income-tax Act imposing a tax on capital gains was ultra vires the Indian Legislature. (ii) Whether the assessment of capital gains at Rs. 4,480 on four-fifths of the land was valid.

Issue (i): Whether section 12B of the Indian Income-tax Act imposing a tax on capital gains was ultra vires the Indian Legislature.

Analysis: The validity of section 12B had already been upheld by the Supreme Court. That binding decision concluded the constitutional challenge and left no room for a contrary view in the reference.

Conclusion: The challenge to the validity of section 12B failed and was answered against the assessee.

Issue (ii): Whether the assessment of capital gains at Rs. 4,480 on four-fifths of the land was valid.

Analysis: The assessee failed to establish that the lands were held for agricultural purposes or that he derived agricultural income from them. The evidence showed that building operations had commenced long before the sale, the land had been put to use for a school, and the surrounding extent was being used for purposes appurtenant to the building. Land which is not held for agricultural purposes and from which no agricultural income is derived does not fall within the exclusion in section 2(4A), so the gain on its sale remains taxable under section 12B.

Conclusion: The assessment of capital gains on the relevant portion of the land was valid and was answered against the assessee.

Final Conclusion: The reference was decided against the assessee, and the capital gains assessment was upheld.

Ratio Decidendi: Land sold after it has ceased to be held for agricultural purposes and from which no agricultural income is proved to have been derived is not excluded from the definition of capital asset for purposes of capital gains taxation.

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