Agricultural land exclusion from capital asset definition prevents capital gains tax where agricultural use is established.

Agricultural land in India used for agricultural purposes is excluded from the definition of "capital asset" under section 2(14)(iii) of the Income-tax Act, 1961, so capital gains tax does not arise on that basis. The court noted that the record showed agricultural use of the land and that agricultural income from it was undisputed. On those facts, the statutory exclusion applied, and the Revenue could not show any infirmity in the Tribunal's view.

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Issues: Whether land used for agricultural purposes falls within the definition of capital asset under section 2(14)(iii) of the Income-tax Act, 1961, so as to attract capital gains tax.

Analysis: Agricultural land in India is excluded from the definition of capital asset under section 2(14)(iii). The record showed that the land was used for agricultural purposes and there was no dispute that the income from such land was agricultural income. On that basis, the statutory exclusion applied and the land could not be treated as a capital asset. The Revenue was unable to point out any infirmity in the Tribunal's view.

Conclusion: The question was answered in the affirmative against the Revenue and in favour of the assessee.

Ratio Decidendi: Land used for agricultural purposes, being agricultural land in India, is excluded from the definition of capital asset under section 2(14)(iii) of the Income-tax Act, 1961.

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