Agricultural land acquisition compensation was not business profit, while income from part of the Aurangzeb Road property remained taxable as property income.

Compensation for acquired agricultural land was treated as a capital receipt and not as business profits because the land had remained agricultural, with no evidence of development, plotting or conversion into trading stock before acquisition. The amended Explanation to the definition of agricultural income was not applied beyond the assessment years for which the Legislature had expressly given it effect, so the compensation was not treated as exempt agricultural income on that basis. Issuance of acquisition notifications did not, on the facts found, change the character of the land, though that point was treated as academic. Income from one-half of the property at 16, Aurangzeb Road was assessable under the head "Property".

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Issues: (i) Whether compensation received on acquisition of agricultural lands was assessable as business profits; (ii) Whether the compensation constituted agricultural income exempt from tax; (iii) Whether issuance of acquisition notifications altered the character of the land from stock-in-trade into a capital asset; (iv) Whether income from one-half of the property at 16, Aurangzeb Road was assessable under the head "Property".

Issue (i): Whether compensation received on acquisition of agricultural lands was assessable as business profits.

Analysis: The references were on identical facts to earlier decisions concerning the same assessee. The lands acquired under the land acquisition proceedings were found to have remained agricultural land, and there was no material to show development, plotting, or conversion into trading stock before acquisition. In a reference under the Income-tax Act, the High Court was bound by the facts found by the Tribunal and could not travel beyond the statement of the case. On that footing, the compensation could not be treated as profits of the assessee's business.

Conclusion: The issue was answered in the negative and in favour of the assessee.

Issue (ii): Whether the compensation constituted agricultural income exempt from tax.

Analysis: The compensation was received for acquisition of agricultural land, and the court treated the receipt as a capital receipt rather than income from business. The amendment introducing an Explanation to the definition of agricultural income was held not to govern the assessment years in question, because the Legislature had given it operation only from a specified retrospective date. The court therefore declined to extend the amended definition beyond that period.

Conclusion: The issue was answered in the negative and in favour of the assessee.

Issue (iii): Whether issuance of acquisition notifications altered the character of the land from stock-in-trade into a capital asset.

Analysis: The mere issue of notifications under the Land Acquisition Act did not, on the facts found, alter the character of the land. The court nevertheless treated this question as academic, while still recording that the notifications had no effect on the character of the acquired land. The earlier consistent view in the assessee's own cases was followed.

Conclusion: The question was treated as academic, but the answer recorded was in favour of the assessee on the character of the land.

Issue (iv): Whether income from one-half of the property at 16, Aurangzeb Road was assessable under the head "Property".

Analysis: On this aspect, the court followed the earlier reference decisions and found no reason to depart from the view already taken. The income from one-half of the property was therefore liable to be assessed under the head "Property".

Conclusion: The issue was answered in the affirmative and against the assessee.

Final Conclusion: The references were disposed of by applying the earlier binding view on identical facts, resulting in relief to the assessee on the taxability of the land compensation, while sustaining the assessment under the head "Property" for the relevant share of the immovable property.

Ratio Decidendi: In income-tax references, the High Court must answer the question of law on the facts found by the Tribunal, and where compensation for acquired agricultural land is received without any prior conversion of the land into trading stock, the receipt is not business profit and the statutory amendment cannot be given operation beyond the period expressly fixed by the Legislature.

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