Capital asset treatment of land under the Income-tax Act: non-agricultural land was brought within capital gains taxation.

Land sold by the assessee was examined under section 2(14) to determine whether it qualified as agricultural land excluded from capital asset treatment. On Third Member reference under section 255(4), the view accepted was that the land was not agricultural land; accordingly, it fell within the definition of a capital asset. The transfer was therefore subject to capital gains tax under section 45, with the issue decided in favour of the Revenue.

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Issues: Whether the land sold by the assessee was a capital asset within the meaning of section 2(14) of the Income-tax Act, 1961, so as to attract capital gains tax under section 45 of the Income-tax Act, 1961.

Analysis: The matter was decided by the majority view after reference to the Third Member under section 255(4) of the Income-tax Act, 1961. The Third Member agreed with the Accountant Member that the land was not agricultural land and, on that basis, answered the referred question against the assessee.

Conclusion: The land was held to be a capital asset and the resultant transfer was held liable to capital gains tax, in favour of the Revenue.

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