Compensation for compulsory acquisition of agricultural land is capital receipt, with standing trees treated as part of the same asset.

Compensation received on compulsory acquisition of agricultural land, including standing trees as part of the same composite asset, is a capital receipt and not agricultural income under the Agricultural Income-tax Act, 1950. The character of the receipt depends on acquisition of title, not on later use of the land; once the State acquires the property, the compensation represents the value of the transferred asset. The value of standing trees cannot be separately carved out from the land to treat any part of the compensation as taxable agricultural income. Accordingly, the reopening and remand order could not stand.

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Issues: Whether compensation received on compulsory acquisition of agricultural land with standing trees was a capital receipt not taxable as agricultural income under the Agricultural Income-tax Act, 1950.

Analysis: The amount in question represented compensation for acquisition of land, not payment for requisition or for use and occupation. In a case of requisition, the owner's title remains and the character of the receipt may depend on the user of the land; in compulsory acquisition, title vests in the State and the compensation is the value of the property transferred, with the land and standing trees forming one composite asset. The subsequent user of the acquired land is irrelevant, and the value of the trees cannot be separately bifurcated from the land for treating any part of the compensation as agricultural income.

Conclusion: The compensation was a capital receipt and not assessable as agricultural income; the reopening and remand order could not stand.

Ratio Decidendi: Compensation received on compulsory acquisition of agricultural land, including standing trees as part of the same asset, is a capital receipt and cannot be taxed as agricultural income merely because the land was previously put to agricultural use.

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