Capital gains on agricultural land in notified areas remain taxable, and the retrospective amendment confirming taxability applies.

Capital gains arising from the sale of agricultural land situated in a notified area are chargeable to tax under the Income-tax Act. The Kerala High Court followed its earlier binding decisions rejecting the view that such land escapes capital gains tax, and gave effect to the retrospective amendment in section 3 of the Finance Act, 1989, which clarified the taxability of these gains. The reference was answered against the assessee and in favour of the Revenue, confirming that the sale of agricultural land in a notified area does not avoid capital gains tax.

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Issues: Whether capital gains arising from the sale of agricultural lands situated in notified areas are exigible to capital gains tax.

Analysis: The Tribunal had followed a contrary view that agricultural land sold within a notified area did not attract capital gains tax. The Court followed its earlier binding decisions holding that capital gains from the sale of agricultural lands are taxable under the Income-tax Act. It also noted the retrospective amendment made by section 3 of the Finance Act, 1989, which clarified that such gains are exigible to tax.

Conclusion: The question was answered against the assessee and in favour of the Revenue. Capital gains arising from the sale of the agricultural lands in question are liable to capital gains tax.

Final Conclusion: The reference was disposed of by holding that the sale of agricultural lands in the notified area does not escape capital gains tax and the Revenue succeeded.

Ratio Decidendi: Capital gains arising from the sale of agricultural land situated in a notified area are chargeable to tax, and a retrospective statutory amendment confirming such taxability must be given effect.

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