Court ruling: Certain sums not exempt from tax as capital gains due to lands not deemed agricultural.

The court held that for the assessment years 1963-64 and 1966-67, the sums of Rs. 5,98,527 and Rs. 2,47,300, respectively, were not exempt from tax as capital gains as the lands were not considered agricultural. However, for the assessment year 1965-66, the sum of Rs. 1,37,328 was exempt from tax as capital gain as the land was deemed agricultural. The final judgment answered the legal question accordingly, with no costs awarded.

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Issues Involved:
1. Whether the sums of Rs. 5,98,527, Rs. 1,37,328, and Rs. 2,47,300 were exempt from assessment to tax as capital gains on the ground that the relevant lands were agricultural lands.

Detailed Analysis:

Assessment Year 1963-64:
The lands in dispute were used for agricultural purposes up to March 31, 1959. The possession of the lands was handed over on September 21, 1961, and the deed of conveyance was executed on May 14, 1962. The Income-tax Officer did not accept the assessee's contention that these were agricultural lands and computed the capital gains at Rs. 5,98,527. The Tribunal upheld the finding of the Appellate Assistant Commissioner that the lands continued to be agricultural lands even at the time when the deed of sale was executed. However, the High Court found that the lands were not put to agricultural use after March 31, 1959, and there was no positive evidence on record to suggest that these lands were agricultural lands and were assessed to land revenue up to the date of their sale. The High Court concluded that the Tribunal was in error in holding that the lands in question continued to be agricultural lands during the previous year relevant to the assessment year 1963-64, and thus, the surplus arising from the transaction was liable to tax as capital gains.

Assessment Year 1965-66:
For this assessment year, there were no material details on record indicating the dates of the agreements, the date of conveyance, the area of the land, or the price for which these were sold. The Tribunal assumed that the facts were identical to the previous years and held that there was no material to show that the nature and/or character of the lands had altered. The High Court agreed with the Tribunal's finding that there was no justification for interference, as there was no material on record to suggest that the nature and/or character of the lands, which were treated as agricultural lands for the assessment years 1960-61 and 1961-62, had changed in any manner whatsoever. Therefore, the sum of Rs. 1,37,328 was exempt from assessment to tax as capital gain.

Assessment Year 1966-67:
The assessee had entered into an agreement with Nanubhai Industries for the sale of certain lands on April 29, 1959. The possession of the lands was given on December 1, 1960. The Tribunal held that the lands were agricultural and that the surplus arising from the transaction was not liable to tax as capital gain. However, the High Court found that the possession of the land was handed over to the purchaser in 1960 itself, and the assessee did not continue agricultural operations after March 31, 1959. The lands were sold to business concerns who were not going to put them to agricultural use. Therefore, the High Court held that the lands sold during the previous year relevant to the assessment year 1966-67 were not agricultural lands, and the surplus computed by the Income-tax Officer was liable to tax.

Conclusion:
- For the assessment years 1963-64 and 1966-67, the sums of Rs. 5,98,527 and Rs. 2,47,300, respectively, are not exempt from assessment to tax as capital gains on the ground that the relevant lands were not agricultural lands.
- For the assessment year 1965-66, the sum of Rs. 1,37,328 is exempt from assessment to tax as capital gain on the ground that the relevant land was agricultural land.

Final Judgment:
The question of law is answered accordingly, with no order as to costs.

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