Agricultural land excluded from capital asset treatment where revenue records, cultivation evidence, and distance criteria were satisfied.

Land shown in the revenue records as agricultural land, supported by Chitta and Adangal entries and situated beyond the prescribed municipal distance, was treated as outside the definition of capital asset. The record also supported agricultural activity, including nursery operations, and the statutory conditions for exclusion from capital gains tax were held to be satisfied. On those facts, the land retained its agricultural character and the sale consideration was not liable to capital gains tax.

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Issues: Whether the land sold by the assessee was agricultural land falling outside the definition of capital asset, so as to exclude the sale consideration from capital gains tax.

Analysis: The land was reflected in the revenue records as agricultural land, the Chitta and Adangal supported that character, and the land was situated beyond the prescribed municipal distance. The assessment records also referred to verification of the land, and the material on record supported the carrying on of agricultural activity, including nursery operations. On these facts, the statutory conditions for exclusion from the definition of capital asset were satisfied.

Conclusion: The land retained its character as agricultural land and was not a capital asset; the resultant sale could not be brought to capital gains tax. The issue is decided in favour of the assessee.

Ratio Decidendi: Land that is shown in the revenue records as agricultural land and is situated beyond the statutory municipal distance remains outside the scope of capital asset under the Act.

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