Prospective operation of capital asset notification bars tax on gains from agricultural land sold before the amendment.

The notification dated 6 February 1973 enlarging the definition of "capital asset" under section 2(14)(iii)(b) was held to operate only prospectively because it did not specify any earlier effective date and the statutory language did not support retrospective application. As a result, agricultural land sold before that date could not be treated as a capital asset under the amended definition, and the resulting gains were not chargeable to tax under section 45.

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Issues: Whether the notification dated 6 February 1973 enlarging the definition of capital asset under section 2(14)(iii)(b) of the Income-tax Act, 1961 applied retrospectively to sales of agricultural land made before the date of the notification, so as to bring the resulting gains to tax under section 45.

Analysis: The sales had taken place before the notification was issued. The notification did not specify any earlier effective date and the language of the provision did not justify treating it as operative from an earlier point of time. The amended definition therefore had to be given effect only from the date of the notification and not with reference to the assessment year so as to affect completed transfers made earlier.

Conclusion: The notification had no retrospective effect. The lands sold before 6 February 1973 could not be treated as capital assets under section 2(14)(iii)(b), and the capital gains from those sales were not chargeable to tax under section 45. The appeal was allowed in favour of the assessee.

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