Ancestral land sale after plotting was capital realisation, not trading activity, and was taxable under capital gains only.

An agriculturist family's ancestral land, used for agriculture until 1980-81, was plotted and sold without any purchase element, trading intention, or substantial development activity. Mere subdivision to secure a better price was consistent with realisation of a capital asset, not an adventure in the nature of trade, so the receipts were not business income. The agreement of sale did not transfer title; title passed only on registered sale deeds. As the land fell within the statutory distance bringing it within the definition of a capital asset, the transactions were assessable under capital gains.

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Issues: Whether the sale of the assessee's ancestral land plotted into house sites constituted an adventure in the nature of trade and business income, or a realisation of a capital asset giving rise only to capital gains.

Analysis: The land was treated as ancestral property of an agriculturist family and had been used for agricultural operations till 1980-81. No purchase of the land was involved, no material showed an intention to trade in real estate, and the record did not establish any substantial investment in developing the land into plots. Mere plotting and sale to secure a better price, in the surrounding facts, was held consistent with maximisation of value from a capital asset rather than a trading venture. The agreement of sale did not by itself pass title, and title passed only on execution of registered sale deeds. The land was also held to fall within the statutory concept of capital asset as it was situated within the relevant municipal distance.

Conclusion: The sale proceeds were not assessable as business income. The transactions were held to yield capital gains only, and the assessee succeeded on this issue.

Final Conclusion: The lower authorities' treatment of the receipts as business income was set aside and the matter was directed to be recomputed under the head of capital gains.

Ratio Decidendi: Where an agriculturist sells ancestral land after plotting it merely to secure the best price, without evidence of trading intention or substantial development activity, the transaction is a realisation of capital investment and not an adventure in the nature of trade.

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