Agricultural land sale treated as agricultural income, leaving capital gains addition unsustainable absent contrary binding authority.

Income from the sale of agricultural land situated within municipal limits was treated as agricultural income and therefore not subjected to capital gains tax. The ITAT Jaipur note records that the Tribunal followed the Bombay High Court view relied on by the assessee and applied the principle that, in the absence of contrary binding authority, a jurisdictionally relevant High Court ruling should be followed. On that basis, the capital gains addition on the land sale was held unsustainable.

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Issues: Whether capital gains tax could be levied on the sale of agricultural lands situated within municipal limits, and whether such sale proceeds were exempt as agricultural income.

Analysis: The assessee sold agricultural lands situated within the municipal limits of Sriganganagar. The Tribunal accepted the view that income arising from the sale of agricultural lands was agricultural income and not taxable, following the Bombay High Court decision relied upon by the assessee and the Madras High Court principle of following a jurisdictionally relevant High Court ruling in the absence of contrary authority.

Conclusion: The issue was decided in favour of the assessee, and the capital gains addition on the sale of the agricultural lands was not sustainable.

Ratio Decidendi: Income arising from the sale of agricultural land is not liable to capital gains tax where it is treated as agricultural income and no contrary binding authority is shown.

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