Agricultural land excluded from capital gains where factual treatment and precedent place it outside the capital asset definition.

Agricultural land, when established on the facts as agricultural and treated as such in the assessment and acquisition proceedings, falls outside the taxable capital asset definition for capital gains purposes. The appellate view relied on binding precedent construing section 2(14) of the Income-tax Act, 1961, and rejected the contention that the land was not actually cultivated. On that basis, capital gains from transfer of the agricultural lands were directed to be excluded from assessment, and the revenue's appeals failed.

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Issues: Whether capital gains arising from the transfer of agricultural lands were liable to be included in the assessments under the definition of "capital asset".

Analysis: The lands were treated in the assessment proceedings and in the acquisition award as agricultural lands, and the factual objection that they were not actually cultivated was rejected. The binding decision relied upon by the appellate authority held that agricultural land would fall outside the taxable capital asset definition unless section 2(14) of the Income-tax Act, 1961 was construed to exclude it, and the Tribunal found no reason to depart from that view.

Conclusion: The directions to exclude the capital gains arising from the transfer of agricultural lands from the assessments were upheld and the revenue's appeals failed.

Ratio Decidendi: Capital gains arising from the transfer of agricultural land are not includible in assessment where the land is established as agricultural and the governing precedent treats such land as outside the scope of the taxable capital asset definition.

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