Agricultural land compensation exempt where land remained agricultural at acquisition despite prolonged non-cultivation.

Compensation received on compulsory acquisition of land was treated as exempt because the land's character at the time of acquisition was held to be decisive. Mere non-cultivation for a prolonged period was insufficient to deny its agricultural nature, so the receipt in lieu of such land was not taxable. The separate argument based on the CBDT circular was not examined further because the matter was resolved on the principal issue in favour of the assessee.

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Issues: Whether compensation received on compulsory acquisition of land was taxable, where the land was found to be agricultural in character at the time of acquisition.

Analysis: The land's character at the time of acquisition was decisive. Mere absence of cultivation for a prolonged period was held insufficient to deny its agricultural nature. On that basis, the compensation received in lieu of such land was treated as exempt. The separate contention based on the CBDT circular was not examined further, as the appeal was decided on the principal issue.

Conclusion: The compensation was not taxable and the claim of exemption was accepted in favour of the assessee.

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