TaxTMI 
TaxTMI 
1984 (8) TMI 16
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.... as the profits of the assessee's business ? 2. Whether, on the facts and in the circumstances of the case, the compensation of Rs. 2,33,489 and enhanced compensation of Rs. 1,04,924 was its agricultural income within the meaning of section 2(1) of the Income-tax Act, 1961, and as such exempt from income-tax ? 3. Whether, on the facts and circumstances of the case, the character of the assessee's lands changed from stock-in-trade and the same stood sterilised and was converted into a capital asset as a result of the issue of notification under section 4 of the Land Acquisition Act, 1894? 4. Whether, on the facts and in the circumstances of the case, income from one-half of the property situate at 16, Aurangzeb Road, has rightly bee....
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....the negative, i.e., the profits were not business profits. The same is the position in the case of the present assessment year. With regard to the second question, it was found that as the compensation had been paid for the acquisition of agricultural land, the question really involved a determination as to whether the price paid for the land by way of compensation could be included within the definition of " agricultural income ". The judgment proceeded on the basis that only rent or revenue arising from agricultural land could be held to be agricultural income. It was further held that agricultural land was excluded from the definition of " capital asset " occurring in section 2(14)(iii) and, hence, any gain resulting from the acquisit....
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....capital gain. We see no reason to differ from the previous view. Mr. Wadhera for the Department urged that the assessee-company had as its business object acquired agricultural land for the purpose of making plots and selling them out to the public and, therefore, the acquisition was of business assets. However, this question would, in our view, only arise if the plots had been carved out and the agricultural land transformed into building plots. But, as already held in the previously reported case and that where the agricultural land remained agricultural land and was not urbanised or converted into plots, the acquisition was of agricultural land and, therefore, exempt. If, for instance, the land had been transformed into building plots....
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....seems to be correct. The nature of the lands is not changed by the notification under section 4 which is at a stage prior to its acquisition The facts of the case show that the land was acquired and compensation paid not only after the notification under section 4, but also after the subsequent notification under section 6 and ail award, etc., under section 12. The case is concerned with the payment of compensation which can only result after the acquisition has been completed. If the land had been converted into plots by the time it was acquired, then the character of the land would have been altered so as to attract both capital gains or income-tax on the basis that the land was stock-in-trade. But, before any steps were taken in this res....