(a) Income-tax---

----Capital gains---Agricultural land---Sale of Agricultural land situate within corporation limits---Gains taxable as capital gains---Indian Income Tax Act, 1961, S.45.

The sale of agricultural land situate within the corporation or municipal limits will attract income-tax on capital gains.

CIT v. T.K. Sarah Devi (1987) 167 ITR 136 (Ker.) and CIT v. Thomas Kurien (1992) 195 ITR 531(Ker.) fol.

(b) Income-tax---

----Appeal to Appellate Tribunal---Sale of land situate within corporation limits---Tribunal not right in remanding matter to find out if land was agricultural---Indian Income Tax Act, 1961.

Held, that, in view of the decision in C.I.T. v. T.K. Sarala Devi (1987) 167 ITR 136 (Ker.), the Tribunal was not justified in remanding the case to arrive at the factual finding as to whether the land which was within corporation limits and which had been sold was agricultural in nature.

Arundhati Balkrishna v. C.I.T. (1982) 138 TTR 245 (Guj.) and Manubhai A. Sheth v. N.D. Nirgudkar, Second ITO (1981) 128 ITR 87 (Bom.) ref.

P.K.R. Menon and N.R. K. Nair for the Commissioner.

Assessee in person.

JUDGMENT

K.S. PARIPOORNAN, J.---At the instance of the Revenue, the Income-tax Appellate Tribunal (in short, "the Tribunal") has referred the following three questions of law for the decision of this Court:

"(1)Whether, on the facts and in the circumstances of the case, and also in view of the decision of the Kerala High Court in Sarala Devi (1987) 167 ITR 136), the Tribunal is justified in remanding the case to arrive at the factual finding as to whether the land was agricultural in nature?

(2)Whether, on the facts and in the circumstances of the case, - the Tribunal is right in law in directing the authority to apply the decision of the Bombay High Court in the case of Manubhai A. Sheth (1981) 128 ITR 87)?

(3)Whether, on the facts and in the circumstances of the case, the capitalgain on the sale of lands by the assessee is exigible to income-tax as capital gains?"

The respondent is an assessee to income-tax. We are concerned with the assessment years 1980-81 and 1982-83 for which the relevant accounting periods ended on March 31,1980, and March, 31, 1982 respectively. During the previous years relevant to the two assessment years 1980-81 and 1982-83, the assessee sold certain plots of land situate within the corporation limits of Trivandrum. The claim of the assessee was that the land sold was agricultural land. The Income-tax Officer declined to accept the said plea. He also held that tax on capital gains is exigible on the sale of the lands in the instant case, since the lands were situate within the corporation limits of Trivandrum. The appeals filed by the assessee were dismissed by the first appellate authority. However, the Tribunal in I.T.As. Nos.239 and 240/Coch of 1985, by a detailed order, dated May 14, 1987, held that the Income-tax Officer should consider the matter afresh as to whether the land is agricultural or not after bringing on record all relevant facts and circumstances and applying the guidelines in Arundhati Balkrishna v. C.I.T. (1982) 138 ITR 245 (Guj.) The Appellate Tribunal further held that the Income-tax Officer should apply the principles laid down by the Bombay High Court in Manubhai A. Sheth v. N.D. Nirgudkar, Second ITO (1981) 128 TTR 87) in assessing capital gains, if it is ultimately found that the land sold is agricultural in character. It is thereafter at questions formulatedherein above have been referred for the decision of this court.

We have heard counsel. A Bench of this Court in C.I.T. v. T.K. Sarala Devi (1987) 167 ITR 136) has taken the view that sale of agricultural land situate within the corporation or municipal limits will attract income-tax on capital gains. The said Bench decision was followed in subsequent cases, the latest decision being C.I.T. v. Thomas Kurien (1992) 195 ITR 531 (Ker.). This Court dissented from the decision of the Bombay High Court in Manubhai A. Sheth' s case (1981) 128 ITR 87) and held that the profits which arose out of the transfer of agricultural lands are exigible to capital gains tax. In the light of the Bench decisions of this Court, we have to hold that, even if the lands sold within the corporation limits were agricultural lands, the sale will attract capital gains tax under the Income-tax Act.

The Tribunal directed the Income-tax Officer to find out whether the lands sold were agricultural or not. The officer was directed to apply Arundhati Balkrishna' s case (1982) 138 ITR 245 (Guj.) We assume for the purpose of this argument that the land sold by the assessee was agricultural in character. But, it is the admitted case from the very beginning that the properties sold are situate within the corporation limits of Trivandrum and, in this view of the matter, the capital gains on the sale of lands will be exigible to income-tax We are of the view that the order of remit made by the Tribunal will result in a futile exercise by the assessing authority. It is so, even if the assessing authority finds that the lands sold are agricultural within the corporation limits of Trivandrum. Once the property sold is within the corporation limits, whatever be its character, either agricultural or otherwise, it attracts the provisions relating to capital gains under the Income-tax Act. That is the very basis of the earlier decision of this Court rendered in Thomas Kurien' s case (1992) 195 ITR 531). The Tribunal was in error in ordering a remit and in further directing the officer (ITO) to apply the ratio of Arundhati Balkrishna' s case (1982) 138 ITR 245 (Guj.). The order of the Tribunal, dated May 14, 1987, on the above aspects stated is vacated.

We answer the questions as follows:

Question No.l:

In view of the Bench decisions in T.K. Sarala Devi' s case (1987) 167 ITR 136 (Ker.), it was unnecessary to conduct investigation to see whether theland is agricultural in nature.

Question No.2:

This question is academic. Even if it turns out that the land transferred is agricultural land, since it is situate within the corporation/municipal limits, the assessee cannot escape from the liability to pay tax on capital gains. We answer question No.2 in the negative against the Assessee and in favour of the Revenue.

Question No.3:

On this question, we are of the view that, if the capital gains arose to the assessee on the sale of lands by him, which are situate within the municipal or corporation limits, it is certainly exigible for the levy of the said capital gains tax. We answer question No3 in the affirmative, against the Assessee and in favour of the Revenue.

The references are answered as above.

A copy of this judgment under the seal of this Court and the signature of the Registrar will be forwarded to the Income-tax Appellate Tribunal, Cochin Bench.

M.BA./2389/TReferences answered.