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Commissioner of Income-tax Vs. Chhotanagpur General Trading Co. Ltd. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKolkata High Court
Decided On
Case NumberIncome-tax Reference No. 150 of 1965
Judge
Reported in[1971]79ITR161(Cal)
ActsIncome Tax Act, 1922 - Sections 2(4A) and 12B
AppellantCommissioner of Income-tax
RespondentChhotanagpur General Trading Co. Ltd.
Appellant AdvocateAmiya K. Basu and ;D.K. Sen, Advs.
Respondent AdvocateA. Roy, Adv.
Excerpt:
- .....found that the land in question yielded agricultural income only. so the income derived from the land is agricultural income. the lease with which we are concerned had transferred to the assessee certain rights in perpetuity. it also appears that the lease had not reserved any right of re-entry to the lessor. these rights which the assessee was holding had been transferred by the assessee out of which the surplus amounts have been realised, which is the subject-matter of this reference. 6. therefore, under sub-clause (iii) of section 2(4a) of the income-tax act, 1922, this land would be excluded from the definition of ' capital asset '. in view of the nature of the lease and the interest of the assessee in the said lease as indicated hereinbefore we are of the opinion that the transfer.....
Judgment:

Sabyasachi Mukharji, J.

1. This reference arises out of the assessments made for assessment years 1959-60 and 1960-61, for which relevant accounting years were financial years ending on 31st March, 1959, and 31st March, 1960, respectively. The assessee is a limited company and the assessee owned certain agricultural lands and carried on certain agricultural operations. Under a registered instrument dated 23rd March, 1948, M/s. Ranchi Zamindari Ltd.., which had owned certain agricultural lands in the District of Ranchi, settled a portion of these lands with the assessee-company. It bad been recited in the said deed that the said M/s. Ranchi Zamindari Ltd. had extensive landed property in the District of Ranchi and since the said company was long desirous of developing the various resources of the said property for the purpose of increasing agricultural production and whereas the assessee had expressed a desire to take lease of the lands for the aforesaid purpose, the said M/s. Ranchi Zamindari Ltd. settled with the said Chhotanagpur General Trading Co. Ltd., being the assessee herein, lands fully described in the deed ' in Raiyati ' for the purposes mentioned in the deed. The said indenture further provided that the assessee would pay a sum of Rs. 1,500 as premium and an annual rent of Rs. 70-13-0 and be entitled to cultivate the lands demised with its own capital and labour in a proper and scientific manner with the sole object of increasing the production of land. Under the said lease the assessee was entitled to excavate tanks and undertake schemes for the development of irrigation facilities and also to build houses, godowns and sink wells in the said land. No period of demise was mentioned in the said indenture. During the accounting years for the assessment years 1959-60 and 1960-61, some of these lands were acquired partly by the Government of Bihar and some of these lands were partly transferred by the assessee to private parties. The surplus arising from such transactions amounted to Rs. 29,497 in the first year and Rs. 18,017 in the second year. The Income-tax Officer held that these two amounts, were taxable as capital gains under Section 12B of the Indian Income-tax Act, 1922. The Income-tax Officer was of the opinion that the assessee had only a lessee's interest in the land and the transfer by the assessee of that interest was not a transfer of land from which agricultural income was derived.

2. There was an appeal before the Appellate Assistant Commissioner who held that the income derived by the assessee from the lands was agricultural income. He, however, held that the document which had transferred these lands to the assessee was a deed of lease and the assessee's interest in the land was not ownership in the land but only the leasehold rights therein. He was, therefore, of the opinion that these amounts were liable to be taxedunder Section 12B of the Indian Income-tax Act, 1922. He, accordingly, upheld the order of the Income-tax Officer.

3. There was a further appeal before the Tribunal. The Tribunal held that the amounts realised from the transfers were not assessable under Section 12B of the Indian Income-tax Act, 1922.

4. Under Section 66(1) of the Indian Income-tax Act, 1922, the following question has been referred to this court:

' Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the transfer by the assessee of its interest under the indenture dated the 23rd March, 1948, constituted a transfer of the land which was not a capital asset under Section 2(4A) of the Indian Income-tax Act, 1922, and the profits and gains arising therefrom were not assessable as capital gains under Section 12B for the assessment years 1959-60 and 1960-61 ?'

5. Under Section 12B of the Indian Income-tax Act, 1922, tax shall be payable by an assessee in respect of any profits or gains arising from the sale, exchange, relinquishment or transfer of capital asset effected after the 31st March, 1956, and such profits and gains shall be deemed to be the income of the previous year in which the sale, exchange, relinquishment or transfer took place. Therefore, there has to be, in order to attract the provisions of Section 12B, a sale or a transfer or an exchange or relinquishment of a capital asset after 31st March, 1956. ' Capital asset ' has been defined under Section 2(4A) of the Indian Income-tax Act, 1922, so far as it is material for this purpose, as a property of any kind held by an assessee but excluding any land from which income derived is agricultural income. It has been found that the land in question yielded agricultural income only. So the income derived from the land is agricultural income. The lease with which we are concerned had transferred to the assessee certain rights in perpetuity. It also appears that the lease had not reserved any right of re-entry to the lessor. These rights which the assessee was holding had been transferred by the assessee out of which the surplus amounts have been realised, which is the subject-matter of this reference.

6. Therefore, under Sub-clause (iii) of Section 2(4A) of the Income-tax Act, 1922, this land would be excluded from the definition of ' capital asset '. In view of the nature of the lease and the interest of the assessee in the said lease as indicated hereinbefore we are of the opinion that the transfer of these interests held by the assessee under the lease would amount to transfer of land from which the income derived is agricultural income and in that view of the matter it would not be a transfer or sale or relinquishment of any capital asset as defined in Section 2(4A) of the Income-tax Act, 1922. Therefore, the amounts realised from this transfer cannot be subjected to tax under the provisions of Section 12B of the Income-tax Act, 1922.

7. In that view of the matter the question referred to this court must be answered in the affirmative. The Commissioner of Income-tax will pay costs of this reference.

Sankar Prasad Mitra, J.

8. I agree.


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