Compensation for compulsorily acquired agricultural land is a capital receipt and not taxable under the AIT Act.

1 Revision Petitioner is a public limited company carrying on business of growing and selling rubber at its Malankara Rubber Estate at Thodupuzha. Petitioner is an assessee to agricultural income tax under the Agricultural Income Tax Act, 1950 (for short 'the AIT Act'). For the assessment year 1981-82 the petitioner was assessed under the AIT Act by order dated 5-12-1983, copy of which is Annexure-A. Petitioner states that the said assessment was accepted by the petitioner and that the petitioner had paid the full tax as per the said assessment. During the period 1974-75, corresponding to assessment year 1975-76, onwards portions of the petitioner's estate were being acquired for the Muvattupuzha Valley Irrigation Project as per the provisions of the Kerala Land Acquisition Act and the petitioner was being paid compensation for the same. A total of 361.256 Acres were acquired during the period 1974-75 to 1980-81. On 2-4-1991 the respondent issued a notice under S.34 of the AIT Act, copy of which is Annexure B, proposing to cancel the petitioner's assessment for the year 1981-82 and to remit it back to the Assessment Officer on the ground that the compensation received by the petitioner for the acquisition of the said 361.256 acres has not been included in the assessment. In response to Annexure-B notice the petitioner filed objection, copy of which is Annexure-C. But the respondent by order dated 12-7-1991, copy of which is Annexure D remitted the matter to the Assessing Officer for fresh disposal. The said order is challenged in this revision.

2 Annexure-B states that as per the decision in Commissioner of Income Tax , West Bengal v, All India Tea & Trading Co. Ltd. (113 ITR 545) compensation paid for requisitioned land used for agricultural purpose is agricultural income. In the first paragraph in Annexure-D it is stated "....On further verification it is seen that an extent of 361.256 acres of agricultural land (rubber estate and coconut plantation) had been acquired by Government upto 31-3-1981 from the company for Malankara Dam", and that the amount of compensation received by the company is not seen adjusted in accounts. Thus the first paragraph of Annexure-D would admit that the receipt of amount was compensation amount of the acquisition of 361.256 acres of agricultural land. After stating so, the order proceeds to state that the compensation received for the 'acquisitioned' lands which were used for agricultural purposes by the assessee is agricultural income as held in the decision in All India Tea Trading Co. Ltd.'s case (113 ITR 545) and in the concluding paragraph after mentioning the objection of the assessee to the effect that the compensation received is capital in nature, it proceeds to state that the sale value of land though can be claimed as capital receipt, the value of crop cannot be so, that if the land was put to agricultural purpose after the acquisition the compensation represents use of agricultural land for agricultural purposes and hence agricultural income, and that this requires further probe to ascertain the true nature of transaction. We cannot but notice the inconsistency and ambiguity in Annexure. D.

3 The validity of the order is assailed contending that, as the amount is capital receipt and not revenue the same cannot be taxed under the AIT Act. Petitioner maintained, that when the land is acquired, the trees thereon cannot be separately dealt with or their value treated as agricultural income. Then it was contended, the purported exercise of jurisdiction under S.34 of the AIT Act, 1950 since it was not within a reasonable time the order was invalid and that since the order entrenches upon the power of the Assessing Authority was invalid on that ground also.

4 In the circumstance we may consider the first point raised to the effect that the amount is capital receipt. According to the petitioner the decision in All India Tea Trading Co. Ltd.'s case (113 ITR 545) referred to in the notice Annexu