UNION OF INDIA vs S. MUTHYAM REDDY

The Supreme Court held that capital gains from the sale of agricultural land cannot be classified as agricultural income under Section 2(1A) of the Income Tax Act, 1961, following the amendment by the Finance Act, 1989. The Court interpreted Section 2(14)(iii) to exclude all agricultural land from the definition of capital asset, thus invalidating the High Court's ruling that allowed taxation of such income. Consequently, the appeal was allowed, and the High Court's order was set aside.