1986 (1) TMI 129 - AT - Income Tax

Summary

Issues Involved:
1. Determination of the nature of the lands (agricultural or non-agricultural).
2. Valuation of the lands if determined to be non-agricultural.

Issue-wise Detailed Analysis:

1. Determination of the Nature of the Lands:
The primary issue in these appeals was whether the lands in question were agricultural or non-agricultural. The facts presented were:
- The lands were recorded as agricultural in the revenue records.
- They were cultivated and used for agricultural purposes until their sale in December 1979.
- No application was made for conversion to non-agricultural use.
- The lands were surrounded by building sites, located in a developed area within municipal limits, and covered under a Town Planning Scheme.
- An agreement to sell the lands to a housing co-operative society was made in 1975, but the sale was delayed due to legal issues.

The WTO held the lands to be non-agricultural, applying the decision of the Gujarat High Court in CIT v. Sarifabibi Mohmed Ibrahim. The AAC confirmed this decision but the assessee argued that the lands were used for agricultural purposes and should be valued as such.

The Tribunal considered the totality of the circumstances, emphasizing the Supreme Court's observation that the character of the land should be determined based on its actual use and the intention of the owner. Despite the potential for non-agricultural use and the high sale price agreed upon, the Tribunal found that the lands were used for agricultural purposes until their sale and were recorded as such in the revenue records. The Tribunal concluded that the lands were agricultural in character.

2. Valuation of the Lands:
Since the Tribunal determined that the lands were agricultural, the question of valuation as non-agricultural land did not arise. The WTO had valued the lands at Rs. 175 per sq. yd. based on the sale agreement, while the assessee argued for a valuation of Rs. 10 per sq. yd. based on the Land Ceiling Act. The AAC applied a discounting factor to the sale price to determine the value for earlier years.

However, with the lands being classified as agricultural, the Tribunal did not need to address the valuation issue further. Consequently, the assessee's appeals were allowed, and the department's appeals were rejected.

Conclusion:
The Tribunal held that the lands in question were agricultural in character based on their use and the revenue records. As a result, the valuation issue did not survive, leading to the allowance of the assessee's appeals and the rejection of the department's appeals.