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2015 (3) TMI 146 - AT - Income TaxShort term capital gain - compulsory acquisition of agricultural land - Held that:- Both the authorities below have misdirected themselves in reaching to the conclusion that the land acquired by the GIDC is a capital asset in view of the fact that the area in which the land situated is notified by the appropriate authority as a development area. Both the authorities below have failed to consider the nature of the land prior to acquisition and notification by the appropriate authority. It has to be borne in mind that the correct test that has to be applied is whether on the date of the sale the land was agricultural land or not. Because after the sale the purchaser was going to put the land to non-agricultural use, it does not mean that the land had ceased to be agricultural land at the date of sale. The crucial date for the purpose of finding out the character of the land is the date of sale and the question that has to be asked is whether on the date of sale the land was agricultural land or not. However, we find that what has weighed with the Tribunal, inter alia, is the fact that after the sale the purchaser was going to use the land for non- agricultural purposes and it is in the light of what was going to happen in future that the Tribunal held that the land was non- agricultural in character at the relevant time. It must be borne in mind, as was held by this Court in Chhotalal Prabhudas vs. CIT (1978 (10) TMI 35 - GUJARAT High Court), that if the land is actually used for agricultural purposes as indicated in Manilal Somnath's case (1976 (3) TMI 41 - GUJARAT High Court) or by the Supreme Court in Begumpet Palace's case (1976 (8) TMI 2 - SUPREME Court), at least, prima facie it can be said to be land which is either actually used or ordinarily used or meant to be used for agricultural purposes. If it is actually used at the relevant date for agricultural purposes and there are no special features, as for example, a building site being actually used as a stop-gap arrangement for agricultural purpose, it would be agricultural land. Potential use of the land as nonagricultural land is totally immaterial. Entries in the record of rights are good prima facie evidence regarding land being agricultural and if the presumption raised either from actual user of the land or from entries in revenue records is to be rebutted, there must be material on the record to rebut the presumption. The approach of the factfinding authorities, namely, the IT authorities and the Tribunal, should be to consider the question from the point of view of the presumption arising from entries in the record of rights or actual user of the land and then consider whether that presumption is dislodged by the presence of other factors in the case. The orders of the authorities below are set aside and the matter is restored back to the file of AO for de novo assessment. The AO is hereby directed to verify the documents as furnished by the assessee in support of its claim that the land was agricultural before acquisition and decide this issue in the light of the ratio laid down by the Hon’ble Jurisdictional High Court in the cases of CIT vs. Siddharth J.Desai (1981 (9) TMI 48 - GUJARAT High Court) and Gordhanbhai Kahandas Dalwadi vs. CIT (1980 (10) TMI 56 - GUJARAT High Court). - Decided in favour of assessee for statistical purposes.
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