TMI Blog1999 (10) TMI 98X X X X Extracts X X X X X X X X Extracts X X X X ..... th, in terms of section 2(e)(2) of the Wealth-tax Act, 1957, on the ground that the lands are agricultural lands. The Finance Act, 1983 has revived the levy of wealth-tax in the case of closely held companies, but has excluded the agricultural lands from the purview of 'assets' by virtue of section 40(3)(v) of the Finance Act, 1983. It is in this context, the assessee-company has claimed exemption from the levy of wealth-tax, on the ground that the land purchased and possessed by it in Tamil Nadu is an agricultural land. The appellant claimed that the land was purchased from 25 different parties for the purpose of setting up an explosive factory and to use the adjacent portion of the factory premises for agricultural purpose. The assessee-company also stated before the Assessing Officer that the land was classified in the revenue records as agricultural land, and it was not put to any alternative use, and as on the valuation dates, relevant for the assessment years under appeal, the land continued to be agricultural land only. It was also contended that the land was situated in an undeveloped area, where there is no possibility of converting it into house plots or putting to any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l' and accordingly denied the exemption claimed by the assessee-company for all the years under appeal. 3.1 When the matter was taken up in appeal, the first appellate authority endorsed the view taken by the Assessing Officer, and held that the assessee was not entitled for exemption as the land was non-agricultural in nature. The learned CWT(A) relied on the decisions of the Supreme Court in Officer In Charge (Court of Wards) case, Sarifabibi Mohmed Ibrahim v. CIT [1993] 204 ITR 631; and CIT v. Gemini Pictures Circuit (P.) Ltd. [1996] 220 ITR 43/85 Taxman 594 and of the Bombay High Court in CIT v. V.A. Trivedi [1988] 172 ITR 95/38 Taxman 102. Examining the facts of the case in the light of the decisions referred to above, the learned CWT(A) decided the issue in the following manner--- "1.5 A reading of all these decisions would show that whether a particular land is agricultural is to be decided on a totality of the relevant facts and circumstances. The intended user of the land is a major factor to be taken into consideration. Classification of the land as agricultural in revenue records is not conclusive but only raises a rebuttable presumption. The intended user of the lan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A) are distinguishable on facts and have no application on the facts of the appellant's case. 4. The learned CIT(A) ought to have appreciated that it is not necessary to carry on the agricultural operations to claim the land as agricultural land, if the other conditions as canvassed by the appellant before both the Wealth-tax Officer and the CIT(A) were satisfied. 5. For these and such other grounds that may be advanced at the time of hearing, the appellant prays that the addition of Rs. 1,30,772 made as the value of the alleged non-agricultural land may be deleted." 6. We heard Shri K.K. Viswanatham, the learned counsel appearing for the assessee-company, and Shri T. Jayashankar, the learned senior departmental representative for the revenue. The learned counsel for the assessee submitted that the lands were used for agricultural purposes before the purchase of the land by the assessee-company, and the land was described in the revenue records as agricultural land. The assessee-company has not utilised the land for any non-agricultural purposes. The nature of the land, as such, before and after the purchase by the assessee, has not undergone any change, and by the efflux ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (P.) Ltd.'s case, he submitted that the property involved in that case was the one situated on Mount Road, Madras, and not in any remote village as in the present cases. 7. The learned counsel further argued that the factum of assessee's failure to carry on any agricultural operations on the land purchased by it, will not alter the character of the land from agricultural to non-agricultural nature. He submitted that the intention of the assessee alone is again not the determining factor, as the intention of the parties may change from time to time and the intention of the assessee and the purpose for which it was purchased, do not change the character of the land which is constant, unless and until the assessee-company has actually done something to change the character of the land, in pursuance of the object for which it purchased the land. In support of these contentions, the leaned counsel relied on the decision of the Bombay High Court in CWT v. H. V. Mungale [1984] 145 ITR 208 / [1983] 12 Taxman 201, and submitted that merely because the land in question was not utilised by the assessee for agricultural purposes and the land was allowed to remain fallow after purchase by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lied upon by the learned counsel are distinguishable from the facts of the present case. He submitted that as far as the present case is concerned, after the purchase of the land, the assessee-company has not at any time put the land to agricultural use, and the intention of the assessee while purchasing the land was to set up an explosive factory; that the assessee-company never had any intention to carry on agricultural activity on the said land, and that as rightly pointed out by the learned CIT(A), the assessee-company, being a limited company is governed by its Memorandum of Association, the objects clause of which do not include agricultural operations. In the light of these factual aspects of the matter, the learned Departmental Representative submitted that by any means, we cannot presume any intention on the part of the assessee-company to carry on any agricultural operations on the land in question. He further submitted that the assessee has not even set apart the land in question for agricultural purposes. According to him, the lower authorities were very much correct in denying the claim of the assessee for exemption from Wealth-tax, in respect of the land in question. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orrectness of the view taken by the lower authorities with regard to the nature of the land in question. 10. As already noted above, from the assessment year 1983-84, agricultural lands are exc`uded from the scope of the term 'assets' under section 2(e) of the Wealth-tax Act. As such, agricultural lands are entirely excluded from the computation of net wealth. It is in this context that the assessee-company has claimed exemption in respect of the land purchased by it sometime in the years 1982-83 and 1983-84, from the levy of wealth-tax. Now, the question is whether the said land, purchased by the assessee for the purpose of setting up an explosives factory can come within the scope of the term 'agricultural lands' exempted from the levy of Wealth-tax. To decide this question, we have to examine whether it is the actual use or the intention of the owner of the land that determines the nature of the land to be an agricultural one, or whether the description of the land in revenue records or the nature of the land by itself with its suitability only for agricultural purposes, together with other features that clinch the issue about the agricultural nature of the land. 11. Setting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l the relevant facts. 14. In the subsequent decision in Gemini Pictures Circuit (P.) Ltd.'s case, the Hon'ble Supreme Court reiterated that the question whether a particular land is agricultural land, has to be decided on consideration of totality of relevant facts and circumstances. There may be circumstances for and against a view. They should be put together and a reasonable decision arrived at considering totality. One has to take a realistic view and see how the persons selling and purchasing it understood it. The decisions rendered by the Courts are in the nature of guidelines. No hard and fast rules can be laid down in the matter, for the reason that it is essentially a question of fact. 15. It is clear from a perusal of the above decisions that whether a particular land is an agricultural land or not is essentially a question of fact, which has to be answered on consideration of totality of facts and circumstances of the case, and weighing the points in favour of and against a particular view together. Further, it is not merely the potentiality of the land for being used for agricultural purpose, or its non-suitability for any other purpose that determines the nature of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e factory as and when finances are available, it equally cannot be said that the land in question is likely to be used for agricultural purposes, much less for a reasonable span of time after the relevant valuation dates. Potentiality of the land for being used for agricultural purposes or non-suitability of land for any other purposes, much less the development in the area or the activities in the neighbouring lands, can come to the rescue of the assessee in determining the agricultural nature of the land in question, or consequential exemption from wealth-tax in relation thereto. 17. As for the case-law relied upon by the learned counsel for the assessee, we are afraid, they are not of much help in the determination of the issue involved in these matters under Wealth-tax Act. The decisions relied on by the learned counsel reported in Kalpetta Estates Ltd.'s case, D.L.E. United Ltd.'s case and Gordhanbhai Kahandas Dalwadi's case are all cases dealing with exigibility to capital gains tax. In the context of examining exigibility to capital gains tax, the nature of land has to be examined only once, with reference to the date of sale or purchase, and the examination in such cases ..... X X X X Extracts X X X X X X X X Extracts X X X X
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