TMI Blog1993 (9) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... and in the circumstances of the case, the Tribunal was right in holding that the land in question admeasuring 30,885 sq. yards excluding 2,607 sq. yards, which was admittedly non-agricultural land, was an agricultural land within the meaning of section 2(14) of the Income-tax Act, 1961, and, therefore, on the sale thereof, tax on capital gains resulting therefrom was not leviable ?" The assessment year concerned herein is 1970-71. The appellants in these four appeals are co-owners of a plot of land admeasuring in all 30,885 sq. yds., situated within the revenue limits of Navagaon village. It is situated within the municipal limits of Surat Municipality and is situated at a distance of one kilometre from the Surat railway station. This plot of land was purchased on February 1, 1936, by the ancestor of the appellants for a consideration of Rs. 5,425. After the death of the said ancestor, the land was inherited by the father of the assessees, who died on February 12, 1966. On March 28, 1958, a portion of the said plot to an extent of 2,067 sq. yds. was converted to non-agricultural purposes after obtaining requisite permission under section 65 of the Bombay Land Revenue Code. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e housing society for constructing houses and buildings. (4) It is sold on a per sq. yard basis at Rs. 23 per sq. yd. on May 30, 1969. (5) No agricultural operations such as growing of wheat, bajra, juwar, rice, groundnuts or cotton crop have been carried on for the last four years. Only grass for fodder is grown in the last year. (6) An application for permission to sell the land to a housing society under section 63 of the Land Revenue Code was made in August, 1968, some nine months before the actual sale effected in May, 1969, and it was granted on February 24, 1969, about a month prior to the actual sale. (7) More than 15 years back a parcel of 2,607 sq. yards out of this very land was converted to non-agricultural user by constructing a chawl on it by the owners themselves after obtaining the requisite permission to convert the land to non-agricultural user under section 63 of the Land Revenue Code. (8) Application to convert the land under transaction to non-agricultural user was not made before the sale deed was executed on May 30, 1969. It was subsequently made by the purchaser-housing society much later. (But then permission could have been applied for if so desi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... date of its sale. Learned counsel submitted that applying the several tests evolved by the Gujarat High Court, on a review of the entire case law on the subject, in CIT v. Siddharth J. Desai [1983] 139 ITR 628 (Guj), the said land must be held to be an agricultural land on the date of its sale. On the other hand, Sri Manchanda, learned counsel appearing for the Revenue, supported the reasoning and conclusion of the High Court. Counsel submitted that, apart from the factors mentioned by the High Court in favour of its conclusion, there is the further fact that a town planning scheme (draft scheme) was published in March, 1967, covering the said land and that by the date of execution of the sale deeds, the draft scheme was also declared. The sale deeds concerned herein were executed in the month of May, 1969. By virtue of clause (viii) in section 47-which clause was inserted by the Finance Act, 1970, with effect from April 1, 1970-"any transfer of agricultural land in India effected before the 1st day of March, 1970" is exempt from the levy of capital gains tax. By the very same Finance Act, it may be mentioned, agricultural lands situated within the jurisdiction of municipalitie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... land is exempted from the purview of the definition of the expression "assets", it is "impossible to adopt so wide a test as would obviously defeat the purpose of the exemption given". The idea behind exempting the agricultural land is to encourage cultivation of land and the agricultural operations. "In other words this exemption had to be necessarily given a more restricted meaning than the very wide ambit given to it by the Full Bench of the Andhra Pradesh High Court". (b) What is really required to be shown is the connection with an agricultural purpose and user and not the mere possibility of user of land, by some possible future owner or possessor, for an agricultural purpose. It is not the mere potentiality, but its actual condition and intended user, which have to be seen for purposes of exemption. (emphasis added). (c)"The person claiming an exemption of any property of his from the scope of his assets must satisfy the conditions of the exemption." (d) "The determination of the character of land, according to the purpose for which it is meant or set apart and can be used, is a matter which ought to be determined on the facts of each particular case." (e) The fact that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision. The decision of the Gujarat High Court in CIT v. Siddharth J. Desai [1983] 139 ITR 628, relied upon strongly by learned counsel for the appellant, reviewed several earlier decisions of the Gujarat High Court as well as the decision of this court in the Begumpet Palace case [1976] 105 ITR 153 and has evolved the following 13 factors/indicators applying which the question has to be answered. The 13 factors are the following (at page 638) ; "(1) Whether the land was classified in the revenue records as agricultural and whether it was subject to the payment of land revenue? (2) Whether the land was actually or ordinarily used for agricultural purposes at or about the relevant time ? (3) Whether such user of the land was for a long period or whether it was, of a temporary character or by way of a stop-gap arrangement ? (4) Whether the income derived from the agricultural operations carried on in the land bore any rational proportion to the investment made in purchasing the land ? (5) Whether the permission under section 65 of the Bombay Land Revenue Code was obtained for the non-agricultural use of the land ? If so, when and by whom (the vendor or the vendee) ? Wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6, he obtained permission to convert the said land to non-agricultural use. In June, 1968, he entered into an agreement with a housing co-operative society to sell three acres out of it. The sale deed was executed in October, 1968. In his assessment proceedings, the assessee claimed that the surplus income arising from the sale of land was exempt from tax inasmuch as it was agricultural land at the time of its sale. The matter reached the High Court. The Division Bench referred to several facts established from the record. Some of them supported the assessee's stand while some others militated against his contention. The facts found in favour of the assessee were : (1) at the time of its purchase by the assessee, the Ajni land was agricultural land ; (2) it had been under cultivation by the assessee till the date of its sale ; (3) it continued to be assessed to land revenue as agricultural land until it was sold ; (4) the intention of the assessee, when he purchased it, was to acquire agricultural land for agricultural purposes; (5) the assessee's use of it was the normal use by an agriculturist ; (6) it was not within any Town Planning Schemes ; and (7) no material has been produc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f. The third member of the Tribunal (to whom the matter was referred on a difference of opinion arising between the two members who first heard the appeal) found the following facts which are mutually inconsistent : (a) there were unprecedented floods in the Tapti river in the year 1968, which rendered the said land useless for cultivation for a couple of months because of heavy accumulated layers of mud and slush; (b) the next monsoon sowing season would have started in June, 1969, but even before that the land was sold in May, 1969 ; (c) there is evidence of agricultural cultivation and raising of "loni" grass during the year 1968-69 ; (d) for a period of seven months from October, 1968, to April, 1969, the land remained uncultivated. In our opinion, the above findings considered together do negative the theory of actual cultivation of the said land during any part of the year 1968-69. It there were floods in the Tapti river in the year 1968-this must be during the months June to September-and there was no cultivation during the period October, 1968, to April, 1969, it is difficult to see when the grass was raised in the said land. We conclude, on the basis of the facts found by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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