TMI Blog1996 (3) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... the Madras High Court (see [1981] 150 ITR 686) answering the two questions referred to it at the instance of the respondent-assessee in favour of the assessee and against the Revenue. The two questions are (page 690) : "(i) Whether, on the facts and in the circumstances of the case, the lands sold during the year of account was not 'agricultural land in India' during the year of assessment and, hence, not liable to be excluded from the definition of the words 'capital asset' ? (ii) Whether the surplus realised on the sale of land in the year of account is not exempt from capital gains ?" The property known as Spencer's Hotel comprising 17 acres, 16 grounds and 825 sq. ft. situated on Mount Road, Madras, was purchased by one Gulab Bhai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its sale is not exigible to tax under section 45 of the Income-tax Act, 1961. The Income-tax Officer rejected the contention holding that having regard to the location and the physical characteristics of the land, the development and use of the adjoining lands and the price at which and the purpose for which it was sold, go to show that it was not an agricultural land. On appeal, the Appellate Assistant Commissioner affirmed the view taken by the Income-tax Officer. On further appeal to the Tribunal, there was a difference of opinion between the Accountant Member and the Judicial Member. The Accountant Member attached great importance to the fact that the land in question was actually under cultivation on the date of the sale and held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be agricultural land. In this appeal, the view taken by the High Court is questioned. The land is situated within the limits of the Madras Municipal Corporation. It is located on the Mount Road which is the main artery of the city and its business centre. Even when the assessee purchased it in 1950, there was a hotel building located in the said land. In the municipal records, the property was registered as urban land and urban land tax was being levied thereon. It bore the municipal door number " 151, Mount Road, Madras". After purchasing the land, the assessee put up two more buildings thereon in the northern portion which together occupied an extent of 20 grounds which means that they were substantially large buildings. One of them ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on any land nearby. In the face of the above circumstances, the mere fact that vegetables were being raised thereon at the time of the sale or for some years prior thereto does not change the nature and character of the land. Obviously, it was only a stop-gap activity. It was not a true reflection of the nature and character of the land. It is a matter of common knowledge that in the heart of New Delhi, there are houses with large compounds wherein a portion of the open land is used for raising vegetables. That does not make those portions agricultural lands. In the case of the assessee too, the raising of vegetables was a stop-gap activity until the assessee found a better use for it, whether construction of buildings or sale. It is well t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le. Potential non-agricultural use or the fact that development had taken place in the vicinity of the land, it was held, do not militate against the fact that it was agricultural land. In the next case too, the land was registered as agricultural land and permission to convert it into non-agricultural land was not obtained before the date of sale. In the circumstances, it was held that the mere fact that it was sold at a high price only indicates its potentiality for non-agricultural use. On a consideration of the entirety of the circumstances, it was held that it was agricultural land. A recent decision of this court in Sarifabibi Mohmed Ibrahim v. CIT [1993] 204 ITR 631, rendered by a Bench comprising one of us (B. P. Jeevan Reddy J.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee had agreed to sell the land for admittedly non-agricultural purposes. The ratio of the said decision was approved in Sarifabibi's case [1993] 204 ITR 631 (SC). We do not think it necessary to multiply the cases, since, in our respectful opinion, no other conclusion is reasonably possible in the facts of the case before us than the one arrived at by us. All the three authorities under the Act too arrived at the same conclusion. With great respect to the learned judges of the High Court, we find their conclusion wholly unsustainable and unacceptable. The appeal is accordingly allowed, the judgment of the High Court is set aside and the two questions referred under section 256(1) are answered in favour of the Revenue and against ..... X X X X Extracts X X X X X X X X Extracts X X X X
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