TMI Blog1989 (12) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year 1970-71 are not agricultural lands and, therefore, liable to be assessed to capital gains tax ? I. T. R. No. 112 of 1989: Whether the Tribunal was right in law in holding that 343.35 acres situated in Vellarmala and 271.39 acres situated in Charity Estates sold during the previous year relevant to the assessment year 1971-72 are not agricultural lands and, therefore, liable to be assessed to capital gains tax ? The assessee/applicant is a limited company mainly dealing with rubber. They are owners of an estate known as Chulika Estate. Vellarmala Estate is an adjacent estate. It was owned by a company which went into liquidation. The assessee-company acquired the Vellarmala Estate from the owners. The resolution of the board of the assessee-company approving the purchase of the estate is dated October 11, 1949. After October 1, 1956, Vellarmala Estate was not subject to land revenue. The estate consisted of timber from forest of spontaneous growth. The forest came under the Madras Preservation of Private Forests Act. During the relevant previous years, the assessee sold portions of the land in Vellarmala Estate. In 1970-71, it sold a portion in Chulika Estate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -tax Appellate Tribunal. The appellate order of the Tribunal from which Income-tax Reference No. 132 of 1989 arises is dated May 23, 1980. Similarly, the appellate order of the Tribunal, relevant for Income-tax Reference No. 9 of 1986, is March 26, 1981, and the appellate order, relevant for Income-tax Reference No. 112 of 1989, is dated March 26, 1981. In the latter cases, the earlier decision rendered for the assessment year 1969-70 in Income-tax Application No. 59 (Coch) of 1978-79 dated May 23, 1980, was followed. Similarly, in this court, counsel for the assessee argued all the three cases on the basis of the relevant appellate order passed by the Appellate Tribunal in the appeal for the assessment year 1969-70 (Income-tax Reference No. 132 of 1989). We heard counsel for the assessee, Mr. C. N. Ramachandran Nair of Menon and Pai, as also counsel for the Revenue, Mr. P. K. R. Menon. Counsel for the assessee highlighted the fact that the assessee/applicant purchased the nearby estate, known as Vellarmala Estate, in 1949 from a plantation company in liquidation. The resolution of the board dated October 11, 1949, as also the attendant circumstances will show that the Vellarma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... racter of the lands changed at any time and they turned out or became agricultural in character. Counsel for the Revenue also stressed the fact that the findings of fact arrived at by the Appellate Tribunal to the effect that the assessee used the land merely to extract timber and that it did not plant any tree, that it was a private forest originally and remained as such without any development, that no agricultural operations were carried out subsequently on the land, that the purchase of the estate was influenced by the presence of valuable timber which was valued at Rs. 5 lakhs and since the lands sold were forest lands coming under the Madras Preservation of Private Forests Act, they cannot be said to be agricultural lands, are all findings of fact and in so far as the assessee has not challenged these findings of fact as such, the conclusion on the basis of the above findings is inevitable that the forest lands containing trees of spontaneous growth are not agricultural lands. On an evaluation of the rival pleas put forward before us, we are of the view that the Appellate Tribunal was justified in holding that the assessee failed to prove its case, namely, that the lands so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... late Tribunal held that the land sold is clearly forest land coming under the Madras Preservation of Private Forests Act. On these findings, the conclusion is irresistible that the forest lands containing trees of spontaneous growth are not agricultural lands. The Supreme Court has held so in V. Venugopala Varma Rajah's case [1976] 105 ITR 593. The onus is on the assessee to show that the character of the lands changed, after the acquisition of the capital asset by the assessee, and that the lands were agricultural lands at the time of transfer of the asset. The Appellate Tribunal held that the assessee totally failed to substantiate the said plea. We are of the view that the approach and conclusion of the Appellate Tribunal to hold that the asset transferred during the relevant previous years is a capital asset and not an agricultural land and so exigible to capital gains tax, is valid, legal and reasonable. One aspect deserves notice at this stage. The material date with reference to which the question whether the particular asset (land) which has been sold is agricultural land or not, is to be decided with reference to the date of sale. In other words, in order to entitle the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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