TMI Blog1981 (7) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... sum of Rs. 97,640. The estate had been acquired before 1st January, 1954, and the market value of the area sold was a profit of Rs. 97,640. On being asked by the ITO why the profit should not be treated as a capital gain under s. 45(1) of the I.T. Act, 1961, the assessee's explanation was that the land sold was suitable for the cultivation and the purchasers were engaged in cultivation of tea in adjoining areas and that the land was agricultural land. The ITO took the view that the land sold was not agricultural land as no agricultural operation had taken place therein and that it was full of forest trees of spontaneous growth. He treated the profit from the sale of land as capital gains and brought the same to tax. The assessee came up i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee that the land sold had been developed and was fit for being immediately put to tea cultivation and that it was only on that account that it was purchased by the owners of the adjoining tea estate. He also referred to the certificate from the assessee's garden manager to the effect that the land sold was not forest and it was pointed out that the certificate of the manager was based on the details of the land as given in the government revenue records. It was also pointed out that it was for the assessee to show that the capital asset was agricultural land and hence did not constitute the capital asset as defined in s. 2(14) of the I.T. Act, 1961. It was further observed that the tea estate was acquired long ago when it was entir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as agricultural land as referred to in section 2(14)(iii) of the Income-tax Act, 1961 ?" In order to appreciate the question referred to above, it is to be ascertained first, what is meant by agricultural land. Section 2(14)(iii) defines agricultural land as land constituted beyond the jurisdiction of municipality or town, etc. The Gujarat High Court in the case of CIT v. Manilal Somnath [1977] 106 ITR 917, held that the land within the municipal area was not by itself sufficient to rebut the presumption arising from actual use of the land. It was held therein that the fact that the land was within the municipal limits or that it was included within the proposed town plan scheme was not by itself sufficient to rebut the presumption arisin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... correct test to apply would be to find out whether human labour had been applied to the land itself, in order to extract from its natural powers, added to or aided by other natural or artificial sources of strength of the soil, a product which can yield an income. In this case, at p. 143 of the report, the Supreme Court further observed that the determination of the character of the 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons. To say that any asset which is useful or beneficial to the agricultural operation should be treated as agricultural land or to conclude that any land which is capable of being used as an agricultural land would be too wide an extension of the term 'agricultural land' not warranted by the scope and language of the Wealth-tax Act." In this case it is further held that where the land not under agricultural operation is claimed as agricultural land within the meaning of s. 2(e)(i) of the W.T. Act, 1957, there should be a clear finding that the land in question is vitally connected with the basic agricultural operations. In this connection we may refer to the decision of the Gujarat High Court in the case of Yaswanti R. Bhatt v. CWT [1978 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further for what purpose the operations were carried out. At p. 65 of the report it is observed that the basic factor to be taken into consideration is whether the land is such where agricultural operations are carried on or are capable of being carried on. Thus, for the purpose of land being agricultural land, actual agricultural operations or cultivation or tilling of the land is not necessary. It is to be seen whether such land is capable of agricultural operations being carried on. Mr. Pal draws our attention to p. 8 of the paper book where the Tribunal observed as follows: " The Tribunal after considering the certificate from the garden manager of the assessee, the description of land sold in the sale deed, the fact of purchase by t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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