TMI Blog1981 (4) TMI 56X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of fact and law as to whether or not the disputed land was " agricultural land " within the meaning of s. 2(14) of the I.T. Act, 1961, the decision of the Tribunal on this question cannot be sustained for reasons which will become manifest in the course of the judgment hereafter. The Tribunal has reversed the concurrent findings recorded by the ITO and the AAC as per annexs. A and B that the land in question was not " agricultural land " and has allowed the appeal preferred by the assessee by its order as per annex. C-4 dated July 3, 1975. It may be mentioned that initially the matter came up before a Division Bench of the Tribunal. The learned Members of the Tribunal disagreed. A reference was, therefore, made by the President to a third Member in exercise of the powers under s. 255(4) of the Act. The third Member came to the conclusion that the ITO and the AAC were in error and that he was not in a position to agree with the opinion expressed by the learned member of the Tribunal who was of the view that the decision of the ITO and the AAC was correct in law. He accordingly opined that the disputed land was agricultural land within the meaning of s. 2(14) of the Act as pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rahim died on February 12, 1966. Thereafter, the four co-owners including the assessee inherited the said land. Assessee, Sarifabibi and her co-owners converted a parcel of 2,607 sq. yds. to non-agricultural user after obtaining the requisite permission under s. 65 of the Land Revenue Code some 20 years back on March 28, 1958. In respect of the remaining block of land the co-owners (assessees) chose not to apply for and obtain such a permission On the parcel of 2,607 sq. yds. in respect of which permission was obtained for non-agricultural user, residential chawls were constructed. The entire land inherited by the four coowners, including the assessee, Sarifabibi, admeasuring 30,885 sq. yds. was sold during the relevant assessment year on May 30, 1969, and the a was assessed to capital gains arising from the sale at the rate of Rs. 23 per sq. yd. After making appropriate-deductions including the basic allowance of Rs. 5,000, the net amount of capital gains was computed at Rs. 52,403. The assessee claimed before the ITO that barring the area of 2,607 sq. yds. on which the chawl was constructed the remaining portion of land was agricultural land within the meaning of s. 2(14) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1969. All these facts and circumstances viewed in the light of the appropriate tests impel us to the conclusion that the lands are not agricultural lands in fact and truth (though they are labelled as such in the revenue records) for reasons which we will presently articulate. But be we do so we must advert to the propositions of law affirmed in the earliest decision of this court which have not undergone any change in the later decisions. The decision we have in mind is the one rendered in Rasiklal Chimanlal Nagri v. CWT [1965] 56 ITR 608 (Guj). The following propositions emerge therefrom : (1) The intention of the owner to put it to any particular user is GP of the criterion though not the sole or exclusive criterion. (2) The actual user may ordinarily furnish a prima facie evidence, of the nature and character of the land If it is lying idle, the question may assume more complexity. (3) The development and situation of the lands in the adjoining area or surroundings would be an important factor for consideration. (4) The physical characteristics may throw some light. (5) Mere fact that the lands are assessed as agricultural lands under the land Revenue Code or the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imits in the [subject to the rider that it is a rebut- proximity of buildings and table presumption and can be destroyed building sites by other circumstances pointing to the contrary conclusion. See Commissioner of Wealth-tax v. Officer-in-Charge (Court of Wards), Paigah [1976]105 ITR 133 (SC)]. (2) That agricultural operations were (2) When land is sold to a carried on in the past or are carried on non-agriculturist for non-currently agricultural purposes. [subject to the rider that it is not a decisive factor inasmuch as agricultural crop can be raised even on building site land (even on desert land as observed in [1976] 105 ITR 133 (SC). And sometimes, a crop is grown in order not to allow the land to remain idle awaiting sale for non-agricultural purposes to a non-agriculturist by way of a step-gap arrangement or in order to avoid payment of revenue at a higher rate or in order to avoid payment of capital gains tax): See proposition No. 5 in Rasiklal Nagri's case [1965] 56 ITR 608 (Guj)]. (3) It is not converted to non-agri- (3) When land is sold on a cultural user. (subject to the same rider per sq. yd. basis at a price as added to clause 2). comparable to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al time? Would he be willing to sell it to an agriculturist on valuation made by adopting the formula of capitalization in the most liberal manner, say 20 years' purchase, computed on the expected yield, assuming that (1) the monsoon is most favourable, (2) the cultivation is made in the most efficient manner by the most modern equipment, and (3) maximum price is obtainable upon the sale of the agricultural produce ? If no agriculturist can afford to purchase the land on a per sq. yd. basis at the prevailing price for building sites (say at Rs. 23 per sq. yd.) for agricultural operations, it being an utterly uneconomic proposition, and if the owner cannot ever expect to sell it at the price worked out on the capitalisation method, even on the basis of the optimum yield and maximum sale price, can one still classify the land as agricultural land? This dual test is one of the most tell-tale realistic down to earth common sense test which one cannot refuse to face. And a blined eye has been turned to it by the majority members of the Tribunal. If these two tests do not warrant the conclusion that the land is agricultural land, can one say that it is agricultural land merely because th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ousing society formed for the purpose of constructing residential houses, at a per sq. yd. basis, could have been held as agricultural land exempt from payment of capital gains tax. The crucial twofold test formulated a short while ago, viz., (1) no agriculturist would purchase for agricultural purpose, (2) the assessee would never have sold it by valuing it as a property yielding agricultural produce on the basis of its yield, applied to the present case in the perspective of the totality of facts and circumstances of the case impel us to the inevitable conclusion that it was not agricultural land on, the date of its sale. Surely the mere fact that at one point in the remote past it was agricultural land or the fact that the owner chooses not to convert it to non-agricultural user cannot indicate the true character of the land at the moment of the transaction. It does not depend on the label applied by the owner or the entry in the revenue records only. We will presently elaborate the other facts and circumstances (besides the aforesaid test of utmost significance) which compel us to hold that the land was not agricultural land: (1) The sale was at Rs. 23 per sq. yd. on a sq. yd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dually or collectively cannot help the assessee. As pointed out earlier the mere fact that it was entered in the relevant records as agricultural land is not of much significance. The Supreme Court in CWT v., Officer-in-Charge. (Court of Wards), Paigah [1976] 105 ITR 133, had in terms declared that entries can at best raise a rebuttable presumption, and had set aside the Full Bench decision of the Andhra Pradesh High Court holding that the land in question was agricultural land, and remanded the matter for a fresh decision in the light of the observations made therein. So also the fact that it was not converted to non-agricultural user is of no value. The assessees could have done so at any time. The assessees did not do so because it was advantageous to wait till the necessity or occasion arose, because, meanwhile, they could pay land revenue at a lower rate and may not have to pay capita gains tax. Similarly, the fact that the application under a. 65 of the Land Revenue Code to convert to non-agricultural purpose was not made cannot alter the character of the land. They could have done so at any time. And ordinarily it would have been granted for, the mere asking. The last poin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore for reaching a contrary conclusion on the basis of the principles which cannot be doubted or disputed. We Cannot, therefore, accede to the submission urged by counsel for the assessee. Under the circumstances, we are of the opinion that the ITO and AAC were right in holding that the disputed land was not agricultural land and the Tribunal was in error in holding that the disputed land was agricultural land. The identical question referred to us in each of the four allied references which have been heard together as a group is, therefore, answered as under: Question Answer " Whether, on the facts and in the In the negative and against the circumstances of the case, the Tribunal assessee was right in holding that the land in question admeasuring 30,885 sq. yds. 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 sale thereof, tax on capital gains resulting therefrom was not leviable ? The references are answered accordingly. There will be no order as to costs. A copy of this judgment shall be placed on the record of each of the four references. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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