TMI Blog1980 (8) TMI 47X X X X Extracts X X X X X X X X Extracts X X X X ..... was formed at the western extremity of the property consisting of about 7.6 grounds, and an extent of 9.8 grounds of the land was utilised as frontage for the two buildings. In the remaining 39.1 grounds to the south of the office building, the assessee was growing good varieties of plantains and bananas. From 1962 onwards, vegetable cultivation was carried on in the land using good quality seeds and modern insecticides and also getting expert advice from competent persons. The assessee sold, (a) 19.74 grounds on April 29, 1966, to India Cements Ltd., (b) 10.05 grounds on April 29, 1966, to Imperial Tobacco India Ltd., and (c), 3.89 grounds on March 27, 1967, to Handicrafts Emporium. Before the ITO, the assessee contended that the lands sold were agricultural lands and hence, not capital assets within the meaning of s. 2(14) of the I.T. Act, 1961, as it stood at the relevant time and there was no liability to capital gains. As the lands were situated in the heart of the city and were not assessed to land revenue and were only subjected to urban land tax, and also taking into account the fact that the lands were sold by the assessee at a fabulous price of Rs. 75,000 per ground and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the I.T. Act, 1961. The Vice President agreed with the view of the judicial Member and held that what was relevant was 'not the use to which the land was put at any point of time but it was the general character of the land that should be taken into account, and if the general character of the land was otherwise, it would not become agricultural in character merely because it was used at some point of time for agricultural purposes. He further held that apart from the factual agricultural user of the land which alone was not conclusive, the character of the land had to be determined on the cumulative basis of, (a) the environment and situation; (b) the intention of the assessee at the time of purchase ; (c) the nature and character of the land ; (d) the previous, present and future use to which the land was put; (e) its potential value ; and (f) its assessment to land revenue. At the instance of the assessee, the following questions of law have been referred to this court for opinion under s. 256(1) of the I.T. Act, 1961 : " 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 ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the basis of this finding of fact that the tests enunciated in Rasiklal Chimanlal Nagri v. CWT [1965] 56 ITR 608 (Guj) were applied. Another test applied by the Vice-President, viz., that the assessee purchased the land in question for the purpose of constructing a cinema theatre has no relevance for determining the character of the land at the time of his purchase or sale by the assessee. As pointed out in Himatlal Govindji v. CWT [1977] 106 ITR 658 (Guj), what has to be considered is not what the purchaser did with the land, but what was the character of the land at the time when the sale took place. Yet another test applied by the Vice-President is that the sale price paid by the assessee was incompatible with the agricultural character of the land. As pointed out by the Gujarat High Court in CIT v. Manilal Somnath [1977] 106 ITR 917, if the land has been used for agricultural purposes for a long time and nothing had happened till the date of sale to change the character of the land, the potential non-agricultural value of the land for which a purchaser may be prepared to pay a large price would not detract from its character as agricultural land on the date of sale. A furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ermining whether a particular land is agricultural or not is first to ascertain what is the use to which the land is actually being put. If it is being used for agricultural purposes or even if the agricultural use has ceased, but it i s apparent that the land is meant to be used for agricultural purposes, it would be agricultural land. If, on the other hand, the land is being used for non-agricultural purpose, it would be a strong circumstance to indicate that the land is not agricultural land. Where, however, the land is not being actually put to any use, the test would be, having regard to the various factors referred to in Rasiklal Chimanlal Nagri v. CWT [1965] 56 ITR 608 (Guj), whether the general nature or character of the land is such that it can be regarded as agricultural land. In CWT v. Narandas Motilal [1971] 80 ITR 39 (Guj), it was pointed out (p. 47): " ........ if once the assessee becomes successful in showing that the land is consistently used for agricultural purpose throughout the relevant period, then that fact can be taken as furnishing some prima facie evidence to determine the character of the land in question. However, this may not be considered as sufficie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ater. The property was a garden land having two wells and a tank. It had 300 coconut trees, a few jack-fruit trees and other fruit bearing trees. It was held that since the assessee had planted coconut and other fruit bearing trees on the property and had been watering and tending them and there were two wells and a tank in the property, it was agricultural land in the hands of the assessee. It was further held that until some act on the part of the assessee has been established, which has converted the property into non-agricultural property, it is not safe to hold that the property ceased to be agricultural by the mere intention of the assessee to convert it into housing site. In Shiv Shankar Lal v. CIT [1974] 94 ITR 433 (Delhi), the property in question called Amba Prasad Garden, comprised of an extent of 14,716 sq. yards, contained a garden house covering an area of 312 sq. yards and was situated at Subzimandy, old Delhi. In the whole of this land, there were 100 fruit bearing trees which were grown, watered, manured and maintained. A portion of the property, including the garden house was rented out to M/s. Ganesh Flour Mills. Later, the mills agreed to fake the entire land in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompound walls. The land had two wells in it and was assessed to land revenue and was not put to any use. The Supreme Court pointed out that it was not enough to show that the land under consideration was capable of being used for agricultural purposes and it must be shown that the actual condition of the laid and intended user had connection with an agricultural purpose and user and the Supreme Court without determining the issue on the basis of the physical characteristics of the land, its location and its adjoining area and the intention of the owner, as gathered from all the relevant circumstances, sent the case back to the Tribunal to determine the actual condition of the land and whether the intended user had connection with an agricultural purpose. The decision of the Supreme Court only emphasises how the actual and current user of the land has a great bearing and relevance in determining the agricultural character of the land. The resultant legal position emerging from the cases cited above can be stated as under : Once the assessee establishes that the land is continuously used for agricultural purpose, then the prima facie presumption arising from such user is that the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he learned judicial Member, viz., the high price paid by the assessee and the fact that later on the assessee put up two constructions on the northern extremity, are not relevant considerations for determining the agricultural character of the land at the time of its purchase by the assessee. The learned vice-president has not recorded any specific finding regarding the character of the land at the time of purchase by the assessee. However, his observation: " At the beginning I was inclined to accept the assessee's contention because it appeared difficult to say that land which is, and has for quite some years together been, used for agricultural purpose is not agricultural. " (vide para. 7 of his order) seem to suggest that he was inclined to the view that the land had characteristics of agricultural land at the time of its purchase by the assessee. The year of purchase of the property in question by the assessee was 1950 and the year of raising the plantain garden is stated to be 1953. The year of putting up two constructions by the assessee in the northern extremity is not indicated. It is not clear from the findings recorded by the Tribunal whether the plantain garden was in ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of the land arising from the fact that the land was purchased as agricultural land and was put to agricultural use consistently from the year 1953 onwards till the date of sale. The case in question is somewhat akin to the case, Shiv Shankar lal v. CIT [1974] 94 ITR 433 (Delhi), where the property known as Amba Prasad Garden, situated at Subzimandy, Old Delhi, consisting of a building fetching a rent of Rs. 900 p.m., and the rest of the land abutting the building having fruit bearing trees and being utilised for growing vegetables was construed as agricultural land, and upheld by the High Court. We are fully conscious that it may sound somewhat paradoxical and odd to construe a plot of land in Mount Road as agricultural land. Without laying undue emphasis on any single aspect and also bearing in mind that no single test evolved by courts is conclusive of the matter, we have persuaded ourselves to the conclusion though not without difficulty, that it is possible to construe the 30.44 grounds of land mentioned in the assessee's letter dated 16th July, 1969, to the ITO, as agricultural land. The learned counsel for the revenue contended that from the questions referred by the Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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