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TMI Blog1978 (10) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... rvey No. 42 and all these three survey numbers seem to have been utilised for the purpose of excavation so that bricks might be made. Even brick-kilns were installed in one or the other of these three survey numbers. After the date of purchase by the HUF, survey No. 41 was subdivided into two survey Nos. 41/1 admeasuring twenty-seven gunthas and No. 41/2 admeasuring two acres, two gunthas; survey No. 51 was already sub-divided into two survey numbers, survey No. 51/1 admeasuring one acre, nine gunthas and survey No. 51/2 admeasuring one acre, ten gunthas. In 1958, these survey Nos. of Usmanpura village in Daskroi Taluka of Ahmedabad District came within the municipal limits of the Ahmedabad Municipal Corporation and in 1959, town planning scheme, being Town Planning Scheme No. 19, was applied in this area. In the beginning, that is immediately after the lands were purchased in 1930 and 1933, they were used for agricultural purposes. Thereafter, the land was put to non-agricultural use, that is, for manufacturing of bricks. This continued up to 1952. In 1952, the assessee applied to the Collector of Ahmedabad for discontinuance of non-agricultural use of the land, namely, of brick-m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lector for using the lands purchased by them for non-agricultural purposes under s. 65 of the Bombay Land Revenue Code. That permission was obtained on October 27, 1969. In the course of the assessment proceedings and, thereafter on the record of this case, entries from the revenue records of panipatraks were produced in connection with the lands belonging to the assessee-family, and entries in the revenue records of the years 1929-30 to 1966-67 have been produced on the record of the case. In connection with the question of capital gains, the assessee contended that the lands in question were agricultural lands at the date of the sale because land revenue was being paid in respect of these lands on the footing that they were agricultural lands, secondly, because agricultural operations had been carried on from year to year, right down till the date of sale, and, thirdly, that the lands were not put to non-agricultural use. The ITO held that the lands were not agricultural lands and he, therefore, passed the appropriate order for levying assessment to income-tax so far as the amount of capital gains was concerned. Against the decision of the ITO, the assessee took the matter in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me pattern of use of this land is found in respect of survey No. 51/1 admeasuring one acre nine gunthas, except that this survey No. was used for a kiln for making bricks only in the year 1939-40; otherwise it was used for excavation work for making bricks. From 1951-52 onwards, the land was lying fallow, with grass growing on it, and it was only in 1959-60 that juvar was grown on this land and thereafter it was used partly for grass, partly for juvar and from 1963-64 till 1966-67, it was wholly used for the purpose of growing juvar. Survey No. 51/2, admeasuring one acre, ten gunthas was also used for earth excavation for the purpose of making bricks and no kiln for manufacturing bricks appears to have been installed on this plot of land. From 1950-51 onwards, earth excavation work seems to have been stopped so far as this plot of land was concerned and it was kept fallow for grass. Thereafter, either grass was growing or it was fallow land until 1959-60, where we find that, along with grass, partially juvar was also grown in this land and for three years, 1959-60, 1960-61 and 1961-62, the land was used partly for growing grass and partly for growing juvar. From 1962-63 onwards til ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the footing that the assessee having applied for permission from the Collector under s. 63 of the Bombay Tenancy and Agricultural Lands Act and the land having been sold for non-agricultural purposes, it was not agricultural land and, therefore, capital gains should be assessed. The Tribunal, relying upon its earlier decisions, held that when land is sold for non-agricultural purposes after permission is obtained under s. 63 of the Bombay Tenancy and Agricultural Lands Act, it is a categorical proof of the fact that the land is not an agricultural land. The intention for using the land becomes clear when the agreement to sell the land is entered into and, therefore, when the land is sold, it is not agricultural land. The Tribunal further held, following its earlier decision, that when permission is obtained for non-agricultural use of the land, the land becomes non-agricultural land. The Tribunal further held that the payment of land revenue in respect of the land does not in any way suggest that the land is being used for agricultural purposes. The Tribunal further held that as soon as the land was agreed to be sold by the agreement, the characteristics of the land changed. Acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the W.T. Act, 1957. The Supreme Court there explained the meaning of what is meant by "agricultural land", and Beg J., as he then was, speaking for the Supreme Court, observed at page 136: "We think that this must be land which could be said to be either actually used or ordinarily used or meant to be used for agricultural purposes. In other words, 'agricultural land' must have a connection with an agricultural user or purpose. It is on the nature of the user that the very large number of definitions and authorities discussed by this court in Raja Benoy Kumar Sahas Roy's case [1957] 32 ITR 466 (SC) have a direct bearing. In that case, this court held that the wider meaning given to agricultural operations, such as breeding and rearing of livestock, poultry farming or dairy farming will not be applicable. It held that the 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 to the soil, a product which can yield an income." At page 138, he further observed: "...we cannot dispense with credible evidence of at least ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x authorities and the Tribunal, should be to consider the question from the point of view of presumption arising from entries in the record of rights or actual user of the land and then consider whether that presumption is dislodged by the presence of other factors in the case." Mr. G. N. Desai, learned Government Pleader appearing for the revenue, urged the following submissions before us: (1) whether the land is agricultural land or not depends principally upon the character of the land; (2) for the purpose of ascertaining the character of the land, there are certain factors to be taken into consideration, for example, (a) the nature of the assessment, (b) situation of the land, that is, either within the town planning scheme or in the light of the surrounding locality and whether it is within municipal limits or not; (3) he further contended that actual use of the land might afford a guide to the determination of the question but is not conclusive; and, lastly, (4) ostensible intention of the assessee is only determinative of the nature of the land. In this case, on the facts of the case, Mr. Desai contended, for twenty years or so, most of these lands had been converted to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1922 was amended so as to introduce the concept of capital gains as a part of income of the year in which capital gain was earned. Mr. Kaji for the assessee is right when he contends that, at the time when the application was made to the Collector to discontinue the non-agricultural use of the land, there was no tax on capital gains and, therefore, the idea to arrange a facade of agricultural use with a view to avoid possible tax on capital gains could not have been present in the mind of the assessee. For some reason or the other, the assessee-HUF seems to have decided to discontinue making of bricks from all these five survey Nos. 41/1, 41/2, 51/1, 51/2 and 42 and seems to have decided to convert these lands back to agricultural use. For whatever it is worth, it may be pointed out that in the Collector's order, a specimen of which has been produced at page 92 of the paper book before us, a mention is made of "Panchatnama dt. 3-2-52 stating that no N. A. use is made in this S. No. and the land is made fit for cultivation during the current year". Therefore, long before capital gains was introduced in the statute book in 1956 and long before this, land formed part of any town plann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... land and as many as twenty-five sale deeds were executed in order to sell these lands in the course of Samvat Year 2024. The reason why so many sale deeds were executed is to be found in the sale deed itself, namely, that under the law relating to stamp duty, co-operative housing societies were exempted from payment of stamp for the purchase of land where the price did not exceed Rs. 50,000 and in order to avoid payment of higher stamp duty, different sale deeds, each with price below Rs. 50,000 were executed by one and the same vendor to one and the same vendee. As we have pointed out, the sale deeds were executed on different dates in 1968, the first one being on April 23, 1968, the second set on June 1, 1968, the third set of deeds on June 27, 1968, the next one on June 27, 1968, and the last one on August 6, 1968. Mr. Desai for the revenue contended that there could not be any growing crops on these lands in the month of April, 1968, or in the month of June, 1968, and, therefore, the recital in the sale deed that there were growing crops on these lands is a mere empty recital. However, the same cannot be said about the sale deeds executed on August 5, 1968, because, by that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the lands were used for agricultural purposes. Application to reconvert back to agricultural use from the use of brick-making was made as far back as 1952, and the sale took place sixteen years later. Nothing has been shown that in the intervening period these lands lost their regained character of agricultural lands. It may be pointed out that in the two cases which have been decided by this court regarding stop-gap arrangement, namely, Himatlal's case [1977] 106 ITR 658 (Guj) and Ranchhodbhai Bhaijibhai Patel v. CIT [1971] 81 ITR 446 (Guj) the lands in each of these two cases was already converted to non-agricultural use by the assessee concerned himself before the date of the sale and after getting N. A. permission from the Collector. In Himatlal's case, the lands were actually plotted out and some plots were sold and in the remaining plots, agricultural operations were carried out till such date as some purchaser might come foward to purchase those smaller plots as building sites. In Ranchhodbhai's case, the lands were converted to non-agricultural use and even after such non-agricultural use until the date of actual sale, the lands were put to agricultural use. In each of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocieties was granted on condition that the land would be used for residential purposes and the application for permission under s. 63 of the Bombay Tenancy and Agricultural Lands Act was applied for on the footing that after the sale the land would be used for residential purposes but that only goes to show that after the date of sale, the land was to cease to be agricultural land. The permission granted by the City Deputy Collector under s. 63 of the Bombay Tenancy and Agricultural Lands Act clearly goes to show that, in case the land did not cease to be agricultural land, the permission would be treated as cancelled and, therefore, the sale in favour of the co-operative housing societies would be infructuous and the land would revert back to the assessee in such an eventuality because the permission to sell the agricultural land would be treated as cancelled. That eventuality has not happened and, as pointed out, it was only in October, 1969, that permission was obtained by the purchasers from the authorities concerned to put the land to non-agricultural use. The fact that a particular use for which the purchaser has agreed to pay a high price does not mean that it is not agricul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aration. We, therefore, are not inclined to accept the submission of Mr. Desai that Indian Molasses case [1970] 78 ITR 474 (SC) formula which has been followed by this High Court in several other cases should be followed in this case. In our opinion, in view of the facts which are already before us and the facts which have been found on the record, no useful purpose would be served by sending the matter back to the Tribunal. Under these circumstances, in the light of the decisions and in the light of the facts which we have discussed, the only possible conclusion in law is that the land was agricultural land at the date of the sale and, therefore, the amount of Rs. 8,13,363 said to be gross capital gains could not be assessed as capital gains. The Tribunal was, therefore, in error in law in deciding in favour of the revenue and against the assessee. We, therefore, answer the question referred to us in the negative, that is, in favour of the assessee and against the revenue. The Commissioner will pay the costs of this reference to the assessee. Before leaving the matter, we may mention that we are fully conscious of the fact that the Tribunal is the final fact-finding body a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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