Gujarat High Court
Commissioner Of Income-Tax vs Madhabhai H. Patel on 27 March, 1993
Equivalent citations: [1994]208ITR638(GUJ)
JUDGMENT G.T. Nanavati, J.
1. Thought the Tribunal has made only one reference for the three assessment years, viz., assessment years 1967-68, 1968-69 and 1969-70, we have though it proper to separate this reference into three references as they pertain to three separate assessment orders and the question raised and referred arises out of three separate orders passed in three separate appeals by the Tribunal. The question, which is referred to this court under section 256(1) of the Income-tax Act, 1961, is as under :
"Whether, on the facts and in the circumstances of the case, the Income-tax Appellant Tribunal was right in law in holding that the land in question was agricultural in character and the assessee was not liable to be taxed in respect of the surplus arising on the sale of the land in question as capital gains ?"
2. The assessee is the owner of land admeasuring acres 3.22 gunthas situated in village Paldi which is now within the limits of the Ahmedabad city. Till 1967, it bore S. No. 25/1. From November 1, 1967, because of the TP Scheme framed and finalised under the Bombay Town Planning Act, 1954, the reconstituted areas of that land was given Final plot No. 136. Originally, the land was acres 3.22 gunthas and after it was reconstituted in a final plot, it became a plot of 13,740 sq. yards. On December 18, 1963, the assessee entered into an agreement with Himatlal Jayantilal and Co. for sale of the said land bearing S. No. 25/1. As the sale deed could not be executed within two months as per the terms of the agreement, the said agreement was cancelled. Thereafter, on May 14, 1966, the assessee again entered into an agreement to sell the entire land to Messrs. Caravan Corporation. The land was to be sold at the rate of Rs. 20 per sq. yard. Pursuant to the said agreement, the land was, in fact, sold in three lots : the first sale took place on March 31, 1967 the second on December 5, 1967, and the third on June 25, 1968.
3. During the assessment proceedings for the assessment years 1967-68, 1968-69 and 1969-70, the Income-tax Officer came to know that the assessee had sold his land and made capital gains in those three years. The assessee was, therefore, required to state why in his income-tax return he had stated that the surplus on the sale of this land was not taxable as the sale was of the land, which was agricultural. In support of the contention that the sale was of agricultural land, the assessee produced a copy of the Pahani-Patrak (record of rights), the Additional Mamlatdar's order dated May 16, 1969, and the agreement to sell the land to Messrs. Caravan Corporation. The Income-tax Officer was of the view that the character of the land had changed when the assessee sold the same. He came to this conclusion for the reason that the land had remained padatar in the years in which the same was sold, that it was sold to a co-operative society and that permission of the Collector approving the sale of the land was obtained under section 63 of the Bombay Tenancy and Agricultural Lands Act and thus the intention of the assessee to put the land to non-agricultural use was clear. The Income-tax Officer was also of the view that the assessee sold that land thrice, and that he got the said lands sold through agencies as a resaleable commodity, and that he got the help of expert and technical advice from Messrs. Himatlal and Jayantilal and Co. and Caravan Corporation. Thus, these activities were sufficient to raise a strong presumption that the assessee had embarked upon the sale of land as an adventure in the nature of trade.
4. The assessee was not satisfied with the assessment order passed by the Income-tax Officer. He preferred three separate appeals to the Appellant Assistant Commissioner. Considering the character of the land as agricultural, the Appellant Assistant Commissioner allowed the three appeals.
5. Therefore, the Revenue went in appeal to the Tribunal. The Tribunal allowed those appeals as it found that the Appellant Assistant Commissioner had not considered the other equally important or relevant aspect, viz., whether the activity of the assessee could be regarded as an adventure in the nature of trade. The Tribunal, therefore, restored the appeals and sent the matters back to the Appellate Assistant Commissioner for deciding them afresh.
6. The Appellant Assistant Commissioner again decided the appeals in favour of the assessee. He held that the land in question was agricultural land and that the sale of the land by the assessee was not by way of an adventure in the nature of trade.
7. The Revenue, therefore, again appealed to the Tribunal. The Tribunal agreed with the view of the Appellate Assistant Commissioner on both the counts and dismissed the appeals.
8. The Revenue, therefore, moved the Tribunal for referring the abovestated question in respect of each assessment year to this court but it failed in its attempt. It, therefore, approached this court by an application under section 256(2) of the Act, and this court then directed the Tribunal to state the case and refer the said question to this court.
9. What is contended by learned counsel for the Revenue is that this is a case where the assessee wanted to dispose of his land for a non-agricultural purpose. Thus, though the land was originally agricultural and was cultivated till the year 1967-68, cultivation after 1963 was only by way of a stop-gap arrangement awaiting the sale of the land for non-agricultural purpose. The land was sold on a per square yard basis and it was sold at a price at which an agriculturist would not have purchased the same for agricultural purpose. The land by the time it was sold, was not only within the Corporation limits of Ahmedabad city but was also covered by a TP scheme and was situated in a residential zone. Thus, the intention of the assessee, when he sold the land, was to sell non-agricultural land. The Tribunal, in taking a contrary view, has, therefore, committed an error of law.
10. In support of his contention learned counsel relied upon the decision of this court in Arundhati Balkrishna v. CIT [1982] 138 ITR 245, wherein this court has held that when determining whether a land in question is agricultural, the following points are required to be borne in mind (at page 253) :
(1) The intention of the owner to put it to any particular user is one of the criteria though not the sole or exclusive criterion.
(2) The actual user may ordinarily furnish 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 land in the adjoining area or surroundings would be an important factor for consideration.
(4) The physical characteristics may throw some light.
(5) The mere fact that the lands are assessed as agricultural lands under the Land revenue Code or the said lands are not actually used for non-agricultural purposes does not necessarily mean that the lands are agricultural lands. Otherwise even building site lands can be considered as agricultural lands since it can always be said that they are capable of being used for agricultural purposes.
(6) A prudent and reasonable man would not purchase agricultural land (that is to say for agricultural purposes) in the midst of a highly developed residential area at an enormously high price, compared to the return.
11. That was a case where only an illusory agricultural use was made of the land. This court came to that conclusion because in the last three years preceding the relevant period, the gross income, which was derived by the assessee from agricultural operations, was less than Rs. 200. Therefore, though the land was shown in the revenue records as agricultural land, it was not actually used for agricultural purposes at the time when it came to be sold. In that view of the matter, the question of intention of the seller of the land became very relevant and important for deciding whether the land in question was agricultural land. Factors other than the actual user of the land were therefore given more importance. Even in that case, it has been held that the actual user would ordinarily furnish the prima facie nature of the character of the land. As we will point out hereafter, the Tribunal had taken all these factors into consideration and had thereafter come to the conclusion that the land in question is an agricultural land.
12. Learned counsel next placed reliance upon the decision of this court in CIT v. Siddharth J. Desai [1983] 139 ITR 628. In that case, this court, after considering all its previous decisions, held that the factors which are required to be taken into consideration for determining the question as to whether the land can be said to be agricultural land are (at page 638) :
(1) Whether the land was classified in the revenue records as agricultural and whether it was subject to the payment of land revenue?
(2) Whether the land was actually or ordinarily used for agricultural purposes at or about the relevant time ?
(3) whether such user of the land was for a long period or whether it was of a temporary character or by way of a stop-gap arrangement ?
(4) Whether the income derived from the agricultural operations carried on in the land bore any rational proportion to the investment made in purchasing the land ?
(5) Whether the permission under section 65 of the Bombay Land Revenue. Code was obtained for the non-agricultural use of the land ? If so, when and by whom (the vendor or the vendee) ? Whether such permission was in respect of the whole or a portion of the land ? If the permission was in respect of a portion of the land and if it was obtained in the post, what was the nature of the user of the said portion of the land on the material date ?
(6) Whether the land, on the relevant date had ceased to be put to agricultural use ? If so, whether it was put to an alternative use ? Whether such cesser and/or alternative user was of a permanent or temporary nature ?
(7) Whether the land, though entered in revenue records, had never been actually used for agriculture, that is, it had never been ploughed or tilled ? Whether the owner meant or intended to use it for agricultural purposes ?
(8) Whether the land was situate in a developed area ? Whether its physical characteristics, surrounding situation and use of the lands in the adjoining area were such as would indicate that the land was agricultural ?
(9) Whether the land itself was developed by plotting and providing roads and other facilities ?
(10) Whether there were any previous sales of portions of the land for non-agricultural use ?
(11) Whether permission under section 63 of the Bombay Tenancy and Agricultural lands Act, 1948, was obtained because the sale or intended sale was in favour of a non-agriculturist ? If so, whether the sale or intended sale to such non-agriculturist was for non-agricultural or agricultural user ?
(12) Whether the land was sold on yardage or on acreage basis?
(13) Whether an agriculturist would purchase the land for agricultural purposes at the price at which the land was sold and whether the owner would have ever sold the land valuing it as a property yielding agricultural produce on the basis of its yield ?
13. Even in that decision, this court has again emphasised that if the land is classified in the revenue records as agricultural land, then it would raise a rebuttable presumption and would furnish good prima facie evidence to show that it is an agricultural land. This court also emphasised that if land is also used for agricultural purpose till the date of the sale, then, unless there is some cogent evidence to indicate otherwise, the land should be treated as agricultural land.
14. In our opinion, what is required to be considered is : Was it agricultural land when it was sold ? If the land is recorded as agricultural land in the revenue records and if till the date of its sale it is used and exploited as agricultural land, and if the owner of the land had not taken any step, which would indicate his intention to exploit the land thereafter as non-agricultural land, then such a piece of land will have to be regarded as agricultural even though it is included within the municipal limits or it is sold on a per square yard basis and not acreage basis. The purpose for which such a land is sold, though not relevant, will not have that much importance and weight as it would have been in a case where the land has remained as Padatar or idle or is used for agricultural purposes only by way of a stop-gap arrangement. So far as the facts of this case are concerned, there is no dispute that the land, till it was sold, was classified as agricultural land in the revenue records. In the village Forms Nos. VII and XII, popularly known as "record of rights", it is mentioned that the whole of the land was cultivated till the year 1967-68. The land was cultivated personally by the assessee. The said land belonged to the family and he got it by way of inheritance and not by way of purchase from some other party. There is no material which discloses that attempt was made by the assessee either to purchase or sell any other land in the past. He had not, at any point of time, applied for permission to use the land for non-agricultural purposes. All these factors have been taken into consideration along with the other relevant factors, viz., that the land was sold to a co-operative housing society; that it was sold at Rs. 20 per sq. yard, and that it was situated within the corporation limits of Ahmedabad city. It is, therefore, not possible for us to say that the view taken by the Tribunal is unreasonable or erroneous in law. Even if we have to consider the intention of the assessee, when he decided to sell the land, it becomes clear that he wanted to sell the land as agricultural land. In the agreement dated December 18, 1963, it is in terms stated that the assessee was selling the land as agricultural land only and, therefore, was not going to sign any application or plan for a non-agricultural use of the said land. There is no material to show that the assessee had taken any part either in getting the plots subdivided into sub-plots, or in getting the plans prepared and passed for non-agricultural use. All those steps were taken by the purchaser of the land and not by the assessee. Thus, the Tribunal, after considering all the relevant factors and also the decision of the Supreme Court in CWT v. Officer-in-Charge (Court of Words), Paigah [1976] 105 ITR 133, wherein the Supreme Court has held that the expression, "agricultural land" for the purpose of the Wealth-tax Act would mean the land actually used for agricultural purpose, has held that the land in question is an agricultural land. It is, therefore, not possible to accept the contention raised on behalf of the Revenue that the Tribunal committed an error in holding that the land in question was agricultural land. In this view of the matter, we answer the question in the affirmative, that is, against the Revenue and in favour of the assessee. No order as to costs.