Gujarat High Court
Rashiklal Chimanlal Nagri vs Commissioner Of Wealth-Tax, Gujarat on 10 November, 1964
Equivalent citations: AIR 1965 GUJARAT 259
Bench: J.M. Shelat, P.N. Bhagwati
JUDGMENT Bhagwati, J.
(1) The short question that arises on this Reference is whether certain lands belonging to the assessee, a Hindu undivided family, are agricultural lands within the meaning of section 2(e)(I) of the Wealth tax Act and are, therefore, exempt from assessment to wealth-tax under the Act. The lands consists of four plots bearing Nos. 801,964, 970 and 346/4A situate in Ellis Bridge area in the City of Ahemadabad. Out of the four plots, the first is situate on the main road leading to Sarkhej while the other three are situate on the 80' road leading from the High Court and joining the Sarkhej Road some distance away from Paldi. All the four plots are situate within Municipal limits and are comprised in the Town Planning scheme which came into force sometime in 1945. The area in which these plots are situate is a residential area and there are numerous residential houses around these plots. The first three out of these plots were obtained by the assessee on partition, plot No. 801 on 14th December 1926 and plot Nos. 964 and 970 on 2nd March 1918 and they were cultivated by the assessee until about 1934-35, but since that time they have been used for any agricultural purposes. The last plot No. 345/4A admeasuring 670 sq. yards was acquired by the assessee jointly with one Kantilal C. Mehta on 16th December 1951 for the price of Rs.13,711/- i.e., at the rate of about Rs. 20/- per sq. yard and ever since it was acquired it has not been put to any agricultural use. All these plots are assessed to land revenue for the purpose of agriculture and the assessee has not obtained permission of the Revenue authorities under the provisions of the Bombay Land Revenue Code to make non-agricultural use of them. On these facts the assessee contended before the Wealth-tax for the assessment year 1957-58, the relevant valuation date being 2nd November 1956 that these plots were agricultural lands and their value was not liable to included in computing the net wealth of the assessee. A similar claim was also made by the assessee in regard to the assessment to wealth-tax for the assessment year 1958-59 for which the relevant valuation date was 23rd October 1957,but that claim was confined only to plots Nos. 964 and 346/4A since the other two plots had gone out of the Hindu undivided family of the assessee prior to the valuation date as a result of partition effected on 18th October 1957. The claim for exclusion of the value of these plots was rejected by the Wealth-tax Officer but on appeal it was allowed by the Appellate Assistant Commissioner. The Revenue thereupon appealed to the Tribunal. The Tribunal took the view that these plots were not agricultural lands within the meaning of section 2(e)(I) and their value was, therefore, not liable to be included in computing the net wealth of the assessee. This view of the Tribunal is now challenged before us on the present Reference on behalf of the assessee.
(2) The Wealth Tax Act imposes a tax on the net wealth of the assessee and "net wealth" is defined in Section 2(m) to mean the amount by which the aggregate value computed in accordance with the provisions of the Act of all asserts, wherever located, belonging to the assessee on the valuation date, including assets required to be included in his net wealth as on that date under the debts owed by the assessee on the valuation date barring certain debts specified in the Section. The wealth-tax is thus a tax on the capital value of held by an assessee. It is therefore, clear that this legislation has been enacted by the Parliament under Entry 86 of List I of the seventh schedule to the Constitution but as that Entry itself expressly provides, the power of the Parliament to makes a law imposing tax on the capital value of assets held by an assessee under that Entry does not extend to agricultural land and the Parliament cannot, therefore, make a law imposing tax on capital value of agricultural land. Recognizing this inhibition on its legislative competence and with a view to giving effect to it. Parliament while defining "assets" in Section 2(c) of the Wealth Act excluded inter alia agricultural land so that the value of agricultural land held by an assessee would not be included in the net wealth of the assessee chargeable to tax under the Act. Section 2(c)(I) provides for this exclusion in the following terms: -
"2 (e). 'Assets' include property of every description, movable of immovable but does not include -
( I ) agricultural land and growing crops, grass or standing trees on such land;
* * * * * * * * * * * * The argument of the assessee was that the four plots in question were agricultural lands within the meaning of Section 2(c)(I) on the relevant valuation dates and were therefore, exempt from assessment to wealth tax and the question which, therefore, requires be considered is what is "agricultural land" within the meaning of this provision. Now it is evident from the object and purpose of the exclusion provided in Section 2(c)(I) the expression "agricultural land" in section 2(c)(I) must have the same meaning as in Entry 86 of List I of the Seventh Schedule to the Constitution. But when we turn to the Constitution, we find this expression has nowhere been defined in the Constitution. We are, therefore, left with the plain, ordinary meaning of the expression according to English language and we must interpret the expression accordingly bearing in mind the fundamental principle of construction that the expression occurs in a head of legislative power and should, therefore, receive the widest and most liberal meaning.
(3) Now, considering the expressions according to its ordinary natural sense, what is it that distinguishes agricultural land from other land? One thing is clear that intention of the owner of the land to put it any particular use at a given point of time cannot be the determining factor. Whether a land is agricultural land or not cannot depend on the fluctuating or ambulatory intention of the owner of the land. The criterion must be something more definite, something more objective, something related to the nature or character of the land and not varying with the intention of the owner as to the use to which he wants to put the land at a particular point of time. Of course, when we say this we must not be understood t mean that the intention as to user is altogether an irrelevant consideration; it is certainly a factor which would bear on the nature or character of the land but it does not afford a sole or exclusive criterion for determining whether a land is agricultural or not. Where the land is actually put to use, there is usually not much difficulty in ascertaining the nature or character of the land. If the n land is used for agricultural purpose, ordinarily it would be correct to say tat the land is agricultural land vice versa. But even this test may not always furnish a correct answer for there may be cases where land admittedly non-agricultural (such as a building site) may be temporarily for agricultural purpose. In such cases would not be correct to say that merely because the land is in fact being used for agricultural purpose, it is agricultural land. But as a general proposition it may be stated without any fear of contradiction that ordinarily the actual user to which the land is being put would furnish prima facie evidence of the true nature or character of the land and therefore whenever a question arises whether a particular land is agricultural land, or not, primarily regard must be had to the purpose for which the land is being actually used at or about the relevant time and that ordinarily provide a satisfactory answer to the problem, where however, as in the present case, the land is not being used for any purpose and is lying idle, the question of determining the true nature or character of the land presents some difficulty. What is the test to be applied in such a case?
(4) Mr.Kaji learned advocate appearing on behalf of the assessee contended that the true test to be applied in such case is whether the land is capable of being put into agricultural use. We pointed out that since the plots in question were assessed for agricultural purpose under the provisions of the Bombay Land Revenue Code and the assessee had not applied for and obtained the permission of the Revenue authorities under Section 65 of the Bombay Land Revenue Code to make non-agricultural use of the plots, it was not really possible for the assessee to make any use of the plots other than for the purpose of agriculture and the plots were, therefore, capable of being used only for the purposes of agriculture and no other purpose and this, in his submission, clearly showed that the plots were agricultural lands within the meaning of Section 2(c)(I). We shall presently deal with this argument of Mr. Kaji based on the fact that the plots were assessed for agricultural purpose and permission for non-agricultural use was not obtained by the assessee, but we may point out at once that the test suggested by him cannot be accepted by us the correct test. Whether a particular land is agricultural land or not must depend on the general nature or character of the land and in order to ascertain the general nature or character of the land, various factors would have to be taken into account. The development and the use of the land in the adjoining area and the surroundings and situation of the land would be an important factor which would have a bearing on the question whether the land is agricultural land or not. This factor may affect the land and the capacity of being used for agriculture and would also indicate the purpose for which the land would ordinarily be likely to be used. The physical characteristics would be another factor to be taken into account. The physical characteristics may show the general nature or character of the land particularly in regard to its adaptability for being used for agricultural purpose. Then the intention of the owner as gathered from all relevant circumstances would also have a bearing on the general nature or character of the land. Of course, as we pointed out above the intention of the owner of the land to put in to a particular use at any given point of time cannot be the determining factor. But the intention of the owner in regard to the user of the land would certainly be a relevant factor which would have to be taken into account. Where, for example in the present case, the land has not been used for agricultural purpose for ever a number of years without any particular reason, it would certainly indicate that the land is no longer meant for agricultural purpose but is meant for being used for non-agricultural purpose and cannot, therefore, be regarded as agricultural land. The fact that the lands is assessed for agricultural purposes would also be a relevant consideration and due effect would have to be given to this factor in arriving at the conclusion whether the land is agricultural land or not. But we cannot agree that the capacity of the land of being put to agricultural use is a determinative factor in deciding whether the land is agricultural land or not. If that were the correct test, even building sites assessed for n0n-agricultural purposes would be agricultural lands so long as they are not actually put to non-agricultural use. Since it would always be possible to say of them that they are capable of being used for agricultural purpose. As a matter of fact all land which has not actually been put to non-agricultural use would be liable to be regarded as agricultural land if this test were the correct test.
(5) Mr.Kaji relied on a decision of a Federal Court Megh Raj v. Allah Rakhia, AIR 1942 FC 27, in his support of his contention that it is the capacity of the land for being put to agricultural use which is the determining factor in the decision of the question whether thee land is agricultural land or not. The observations to which he referred were the observations of Varadachariar J. at p.32 of the Report where the learned Judge seeking on behalf of the Bench said: -
"It may on a proper occasion be necessary to consider whether for the purpose of the relevant entries in List 2 and 3, Constitution Act, it will not be right to the into account the general character of the land (as agricultural land) and not the use to which it may be put at a particular point of time, It is difficult to impute to Parliament the intention that a piece of land should, so long as it is used to produce certain things, be governed by and descend according to laws framed under List 2, butt that when the same parcel of land is used to produce something else (as often happened in this country), it should be governed by and descend according to laws framed under List 3".
Now it is difficult to see how thee observations in any way support the contention of Mr.Kaji. The learned Judge in making these observations expressed be a tentative opinion that while considering what is agricultural land for the purpose of the relevant entries in List 2and 3, it may be right to take into account the general character of the land as agricultural and not the use to which it may be put at a particular point of time and so far as that goes, we are in entire agreement with it for as we have pointed out above, it is the general nature or character of the land which must determine whether it is agricultural land or not and actual use to which it is put at a particular point of time is of importance only in so far as it throws light on the general nature or characters of the land. The learned Judge did not go further and say that the capacity of the land for being put to agricultural use must regarded as the sole or exclusive test for deciding the general nature or character of the land, namely, whether it is agricultural land, or not, This decision does not therefore advance the contention of Mr.Kaji.
(6) The next decision on which Mr. Kaji relied was a decision of a Division Bench of the Madras High Court in Sarojini Devi v. Sri Kritsna, AIR 1944 Mad 401.now it is true that in this decision Patanjali Sastri J., observed: -
"We are of the opinion that for the purposes of the relevant entries in Lists II and III of Sch 7, the expression "agricultural lands' must be taken to include lands for raising any valuable plants or trees or for any other purpose of husbandry".
But these observations must be read in the context of the facts of the case. There the questions was whether a mango grove could be said to be agricultural land. The questions became necessary to be considered because if the mango grove was agricultural land, it would devolve according to laws passed by the Provincial Legislature but if it was not agricultural land, it would devolve according to the Hindu Women's Rights to Property Act being a law passed by the Central Legislature. The argument urges was that the mango grove could not be said to be agricultural land because it was not used for the purpose of agriculture. Dealing with this argument the Madras High Court pointed out that if the argument were correct, the result would be that lands devoted to the production of one kind of crop would devolve according to laws passed by Provincial Legislature while those used for growing another kind would pass according to laws made by the Central Legislature or in other words the circumstances in which the cultivation is carried on would determine the laws which governs the devolution of the land which could never have been intended by the Parliament. The Madras High Court therefore, observed that so long as land was capable of being used for raising any valuable plants or trees or for any other purpose of husbandry, it could be regard as agricultural land. This observations was being actually used for the purpose of providing crop and merely because one kind of crop which did not constitute agriculture was produced, it did not mean that the land ceased to be agricultural land, for instead of that crop another crop which constituted agriculture could always be produced on thee land. The Madras High Court in making this observation cannot, therefore, be regarded as having laid down any general or universal test applicable in all cases for determining when a land can be said to be agricultural land.
(7) Mr.Kaji also relied on a decision of the Calcutta High Court in Nil Govinda Misra v. Sm.Rukmini Deby, AIR 1944 Cal and 421 and he drew our attention to the following observations from the judgment in that at page 4254 of the Report: -
"Lands used or lands though lying unused, but capable of being used, regard to its general nature and character, for raising through the labour of man, food for man and beasts, food grains and vegetables and fodder ...... should be regarded as agricultural lands".
But if these observations are read along with what is stated a little earlier in the judgment, it will be clear that these observations far from supporting the contention of Mr.Kaji actually militate it and lay down the same test which we have discussed above and accepted as the correct test. This is what the Calcutta High Court observed a little before the passage quoted above:-
"Where, however, a piece of land is not being actually used but is lying waster, its general nature and character must be the determining factor. Surrounding and situation would have an Important bearing in such cases. A piece of fallow land in the middle of agricultural fields would have to be taken as agricultural land, for it is capable of being brought under tillage and would in all possibility be brought under tillage and not used for building a residential house, if in future it is to be put to be beneficial use".
This is so different from what we have said above while discussing the questions on general principle.
(8) A decision of a Division Bench of the Orissa High Court in Paramanand Das v. Sankar Rath, AIR 1951 Orissa 11 was also cited by Mr. Kaji, where Narasimham J., as he then was, cited with approval the observations of the Madras High Court in AIR 1944 Mad 401 (supra) and of the Calcutta High Court in AIR 1944 Cal 421 (supra). But this case cannot help the assessee for the evidence in this case clearly showed that the land was being used for cattle shed being a purpose subservient to agriculture and vegetables were also grown on the land. The decision of the Mysore High Court in Krishna Rao v. Third Wealth Tax Officer, (1963) 48 ITR 472 : (AIR 1963) Mys 111) also cannot help the assessee for in that case the land in question had been converted into an airfield and was being used as an airfield for over fifteen years before the date when the question arose for decision whether it was agricultural land or not and the Mysore High Court held that the land had long ceased to be agricultural land and it could only be reconverted into a agricultural land by expending considerable labour and money. When the land was actually being used as an airfield for over fifteen years, it is difficult to see now it could be said to be agricultural land.
(9) It is, therefore, clear that the true test to be applied for the purpose of determining whether a particular land is agricultural land or not, in a case where the land is not being actually put to any use, is not whether the land is capable of being used for agricultural purpose but whether having regard to the various factors to which we have referred to earlier, the general nature or character of the land is such that it can be regarded as agricultural land. When we consider the matter from this point of view, it is manifest that the plots in question in the present case, were not agricultural lands. The plots were situate in a wholly residential area with numerous residential buildings around the plots and they were situate in an area in respect of which Town Planning Scheme was in force since about 1945. Three out of the four plots wee cultivated up to about 1934-35 but had ceased to be cultivated since then and no agricultural operations were carried on these plots since about 21 to 22 years. The assessee did not say that he had any special reasons for stopping on these plots other than the intention to use them for non-agricultural purposes. It is rather significant that the assessee ceased cultivating these plots from about at the time when that area started developing as a fine residential area. So far as the fourth plot is concerned, the assessee purchased it on 16th December 1951 at the rate of about Rs.20 per square yard and ever since it was acquired, it ha not been put to any agricultural use. It is rather difficult to believe that any prudent and reasonable man would purchase agricultural land in the midst of a highly developed residential area and that too on payment of an enormously high price of about Rs.20 per square yard. It is also strange that the assessee should allow the plot to remain uncultivated or untilled for a period of several years if he purchased it as agricultural land and it was meant to be agricultural land. The only circumstances on which some reliance could be placed on behalf of the assessee in support of his contention that the plots were agricultural lands was that the plots were assessed for agricultural purpose and the assessee had not applied for and obtained permission of the revenue authorities to make non-agricultural use of the plots. Now as we have pointed out above, this is undoubtedly a relevant considerations, but having regard to the facts and circumstances of the case, too much importance cannot be attached to it. In the first instance it is for as if the assessee applied for permission to make non-agricultural use of the plots and such permission was refused. If that had been the case, the assessee would have been on strong ground for in that event the assessee could have successfully contended that the plots were incapable of being used for any purpose other than agriculture and were, therefore, agricultural lands. But no such permission was made by the assessee. Now having regard to the fact that the plots are comprised in the Town Planning Scheme, one can reasonably resume that if permission for non-agricultural use is applied for by the assessee, such permission would be granted by the revenue authorities as a matter of course. The Town Planning Scheme was made under the Bombay Town Planning Act, 1915, and it is clear from the provisions of that Act that the object of the Town Planning Scheme was to regulate the development of the area comprised in the Town Planning Scheme as a building area. Under S. 3 of the act a Town Planning Scheme would ordinarily provide inter alia for the following matters: --
(a) the construction, diversion, alteration and stepping up of streets, roads and communications;
(b) the construction, alteration and removal of building bridges and other structures;
(c) the plotting out of land as building sites whether such land is intended to be used for building purpose in the immediate future or not; and
(d) the allotment or reservation of and for roads, open spaces, gardens, recreation grounds, schools markets and public of all kinds;
and one may, therefore, assume that the Town Planning Scheme in the present case must have been made provision for these matters. Now the plots in question were admittedly not used for the purpose of either of the first two matters. Nor as it the case of the assessee that they were allotted or reserved for roads, open spaces, gardens recreation grounds, schools, market or public purposes of any other kind. It must, therefore, be concluded that the plots were plotted out as building it was and if that be the position, it can hardly be disputed that if permission for non-agricultural use of the plots is applied for such permission would be granted as a matter of course by the revenue authorities. The assessee obviously did not apply to the revenue authorities for permission to make non-agricultural use of the plots until the relevant valuation dates, of the assessment for non-agricultural purpose would be many times higher than the assessment for agricultural purpose and it would be highly unprofitable to the assessee to apply for and obtain permission for non-agricultural use and pay considerably higher assessment unless the assessee wanted to make immediate non-agricultural use of the plots,. The assessee could always apply for and obtain permission for non-agricultural use at the time when we decided to build on the plots or to make other non-agricultural use of them. The fact that the plots were assessed for agricultural purpose and no application was made by the assessee for permission to make non-agricultural use of the plots is, therefore, not such a factor, as would outweigh the other factors to which we have referred a little earlier. As a matter of fact the inclusion of the plots in the Town Planning Scheme and the plotting out of the land comprised in the plots as building sites would clearly show that the plots were not agricultural lands. We are, therefore, of the view on a consideration of all the relevant circumstances to which we have adverted that the assessee has failed to show that the plots in question were agricultural lands with in the meaning of Section 2(c)(I).
(10) We, therefore, answer the question referred to us in the negative. The assessee will pay the costs of the Reference to the Commissioner.
(11) Reference answered in the negative.