Income Tax Appellate Tribunal - Jodhpur
Wealth Tax Officer vs Satyanarain Saraf And Ors. on 29 September, 2000
Equivalent citations: [2003]86ITD24(JODH), (2003)78TTJ(JODH)583
ORDER
1. These thirty-two appeals are preferred by the Revenue against the four separate orders of the learned CWT(A), Udaipur, all dt. 30th Nov., 1993, in respect of four assessees involving eight assessment years i.e., 1982-83 to 1989-90, whereas all the four assessees have also filed their cross-objections against these Departmental appeals. As the issues involved in all these appeals and cross-objections are common, we have taken up the same together for disposal by a common order for the sake of convenience.
2. The facts giving rise to these appeals are that all the four assessees, namely, Shri Satyanarain Saraf, Shri Manilal Saraf, Smt. Ganeshi Bai and Smt. Kalawati Bai were the partners in M/s Ashoka Dairy Farm (ADF for short) having equal shares. The said firm M/s ADF owned 35 bighas of land in Banswara which was claimed as agricultural land not covered by the definition as per Section 2(e) of the WT Act and as such was not includible in the net wealth. However, while finalising the wealth-tax assessments of the partners for the asst. ys. 1982-83 to 1989-90, the WTO considered this land as urban land and on the basis of the valuation report dt. 7th Jan., 1993, obtained from the DVO, determined the value of interest of the assessees as partners in the firm of M/s ADF, Banswara, and included the same in their respective net wealth.
3. The matter was carried before the CWT(A) who considered the said land as exempt from wealth-tax within the meaning of Section 2(e) being agricultural in nature. However, considering that a portion of the building standing on the said land was let out and as such ceased to be used as a dwelling house/storage house by the cultivators, the learned CWT(A) held that interest of the assessee in the value of the rented portion calculated on the basis of rent capitalisation method was liable to be included in the net wealth of the assessee for asst. yrs. 1986-87 to 1989-90. Aggrieved by the same the Revenue is in appeal before us in respect of all the assessments involved, whereas all the four assessees have filed cross-objections against the Departmental appeals.
4. The learned Departmental Representative strongly supported the order of the AO and contended that the said land had substantial potential for use as non-agricultural in view of its situation in municipal limit of Banswara town. He has also submitted that it was with this intention that the land originally belonging to one of the partners was taken over by the firm as his capital contribution. He, therefore, contended that the market value of the said land has to be judged from this angle notwithstanding it temporary and transitional character as agricultural land. He further submitted that all the four assessees were partners in the firm of M/s ADF, Banswara, on the relevant valuation dates having 25 per cent share in the profit/loss of the firm and the firm owned this substantial open land in residential/Abadi area in Banswara which was claimed by the partners of the firm themselves to be non-agricultural land for such utilisation. He also submitted that the decision of State Revenue Board, Ajmer, holding the said land as agricultural land was contested by the assessees before the Hon'ble Court of Revenue. Appellate Authority, Udaipur, which rendered its decision in favour of the assessee on 13th June, 1989, treating the land as Abadi land, and this decision has also been subsequently upheld by the Hon'ble Court of Revenue Board Rajasthan vide its order dt. 29th April, 1992. He, therefore, contended that considering the facts of the case and the decisions of the aforesaid authorities, the subject land cannot be considered as an agricultural land. He further contended that the order of the Revenue Board has the effect from the date when application for conversion of land into Abadi land was made and claimed as such by the assessee. He further submitted that the value of assessee's interest in the firm of M/s ADF have been included in the net wealth of the assessees being partners in the said firm under Section 4(1)(b) and contended that such interest is in the movable property for which no exemption is provided in the WT Act, in spite of the fact that the firm owned certain fixed assets like agricultural land in this case. For this contention, he relied on the judgment of the Hon'ble Supreme Court Juggilal Kamlapat Bankers and Anr. v. WTO and Ors. (1984) 145 ITR 485 (SC). He further contended that permanent abandonment of user for agricultural purpose as well as conversion of land for non-agricultural purposes have affected the character of the land as agricultural land relying on the judgment of Hon'ble Delhi High Court Shiv Shankar Lal v. CIT (1974) 94 ITR 433 (Del). He also contended that the intention of the owner/occupier is very material in such cases as held by the Gujarat High Court in Arundhati Bal Krishna and Anr. v. CIT (1982) 138 ITR 245 (Guj) as well as by Bombay High Court in CWT v. H.V. Mungale (1984) 145 ITR 208 (Bom). He, therefore, contended that the AO's order on this issue suffers from no infirmity and. accordingly deserves to be upheld.
5. The learned counsel for the assessee relied on the submissions made before the CWT(A) in this case and submitted that the issue involved in these appeals is covered in favour of the assessee by the decision of Jaipur Bench of Tribunal in the assessee's own case for the immediately preceding years 1974-75 to 1981-82 in ITA No. 64 to 79/Jp/83, dt. 6th Aug., 1984, involving identical facts and circumstances. He also furnished a copy of the said judgment in his paper book at pp. 16 to 18. He further submitted that the Hon'ble Court of Revenue, Appellate Authority, Udaipur, delivered its judgment treating the land as Abadi land only on 13th June, 1989, i.e., after the last valuation date involved in these appeals and, therefore, contended that the same cannot have any bearing on the decision in these cases. He further submitted that the land was owned by a partnership firm called M/s ADF, Banswara, and the said firm has recorded all the transactions in respect of agricultural income and agricultural expenses pertaining to the said land in its books of account. He also submitted that the agricultural income derived from the said land has been duly disclosed in the return of income for each of the assessment years from asst. yrs. 1982-83 to 1986-87 and furnished the copies of the relevant returns in his paper book in support. He further submitted that the share of agricultural income of the said firm has also been disclosed by the assessees in their respective returns of income. He also furnished the copies of relevant land revenue record as well as the copies of land revenue receipts in support of land revenue having been paid upto the year 1992. Therefore, considering the facts of the case and the decision of Jaipur Bench in assessee's own case for the earlier period, he contended that the CIT(A) was fully justified in treating the land as agricultural land and accordingly exempt from levy of wealth-tax.
6. We have considered the rival submissions and also perused the material on record including the decisions cited by both the parties. It is observed that while deciding the similar issue in the case of two of the four assessees involved here, for asst. yrs. 1974-75 to 1981-82, the Jaipur Bench has held in ITA Nos, 64 to 79/Jp/1993 as follows :
"Admittedly the property is being used as agricultural property. It has not been used for purposes of dairy farm because the Revenue Department of Government of Rajasthan insists that it is agricultural land which can be used for no other purposes. It is not Abadi land as claimed by the assessee. The matter so far as the classification of the land is concerned has become final by the order of the Board of Revenue as the final Court of appeal holding that it is agricultural land. It cannot, therefore, be valued as potential building site even though it is adjacent to Abadi area of Banswara and it can indeed be converted for agricultural use."
It is also observed that this judgment was delivered by Jaipur Bench on 6th Aug., 1984, involving assessment years upto 1981-82 pertaining to the valuation date of 31st March, 1981, whereas the appeals before us involve assessment years from 1982-83 to 1989-90 in which the latest valuation date involved is 31st March, 1989. From the perusal of material available on record, it is evident that, there has been no material change in the facts and circumstances of the case as prevailing on 31st March, 1989, from the one prevailed on 31st March, 1981, to consider the matter on a different footing. However, the learned Departmental Representative has raised various new contentions before us in support of Revenue's case which need to be considered.
7. The learned Departmental Representative has contended that the value of assessee's interest in the firm has been included in the net wealth of the assessee under Section 4(1)(b) which is not exempt under the WT Act. It is observed that no doubt Section 4(1)(b) contains provisions relating to inclusion of the value of assessee's interest. However, in the instant case such interest is mainly related to the agricultural land and the building constructed thereon which are not the assets envisaged by Section 2(e) and as held by the Hon'ble Madras High Court in the case of CWT v. Vasantha (1973) 87 ITR 17 (Mad) any property which is owned by the firm and which is not an asset as envisaged by Section 2(e), should not be aggregated while computing the interest of a partner in a firm, under Rule 2(1) of the WT Rules r/w Section 4(1)(b). Accordingly, this contention of the learned Departmental Representative fails.
8. The decision of Hon'ble Supreme Court in the case of Juggilal Kamlapat Bankers and Anr. v. WTO and Ors. (supra) cited by the learned Departmental Representative is not applicable in this case, as the assets owned by the firm in that case were the assets chargeable to wealth-tax whereae in the present case the asset owned by the firm is an agricultural land which is considered as not as asset for the purpose of levy of wealth-tax.
9. In the case of Shiv Shankarlal v. CIT (supra), relied by the learned Departmental Representative, it has been observed by the Hon'ble Delhi High Court that a temporary non-user for agricultural purposes will not affect the character of the land but a permanent abandonment of the user for agricultural purposes will affect the character of the land as agricultural land. It has also been observed by the Hon'ble High Court that the actual conversion of the land for non-agricultural purpose will also affect the character of the land as agricultural land. In the present case before us, there is neither such permanent abandonment of user for agricultural purpose nor the actual conversion of land for non-agricultural purposes, upto the relevant valuation date and as such this decision is distinguishable on the facts, In another case cited by the learned Departmental Representative, (1982) 138 TTR 245 (Guj) (supra), the Hon'ble Gujarat High Court while deciding the issue of capital gain, laid down certain criteria for determining the nature of land as agricultural and observed that the intention of the owner to put it to any particular user is one of the criterias, though not the sole or exclusive criteria. Finally, the land in that case was held as non-agricultural considering that the same was sold to housing society with the specific intention to use the same for developing housing complex and the sale price was also found to be much excessive. The facts involved in the case before us are entirely different from the facts on which the decision of the Hon'ble Gujarat High Court has been rendered and accordingly it is not relevant. The decision of the Hon'ble Bombay High Court in the case of CIT v. Universal Cine Traders (P) Ltd. (1986) 161 ITR 696 (Bom), relied upon by the learned Departmental Representative, the facts involved were altogether different from the present case inasmuch as no agricultural operations were carried on, on the said land by the assessee in that case and on the contrary the assessee constructed a studio on the said land which resulted into actual use of the said land for non-agricultural purposes. Another decision of the Hon'ble Bombay High Court in the case of CWT v. H.V. Mungale (supra) also appears to be of no help to the Revenue in this regard. On the contrary it seems to render some support to the assessee's case as it has been observed therein that merely because the land remained fallow for some period after being used for agriculture and entered in the Revenue record as agricultural land, it did not cease to be agricultural land. It was, therefore, held that the said land was agricultural land within the meaning of Section 2(e)(1)(ii) on the valuation date and its value could not be included in computing the net wealth of the assessees.
10. It is observed that the learned CIT(A) has elaborately discussed all the relevant facts of the case before finally observing as under :
"I have considered the facts of the case and the submissions of the authorised representative. The contentions of the appellant that the land is agricultural are acceptable. Though it is true that the appellant was trying for the conversion of the land into Abadi land, the land is situated within the municipal limits and is surrounded on three sides by urban areas, the situation of the land in a village or in an urban area is not by itself determinative of its character. The land under consideration is not only capable of being used for agricultural purpose that has actually and continuously over a period of several years been used for such purposes. Agricultural operations have been carried out on the land, the land has been classified as agricultural land and assessed to land revenue. Entries in Revenue records are good prima facie evidence [CWT v. Officer-in-Charge (Court of Wards), Paigah (1976) 105 ITR 133 (SC)). The land which is recorded as agricultural land in the Revenue papers cannot be used for a non-agricultural purpose by the owner unless the land is allowed to be converted to non-agricultural purposes by the Collector under the provisions of the relevant Land Revenue Act. Such conversion was not permitted by the Revenue authorities during the eight assessment years under consideration.
Even though, w.e.f. asst. yr. 1987-88 the land was not cultivated and lay fallow and barren, this fact by itself would not render the land non-agricultural. The fact remains that the land was still capable of being used for agricultural purposes, and had not been put to use for non-agricultural purposes so as to change the character of the land.
Therefore, during the asst. yrs. 1982-83 to 1989-90, the land was agricultural in nature and exempt from wealth-tax within the meaning of Section 2(e)."
11. In CIT v. Siddharth J. Desai (1983) 139 ITR 628 (Guj) the Hon'ble Gujarat High Court has discussed as many as 18 decisions rendered by it on this issue and identified various factors which require consideration in order to decide whether the land is agricultural land. This decision of the Gujarat High Court is considered as a landmark decision on this issue and we consider it worthwhile to apply these tests/criteria laid down by the Hon'ble High Court to the facts of this case as follows :
(1) The land was classified in the Revenue records as agricultural land and was also subjected to the payment of land revenue;
(2) The land was actually used for agricultural purposes during the previous year relevant to asst. yr, 1982-83 to 1986-87 and agricultural income derived from the said land has duly been disclosed in the return of income. Subsequently, during the asst. yrs. 1987-88 to 1989-90, there was a temporary discontinuance of the agricultural activities, as the firm was engaged in litigation on this issue.
(3) The land was actually used for agricultural purposes for a long period and it was not just a stop-gap arrangement.
(4) The land was introduced by one of the partners as his capital contribution for an agreed value of Rs. 1,50,000 and the firm derived the agricultural income from the said land as given below :
Asst. yr.
Income (Rs) 1982-83 25,962 1983-84 22,284 1984-85 17,439 1985-86 27,937 1986-87 30,190 From the above, it is evident that the income derived from agricultural operations carried on in the land bore rational proportion to the value of land.
(5) Although the permission was sought by the assessee for the use of the land for non-agricultural purposes, the same was accorded only on 13th June, 1989, by the decision of the Hon'ble Court of Revenue Appellate Authority, Udaipur. This matter was subsequently carried before the Hon'ble Court of Revenue Board, Rajasthan who upheld the decision of the Court of Revenue Appellate Authority by its judgment delivered on 29th April, 1992, and only then the matter acquired finality.
(6) The land upto the last valuation date involved in all these cases i.e., 31st March, 1989, had not ceased to be put to agricultural use and it was also not put to any alternative use till that date.
(7) There is nothing on record to suggest that there was any previous sale of a portion of the land for non-agricultural use.
(8) The land was situated in the developed residential/Abadi area in Banswara. However, as held by the Hon'ble Gujarat High Court in the case of CIT v. Manilal Somnath (1977) 106 ITR 917 (Guj), the mere fact that the land was situated within the municipal limits surrounded by developed area by itself does not dislodge the presumption flowing from the actual use of the land.
As such on consideration of the entire circumstances of the case before us in the light of the various criteria laid down by the Hon'ble Gujarat High Court, the position which comes out very clearly is that the land was an agricultural land upto the relevant date of valuation i.e., 31st March, 1989.
12. Undoubtedly the assessee sought the permission to use the said land for non-agricultural purposes and also contested this matter before different authorities. However, we are of the opinion that the mere intention of the assessee to convert the agricultural land into non-agricultural land would not rob such land of its agricultural character. Moreover, the matter of non-agricultural use of the said land acquired is finality after the relevant valuation date only and as held by the Hon'ble Delhi High Court in the case of DLF Housing and Construction (P) Ltd v. CIT (1983) 141 ITR 806 (Del), the character of land on the date of transfer is to be ascertained and not its future character.
13. The initial burden to prove that the land in question was being used for agricultural purposes at the relevant time was on the assessee, and the assessee's have discharged their burden by bringing sufficient material on record in support of classification of the said land as agricultural land in Revenue records and also in support of the agricultural income derived from the said land. This prima facie evidence and the presumption arising therefrom has not been rebutted by the Department by leading any evidence in support of non-agricultural use of the said land.
13. In the case of Gordhan Bhai Kahandas Dalwadi v. CIT (1981) 127 ITR 664 (Guj), the Hon'ble Gujarat High Court has held that the crucial test for determining the nature of a particular land is the actual use of the said land on the relevant date and not the potential non-agricultural use which does not alter the character of the land from agricultural to non-agricultural. The Hon'ble Supreme Court had an occasion to deal with a similar issue in the case of CWT v. Officer-in-charge (Court of Wards) (1976) 105 ITR 133 (SC) and it has been held by the Hon'ble Supreme Court that the classification of the land and its assessment to land revenue as agricultural land under the Relevant revenue enactment is a good prima facie evidence of land being agricultural one and this presumption can only be rebutted only by leading evidence for establishing that the said land is put to some other non-agricultural purpose.
14. The learned counsel for the assessee has placed on record a copy of Circular No. 2(WT), dt. 16th March, 1968, and the relevant portion of the same is reproduced below :
"At the 10th meeting of the Direct Taxes Advisory Committee, the question of assessment of vacant lands, which were converted into non-agricultural use, was considered. It was decided that land which is covered by the Town Planning Scheme may be treated as agricultural land provided the following conditions are satisfied :
(i) land revenue/agricultural cess is paid;
(ii) agricultural operations have been carried on from year to year; and
(iii) it has not been put to non-agricultural use.
Before granting exemption under Section 2(e)(i) of the WT Act, WTO should see that the conditions mentioned above are satisfied."
14.1. A perusal of this circular and the elaborate discussion made by us hereinabove, explicitly reveal that all the three conditions prescribed in the said circular get fully satisfied, in the cases before us, which fortifies our view that the said land was an agricultural land on the relevant valuation date. Considering all the facts of the case, the circumstances prevailing on the relevant valuation date, legal position emanating from the various judicial pronouncements referred hereinabove and the decision of the Jaipur Bench on the similar issues in the assessee's own case for the immediately preceding years, we are of the considered opinion that the land owned by M/s ADF was an agricultural land not includible in the definition of "assets", within the meaning of Section 2(e) on the relevant valuation dates and as such the assessee's interest in its value cannot be included in computing the net wealth of the assessees in the asst. yrs. 1982-83 to 1989-90.
15. The other issue raised by the assessee in all the cross-objections relates to the deduction under Section 5(1)(iv).
16. It is observed that the learned CWT(A) has held that the portion of building has let out by the assessee and as such ceased to be used as a dwelling house, store house/out-house by the cultivators. Accordingly the value of rented portion was determined by rent capitalisation method and interest of the assessees in the same was considered as liable for inclusion in the assessee's wealth for asst. yrs. 1986-87 to 1989-90. Now before us, the learned counsel for the assessee has contended that the assessees are entitled for deduction under Section 5(1)(iv) in respect of the said assets. These contentions have been raised for the first time before us as the issue has cropped up out of the learned CWT(A)'s order. After considering the submission made by the learned counsel for the assessee and perusing the relevant material on record, we find that this issue requires verification from the actual record in respect of nature, ownership, valuation and, other relevant aspects and, therefore, we feel it appropriate to restore back this issue to the file of the WTO for verifying all the relevant aspects to ascertain the eligibility of the assessees in respect of their claim for deduction under Section 5(1)(iv).
17. In the result all the appeals of the Revenue are dismissed whereas the cross-objections filed by the assessee are treated as allowed as indicated above.