Decided on January 31,1979



DIVAN, J. - (1.) IN this case, at the instance of the assessee, the following question has been referred to us for our opinion : "Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the land under reference was not agricultural land within the meaning of the IT Act, 1961?"
(2.) WE are concerned in this case with the asst. year 1967 68, the relevant previous year being the financial year 1966 67. The facts leading to this reference are that one Morarbhai Bhikhabhai Chauhan purchased six acres and fifteen gunthas of agricultural land as far back as 1921. These lands were situated at village Phoolpada of Surat District and it appears that this village is near Surat City. The lands consisted of four acres and twenty three gunthas of survey No. 95 and one acre and thirty two gunthas of survey No. 122/3. Morarbhai died in 1949. At that point of time, he was about 90 years of age. His son Maganlal Morarji, the assessee before us, inherited the lands and he used these lands for agricultural purposes. On July 10, 1965, the assessee entered into an agreement to sell four acres and thirty two gunthas and forty nine square yards, that is, 23,281 square yards, from the lands he owned. With reference to the survey numbers, the entire land of survey No. 122/3 admeasuring one acre and thirty two gunthas and three acres and forty nine square yards out of survey No. 95, were agreed to be sold. The agreement to sell was in favour of Maheshwari Co operative Housing Society. Price of the land was fixed at Rs. 6.95 per square yard and the total sale price came to Rs. 1,61,802. The land was agreed to be sold according to the areas mentioned in terms of acres and gunthas. On August 23, 1966, the assessee applied to the Collector of Surat for permission under S. 63 of the Bombay Tenancy and Agricultural Lands Act, 1948, since the sale of agricultural land was going to be in favour of a non agriculturist. This permission under S. 63 was granted by the Assistant Collector, Surat, on January 2, 1967. Thereafter, on January 12, 1967, the assessee executed the sale deed in respect of 23,281 square yards, that is, four acres, thirty two gunthas and forty nine square yards, in favour of Maheshwari Co operative Housing Society Ltd., Surat. After the sale was effected, the purchaser, that is, the co operative society, applied under S. 65 of the Bombay Land Revenue Code to the Revenue authorities for permission to use the lands which it had purchased for non agricultural purposes and for this non agricultural use permission was granted on May 11, 1967. It is the case of the assessee that, barring this money which he received from the sale price of the lands in question, his income from other sources was below the exemption limit. His contention was that in the previous year relevant to the asst. year 1967 68, his income from interest was Rs. 722 and income from self occupied property and rent of immovable property came to Rs. 2,753. Thus, his entire income was Rs. 3,475. On October 15, 1969, the ITO issued a notice under ss. 147 and 148 of the IT Act, 1961, proceeding on the basis that the assessee had earned long term capital gains which should have been included in his income tax return so far as the asst. year 1967 68 was concerned. Ultimately, in the assessment proceedings, the ITO came to the conclusion that long term capital gains, after making suitable adjustment, came to Rs. 1,33,521. Before the ITO, it was contended by the assessee that the lands were agricultural lands and, hence, because of the provisions of the IT Act, 1961, the sale of agricultural lands would not result in any capital gains. The ITO rejected the contention of the assessee holding that at the time when the land was sold on January 12, 1967, the land had lost its agricultural character and it had become non agricultural land. Against the decision of the ITO, the assessee went in appeal and the AAC accepted the contention of the assessee and held, in view of the facts and circumstances of the case, that the sale of January 12, 1967, was not of non agricultural land and he, therefore, allowed the appeal. The Revenue took the matter in appeal before the Tribunal and the Tribunal came to the conclusion, looking to the totality of circumstances of this case, that, on the date on which the land was sold on January 12, 1967, the land was no longer agricultural land and hence it had ceased to be agricultural land on the date in question. The law on the point has been considered in several decisions of this High Court and in one decision of the Supreme Court. The decisions of this High Court are Rasiklal Chimanlal Nagri's case (1965) 59 ITR 608 (Guj), CWT vs. Narandas Motilal (1971) 80 ITR 39 (Guj), Ranchhodbhai Bhaijibhai Patel's case (1971) 81 ITR 446 (Guj), Himatlal Govindji's case (1971) 106 ITR 658 (Guj), CIT vs. Manilal Somnath (1977) 106 ITR 917 (Guj), Chandravati Atmaram's case (1978) 114 ITR 316 (Guj), CIT vs. Prakash Industries (1978) 114 ITR 316 (Guj), Yashwanti R. Bhatt's case (1978) 114 ITR 318 (Guj), and the decision of this Bench in Chhotalal Prabhudas (HUF)'s case, IT Ref. No. 105 of 1975 decided by this Bench on October 10, 1978 (since reported in (1979) 116 ITR 631). The decision of the Supreme Court is in CWT vs. Officer in Charge (Court of Wards) (1976) 105 ITR 133 (SC). In CIT vs. Manilal Somnath (supra), the position of law was thus summarised after considering all the decisions available till the date of the decision : "In our opinion, the correct approach has rightly been indicated in Rasiklal Chimanlal Nagri's case (supra). First, find out whether the land in question is being put to any use or not. If it is being put to agricultural use, ordinarily it would be agricultural land unless there are factors which dislodge that presumption. Similarly if the land is being put to non agricultural use, it would be non agricultural land. The different tests which are mentioned in Rasiklal Chimanlal Nagri's case (supra) and other factors which require to be taken into consideration have applicability when the land is not being used for any purpose and is lying idle. In Himatlal Govindji's case (supra), though the land was being put to agricultural use, since it was found that it was only by way of a stop gap arrangement till a purchaser of the plot which was already laid out came forward to purchase it, it was held that the land was not agricultural land. In each case, therefore, in the light of the facts and circumstances of the particular case, the question will have to be asked, whether the presumption from the use of the land arises or not and, secondly, whether such presumption flowing from the actual use of the land is dislodged by the presence of other factors in the case."
(3.) IN Smt. Chandravati Atmaram vs. CIT (supra), this Bench considered all the cases up to the date of delivery of the judgment including the decision of the Supreme Court in CWT vs. Officer in Charge (Court of Wards) (supra) and the following passage from the judgment of Beg J., as he then was, at page 136 of the report of the Supreme Court case was extracted : "It is true that this case (CIT vs. Raja Benoy Kumar Sahas Roy (1957) 32 ITR 466 decided by the Supreme Court) is not a direct authority upon what is 'agricultural land'. Nevertheless, it goes a long way in helping us to decide what could be agricultural land. 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 (supra) have a direct bearing. In that case, this Court held that the wider meaning given to agricultural operations, such as breeding and rearing of live stock, 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". The following passage from page 141 of the Supreme Court case was also extracted : "It is only 'agricultural land' which could be exempted. Therefore, it is imperative to give reasonable limits to the scope of the 'agricultural land', or, in the other words, this exemption had to be necessarily given a more restricted meaning than the very wide ambit given to it by the Full Bench of the Andhra Pradesh High Court (in this very case)." ;

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