COMMISSIONER OF INCOME TAX Vs. VAJULAL CHUNILAL HUF
LAWS(GJH)-1979-2-4
HIGH COURT OF GUJARAT
Decided on February 05,1979

COMMISSIONER OF INCOME TAX Appellant
VERSUS
VAJULAL CHUNILAL (HUF) Respondents

JUDGEMENT

DIVAN, J. - (1.) ALL these four references arise out of the same set of facts and are inter related. The order of the ITO in Ref No. 287 of 1975 is by way of protective assessment in case the Department loses in the case out of which Ref. No. 71 of 1976 arises. Similarly, I.T. Ref. No. 5 of 1976 is also in connection with the same transaction out of which IT Refs. Nos. 70 and 71 of 1976 arise. Hence, all these four matters are being disposed of by this common judgment. In IT Refs. Nos. 70 and 71 of 1976, two questions have been referred to us, one at the instance of the assessee and the other at the instance of the Revenue for our opinion. Question No. 1 is : "Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the land sold to Kalpana Co operative Housing Society was non agricultural in character when it was sold ?"
(2.) THIS question has been referred to us at the instance of the assessee. The second question is : "Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that there was a valid partition of the land in question and, therefore, the capital gains arising out of the sale transaction between Devidas Sunderlal and the Kalpana Co op. Housing Society were not taxable in the hands of the assessee ?" This question No. 2 has been referred to us for our opinion at the instance of the Revenue. We are concerned in this case with asst. year 1969 70, the relevant previous year being Samvat 2024. Samvat 2024 ended on October 21, 1968. The assessee is an HUF in the name of Vajulal Chunilal HUF. The assessee family owned 23 acres and 17 gunthas of land at Adajan village in Chorashi Taluka of Surat District. These lands were purchased by Vajulal Chunilal on June 29, 1929. At that time, the lands were in four survey numbers, namely, survey Nos. 464, 465, 470 and 471 on Adajan village. The total area aggregated to 25.17 acres. Between 1929 and 1964 65, some parts of survey Nos. 464 and 465 were acquired under the Land Acquisition Act for construction of roads and two acres of land were taken away from the family under the Land Acquisition Act, leaving the family with 23 acres and 17 gunthas of land that means 1,13,375 square yards of land. On July 22, 1964, the joint family entered into an agreement with a firm called Skyline Land Corporation to sell 43,985 sq. yrds of land out of its total holding and the price which was agreed was Rs.45,001 per bigha which works out to Rs. 16.17 per square yard. In Surat District, one acre is equivalent to 1.75 bighas of land. The agreement to sell, dated July 22, 1966, mentioned that the agreement was to sell 25 to 30 bighas of land but on actual measurement, it was subsequently ascertained with reference to the map and other documents that the agreement to sell covered 43,985 square yards of land. On May 8, 1968, there was a partial partition of the land belonging to the family and on that partial partition, out of the several coparceners of the family, an area covering 43,985 sq. yrds of land was given to Devidas, who is the assessee in IT Ref. No.287 of 1975. It may be pointed out that Vajulal Chunilal who purchased the land in 1929 died in 1950 leaving behind him six grandsons. Vajulal had only one son, Sunderlal, and Sunderlal predeceased Vajulal, having died on June 1, 1947. After 1950, that is, after Vajulal's death, the joint family consisted of six sons of Sunderlal and their descendants. The six sons were Natwarlal, Vadilal, Manharlal, Harshadray, Yashwantray and Devidas. Under the deed of partition, an area aggregating to 43,985 sq. yrds was allotted to Devidas Sunderlal. Devidas was entitled to one sixth share in the joint family properties. Devidas agreed with his five brothers to pay each of them a sum of Rs. 1,09,795.83 as the share of each of them in the lands admeasuring 43,985 sq. yrds. On the very day on which the partition deed was executed between the different coparceners of the HUF of Vajulal Chunilal, Devidas executed a sale deed in favour of Kalpana Co operative Housing Society for the aggregate sum of Rs.7,11,237. Prior to the deed of sale but after the agreement to sell was entered into with Skyline Lands Corporation, on November 21,1966, the assessee HUF applied to the Collector of Surat for permission under s.63 of the Bombay Tenancy and Agricultural Lands Act to sell the land to a non agriculturist. This permission was granted by the Asstt. Collector of Olpad Division, Surat, by his letter dated February 12/14, 1968. The land was not converted to non agricultural use as contemplated by s.65 of the Bombay Land Revenue Code prior to the date of sale, but on an application made by the chairman of the Kalpana Housing Society, permission for non agricultural user was granted by the District Development Officer, Surat, on March 10, 1969, and the permission granted clearly shows that this permission was being granted on the application of Shri A. G. Patel, Chairman and others of Surat, Kalpana Co op. Housing Society Ltd. for obtaining permission to make non agricultural use of the land forming part of survey Nos. 464, 465 and 471. At the time of the assessment proceedings, it was ascertained that an amount of Rs. 3,71,105 would be the capital gains out of the sale price in respect of this land and this amount of capital gains was arrived at after making necessary adjustments regarding the cost of acquisition and other permissible adjustments.
(3.) THE assessee HUF applied to the ITO under s.171 for recognition of the partial partition regarding this particular asset, but the ITO rejected that application on the ground that the partition was not valid and genuine. As regards the question of capital gains, the ITO held that the land was non agricultural land at the date of sale and he, therefore, held that the amount of capital gains worked out by him should be included in the assessable income of the assessee HUF. Against these two decisions of the ITO, one under s.171 and the other on the question of capital gains, two appeals were filed by the assessee and the AAC dismissed both the appeals. The assessee took the matter in further appeal to the Tribunal. The Tribunal held that the partition was a valid partition but it held that the land was non agricultural land on the date of sale, that is, on May 8, 1968, and hence we have got two questions before us, in Refs. Nos. 70 and 71 of 1976, and, as we have pointed out earlier, the question regarding partition having been held to be valid is at the instance of the Revenue and the question as to whether the land was non agricultural land or not, therefore, on the question of capital gains, is at the instance of the assessee. In Ref. No. 287 1975, the question that is referred to us is at the instance of Devidas Sunderlal, the individual, the brother to whom the land was given by the partition of May 8. 1968. As we have pointed out, the assessment of the capital gains in the hands of Devidas Sunderlal is by way of protective assessment and if the partition is held to be valid, the amount of capital gains would be in the hands of Devidas Sunderlal and the question would have to be determined in his individual assessment whether the land sold by him on May 8, 1968, to Kalpana Co operative Housing Society after obtaining the land on partition from the rest of the coparceners, was agricultural land or not and the question that has been referred to us in IT Ref. No. 287 of 1975 is : "Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the land sold to Kalpana Co op. Housing Society was non agricultural in character when it was sold ?" This question has been referred to us by the Tribunal at the instance of the assessee, Devidas Sunderlal, in his individual status. In IT Ref. No. 5 of 1976, the question that has been referred to us is : "Whether, on the facts and in the circumstances of the case, the assessee was entitled to the recognition of partial partition of the land in question effected by a deed dated May 8, 1968, under s. 171 of the IT Act, 1961 ?" ;


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