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Commissioner of Wealth-tax Vs. P.K. Samal - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Delhi
Decided On
Judge
Reported in(1985)13ITD781(Delhi)
AppellantCommissioner of Wealth-tax
RespondentP.K. Samal
Excerpt:
1. the applicant-revenue by their present reference applications under section 27(1) of the wealth-tax act, 1957 ('the act') all presented on 30-1-1984, required the tribunal to refer certain identical questions for the valuable opinion of the hon'ble orissa high court, said to be referable questions of law and further said to be arising out of consolidated order dated 24-11-1983 of the tribunal, delhi bench 'a' in wt appeal nos. 80 to 94 (cuttack) of 1980 for the assessment years 1966-67 to 1974-75. 7. whether, on the facts and in the circumstances of the case, the tribunal was justified in coming to the conclusion that the land adjoining the property under the name wilson house was agricultural in nature and, therefore, was not included in the taxable wealth of the assessee 2. on the.....
Judgment:
1. The applicant-revenue by their present reference applications under Section 27(1) of the Wealth-tax Act, 1957 ('the Act') all presented on 30-1-1984, required the Tribunal to refer certain identical questions for the valuable opinion of the Hon'ble Orissa High Court, said to be referable questions of law and further said to be arising out of consolidated order dated 24-11-1983 of the Tribunal, Delhi Bench 'A' in WT Appeal Nos. 80 to 94 (Cuttack) of 1980 for the assessment years 1966-67 to 1974-75.

7. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in coming to the conclusion that the land adjoining the property under the name Wilson House was agricultural in nature and, therefore, was not included in the taxable wealth of the assessee 2. On the facts and in the circumstances of the case, whether the Tribunal was justified in stating that the WTO did not carry any enquiry in treating the property as one in which no agricultural operation was carried on 3. Following is the common question during the assessment years 1973-74 and 1974-75 : 3. Whether the Tribunal was legally justified in accepting the contention that the lease period expired on 1-4-1973 and directing the deletion of property from the taxable wealth although no such contention was at any time put forth for consideration by the WTO 4. The appeals were decided by a consolidated order. The facts, circumstances, parties and issues are common, and, therefore, for the sake of convenience, we consolidate the reference applications for consideration and disposal.

5. Inasmuch as, in our opinion, mixed questions of law and fact do, in fact, arise from the said consolidated order of the Tribunal, we proceed to draw up a consolidated statement of the case for making a reference.

6. The assessee is shown as a HUF by status and the valuation dates are 31-3-1976 and onwards. The assessee was the owner of land situated in the Cantonment Road, Cuttack, Orissa.

The first item of property which is in dispute is a land situated in the Cantonment Road, Cuttack, Orissa. There is a small dilapidated house, the value of which is not in dispute in these appeals as the value fixed by the valuation cell is accepted. It is in respect of the land that several objections have been raised by the assessee.

It is useful to give a history of the land in brief. The land is the Government land. The land was given on lease to one P.S. Beument of Calcutta, long prior to 1950. She bequeathed the land in favour of her daughter Mrs. P.M. Macdonald, who became entitled by virtue of the probate granted by the Calcutta High Court on 9-2-1945. Just before the grant of the probate, the assessee's father late S.M. Samal entered into an agreement with the executors of the will of Mrs. Macdonald to purchase the leasehold rights. That agreement somehow fell through and a second agreement was executed on 10-4-1951. After the mutation of the land in favour of the legatee, the sale deed was executed by her and P.K. Samal became the owner of the leasehold rights and Khaitan (record of rights) was issued in favour of the assessee on 5-6-1953. The total area of the land is 3.508 acres. In the year 1969, the Government of Orissa started acquisition proceedings for a portion of the land measuring 2 acres.

However, the land actually acquired was 1.764 acres. This was meant for the purpose of the Government of India and a compensation of Rs. 4,18,600 was paid for the land. It further appears that the remaining portion of 0.236 acres was not acquired although the Government of India deposited the compensation for the same with the Collector of Cuttack. Subsequently, the Government thought of resuming the land measuring 0.236 acre as also the remaining land.

One mere fact that is relevant to be mentioned is that the lease in favour of the assessee as per the terms of the lease deed expired on 1-4-1973. In these appeals, we are concerned with the assessment years 1966-67 to 1974-75. The expiry of the lease will have some bearing on the question of determination of the value of the property. The question of inclusion of this land came for consideration in the wealth-tax assessments of the assessee for all these years.

The Wealth-tax Officer rejected all the objections raised by the assessee and determined the value taking the compensation paid for 1.764 acres as the basis. He has also kept in mind the increase in the value of the land from year to year.

Copies of the assessment orders are marked as Annexures A1 to A9 and form part of the statement of the case.

7. The matter was thereafter taken by the assessee before the learned AAC by way of first appeals. The learned AAC confirmed the findings of the learned WTO during all the years under consideration.

A copy of the consolidated order dated 20-3-1980 of the learned AAC is marked Annexure B and forms part of the statement of the case.

8. Finally, the matters were taken by the assessee before the Tribunal by way of second appeals.

Mr. Pasayat for the assessee raised a number of contentions in regard to this particular land. He pointed out that the land is essentially agricultural land which is recorded as such in the record of rights issued by the Government and that the land revenue was being paid by the assessee. Thus, it is submitted that the land is not an asset the value of which can be included in the wealth of the assessee. Secondly, he submitted that the lease is a precarious one, which is terminable at the option of the Government by giving three months' notice in accordance with Clause 12 of the agreement dated 6-6-1952 and as such it cannot be treated as an asset under the definition of 'assets' in the Wealth-tax Act. Thirdly, the valuation made by the authorities below is totally against the principles of valuation and cannot be supported. It is submitted that the leasehold right has to be valued keeping in mind the unexpired period of lease. Lastly, it was submitted that after the expiry of the lease, there is no question of including the value of the land and this would be applicable for the assessment years 1973-74 and 1974-75.

The learned departmental representative opposed each of these submissions vehemently. It was pointed out by him that the land in question is in the heart of the city of Cuttack surrounded by residential and other buildings and, therefore, it cannot be treated as an agricultural land by any stretch of imagination. Goela further argued that the question whether a particular land is an agricultural land is to be judged from the surrounding circumstances and not merely on the fact that the land is recorded as agricultural or that the land revenue is being paid. He relied on the decisions of the Gujarat High Court which will have an occasion to refer to.

9. The Tribunal after considering the ratios in the following cases, namely, CIT v. Sarifabibi Mohammed Ibrahim [1982] 136 ITR. 621 (Guj.), Arundhati Balkrishna v. CIT [1982] 138 ITR 245 (Guj.), Sercon (P.) Ltd. v. CIT [1982] 136 ITR 881 (Guj.), Gemini Pictures Circuit (P.) Ltd. v.CIT [1981] 130 ITR 686 (Mad.) and CWT v. Officer-in-Charge (Court of Wards) [1976] 105 ITR 133 (SC), vacated the findings of the lower authorities on the point with the following observations : If the above principles are kept in mind, we may straightaway observe that each of the cases cited by both the sides must be held to have decided the matter on the facts of that case. In fact, there is plethora of decisions on this point and it will be a futile exercise to deal with all those decisions as ultimately we have to bear in mind the basic principles and look to the facts of the case before us in order to decide whether the land in question is an agricultural land or not. On the facts of the case before us, we have no hesitation in holding that the land is an agricultural land.

As already mentioned, the land is registered in the Jama Bandi register as cultivated land. The statement of the assessee that crops were grown remain uncontroverted. It must, therefore, be held that actual cultivation was taking place and crops were being raised for several years. There is no conversion of agricultural use to non-agricultural use at any stage. There was not even an attempt by the assessee to convert it into non-agricultural use by any mode.

The fact that the land is in a developed residential area is not a decisive factor as held by the Gujarat High Court in Sercon (P.) Ltd.'s case (supra) and that by the Madras High Court in Gemini Pictures Circuit (P.) Ltd.'s case (supra). We, accordingly, hold that the land is agricultural in character and on this finding the value of the land cannot be included in the wealth of the assessee.

We may also add here that so far as 0.846 acre of land is concerned, admittedly, there is an orchard and the land was shown as cultivated land.

Apart from the above aspect, the argument that the land has no value because of the precarious nature of the lease and various proceedings to have taken place as well as in regard to resumption proceedings started by the Government to resume the land may be considered. Mr. Pasayat having brought to our notice the terms of the lease argued that it is a precarious lease terminable by giving three months' notice and that it cannot be treated as an asset of the value. He referred to these lines of cases where the Courts have held that in such precarious nature, the interest cannot be treated as an asset. But Mr. Pasayat's submission cannot be accepted inasmuch as all those cases were decided prior to the amendment of Section 2(e) of the Act, brought about by the Wealth-tax (Amendment) Act, 1964. This aspect has come before the Allahabad High Court recently in the case of P.S. Gandhi v. CWT [1983] 141 ITR 105. Their Lordships referred to the decision of the Supreme Court in CWT v. Smt. R.A. Muthukrishna Ammal [1969] 72 ITR 801, which was decided prior to the amendment and distinguished the same. This is what their Lordships at page 119 have stated : ...The amendment has now introduced a significant alteration inasmuch as the availability of the interest for a period not exceeding six years is to be seen from the date the interest vests in the assessee. In the present case, we have shown that the interest available to the assessee in the disputed properties has been for a period exceeding six years from the date the new contract of tenancy came into existence. In our opinion, therefore, this decision does not help the assessee....

In the case before us also the interest of the assessee was for more than six years as the lease commenced sometime in 19.53. On the relevant valuation dates which are involved in these appeals except for the assessment years 1973-74 and 1974-75 about which we will deal with a little later, obviously the period was more than six years from the date of vesting of the leasehold right in the assessee. It is, therefore, difficult to agree with the contention of Mr. Pasayat that the leasehold interest of the assessee cannot be treated as an asset. Such an interest is being treated as an asset is clear from the decision of the Allahabad High Court as also a decision of the Calcutta High Court in CWT v. Md. Ismail [1979] 117 ITR 273.

Then the question, however, arises about the valuation of such leasehold interest keeping in mind the right of the Government to resume the land by giving three months' notice and also the fact that after the expiry of the lease period, the land might be resumed. In valuing such right, one has to bear in mind, the valuation made by the authorities below by taking into account the compensation fixed for the land acquired is clearly unsupport-able.

The Government thought that the assessee had freehold interest and, therefore, fixed the compensation, accordingly. The compensation cannot be a guide for fixing the value of the leasehold interest of the assessee for the assessment years under appeal (barring 1973-74 and 1974-75). What should be the value of such interest for each of the assessment years from 1966-67 to 1972-73 is a matter which has to be decided on proper principles of valuation keeping in mind the above features, but we do not want to do that exercise nor is it necessary to direct the lower authorities to redetermine the value in view of our basic finding that the land is an agricultural land.

Copy of the consolidated order of the Tribunal dated 24-9-1983 is marked Annexure C and forms part of the statement of the case.

10. In the light of the aforementioned paragraphs, we refer the questions hereinbefore mentioned, for the esteemed opinion of the Hon'ble Court at Cuttack.

11. On 21-9-1984, submissions were made on behalf of the assessee by Mr. Pasayat, the learned Counsel, that the draft statement of the case prepared on 24-7-1984 and circulated to the parties be not pursued any further and that, in fact, the reference applications be dismissed. By the learned Counsel, the reliance was placed on various case laws including : CWT v. Sayaji Mills Ltd. [1971] 82 ITR 662 (Guj.), CIT v. S. Devaraj [1969] 73 ITR 1 (Mad.), CIT v. L.G. Ramamurthi [1977] 110 ITR 453 (Mad.), CIT v. Land Corporation of Bengal (P.) Ltd. [1982] 138 ITR 63 (Cal.), CIT v. Smt. Anusuya Devi [1968] 68 ITR 750 (SC), CWT v. Smt. Sheela Devi [1970] 77 ITR 693 (Punj. & Har.), CIT v. Anilbhai J. Chinai (HUF) [1984] 17 Taxman 354 (Bom.), CIT v. Burn & Co. Ltd. [1978] 114 ITR 565 (Cal.) and Raja Bahadur Vishweshwara Singh v. CIT [1954] 26 ITR 573 (Pat.).

1. Insofar as it has not been possible to persuade myself to agree with the views of the learned Judicial Member that the questions sought to be raised in these reference applications by the revenue relating to the wealth-tax assessments made on the assessee for the assessment years 1966-67 to 1974-75 are referable questions of law or mixed questions of fact and law, I would, with respect, dissent and hold as follows : 2. The following two identical questions have been raised by the department in the assessment years 1966-67 to 1974-75 : 1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in coming to the conclusion that the land adjoining the property under the name Wilson House was agricultural in nature and, therefore, was not included in the taxable wealth of the assessee 2. On the facts and in the circumstances of the case, whether the Tribunal was justified in stating that the Wealth-tax Officer did not carry any enquiry in treating the property as one in which no agricultural operation was carried on For the assessment years 1973-74 and 1974-75, the following additional question is identically raised : 3. Whether the Tribunal was legally justified in accepting the contention that the lease period expired on 1-4-1973 and directing the deletion of property from the taxable wealth although no such contention was at any time put forth for consideration by the WTO 3. Before I take up the task of deciding the nature of the above questions, I may briefly state the facts indicating as to how these reference applications came up for repetitive hearing before the Tribunal. The departmental reference applications were initially heard on 29-6-1984 and a common draft statement of case had been prepared.

Thereafter, when the consolidated draft statement was fixed for the purpose of finalisation on 31-8-1984, the learned Counsel for the assessee submitted that the questions raised in the reference applications filed by the revenue were merely questions of fact and that, therefore, the draft statement of the case already prepared by the Tribunal deserves to be recalled. It was pointed out by the learned Counsel that the proceedings up to the stage of the draft statement are merely tentative and that if the Tribunal prepares a draft statement under a mistaken impression that the questions sought to be raised therein are questions of law, it can redecide the matter if in fact it finds that the questions sought to be raised are only questions of fact. In support of this contention, the learned Counsel for the assessee placed reliance on a decision in Sayaji Mills Ltd.'s case (supra). In order to hear the learned representatives of the assessee and the department at some length, the matter was adjourned to 21-9-1984. On that date, once again the learned Counsel for the assessee placed reliance on the aforementioned decision and submitted that despite a draft statement having been prepared earlier, the Tribunal should redecide the matter and hold that no questions of law arose out of the order of the Tribunal in WT Appeal Nos. 86 to 94 dated 24-11-1983. Being satisfied that the matter could be reheard, the representatives of the rival parties were allowed to make their submissions once again. While it was contended by Shri J.R. Malhotra that the questions raised in the captioned reference applications were questions of law, the learned Counsel of the assessee submitted after taking us through the order of the Tribunal dated 24-11-1983 that no questions of law arose out of that order. It was next submitted by the learned Counsel of the assessee that whether a particular land is agricultural or not is a pure question of fact and for that he placed reliance on a decision of the Hon'ble Punjab and Haryana High Court in Smt. Sheela Devi's case (supra). After so submitting with regard to the identical questions sought to be raised in these reference applications, the learned Counsel submitted that the reference applications filed by the department should be rejected as the order passed by the Tribunal in WT Appeal Nos. 86 to 94 dated 24-11-1983 was based on facts and facts alone.

4. After considering the rival submissions and after carefully perusing the order of the Tribunal dated 24-11-1983, it appears to me that indeed no questions of law arise out of the order of the Tribunal. The question for consideration before the Tribunal was as to what was the nature of the land belonging to the assessee situated on the Cantonment Road, Cuttack, in the State of Orissa. Before deciding the nature of the land, the Tribunal recorded the historical background showing as to how the land in question came to be acquired by the assessee.

Thereafter, the Tribunal noticed the objections raised by the WTO to the assessee's contention that the land in question was agricultural in nature. In paragraph No. 3 of its order, the Tribunal summed up the contentions of the learned Counsel of the assessee and the departmental representative. In paragraph Nos. 4 and 5 of its order the Tribunal gave the following finding of fact : At the outset, we may mention that the observations of Appellate Assistant Commissioner that in the records of Tahsildar, the land measuring 2.662 acres is recorded as homestead is not correct. From the papers filed on record, it is clear that 0.846 acre has been recorded as cultivated and it has been admitted that it is orchard land. 2.662 acres also has been mentioned as cultivated land. As already mentioned, the total land is 3.508 acres out of which 1.764 acres was already acquired and compensation was paid to the assessee. We are, therefore, concerned with the nature of the remaining land. We will deal with the right of the assessee to receive compensation insofar as the lands that were acquired. In other words, we have to consider the nature of the land that remained with the assessee.

5. Apart from the fact that the record of rights shows that the land is cultivated land and that the assessee has been paying land revenue, the assessee asserted right from the beginning that actual cultivation was going on and that crops were raised. In this connection, we would like to point out what the assessee stated before the Wealth-tax Officer in his letter dated 24-2-1975. He requested the Wealth-tax Officer to inspect the site and satisfy for himself that the land has been under agricultural operation. In spite of this, the Wealth-tax Officer did not cause any enquiries.

There is, therefore, no doubt that the land was being cultivated and crops were being raised by the assessec. The assessee also was very fair in stating that in view of his absence and in view of the fact that a portion of the land was taken by the All India Radio, there was difficulty in raising the crops after 1975. We have, therefore, no hesitation on the basis of this material in holding that the land is agricultural, in which case it cannot be included in the wealth of the assessee.

Almost at the end of paragraph No. 5, the Tribunal took into account the guidelines laid down by the Hon'ble Supreme Court in the matter of determining as to whether a particular land is an agricultural land or not. The decision in the case of Officer-in-Charge (Court of Wards) (supra) was noticed. The observations and findings of their Lordships of the Supreme Court were thereafter extracted. These were as follows : ... We agree that the determination of the character of land, according to the purpose for which it is meant or set apart and can be used, is a matter which ought to be determined on the facts of each particular case. What is really required to be shown is the connection with an agricultural purpose and user and not the mere possibility of user of land, by some possible future owner or possessor, for an agricultural purpose. It is not the mere potentiality, which will only affect its valuation as part of 'assets', but its actual condition and intended user which has to be seen for purposes of exemption from wealth-tax. One of the objects of the exemption seemed to be to encourage cultivation or actual utilisation of land for agricultural purposes. If there is neither anything in its condition, nor anything in evidence to indicate the intention of its owners or possessors, so as to connect it with an agricultural purpose, the land could not be 'agricultural land' for the purposes of earning an exemption under the Act. Entries in revenue records are, however, good prima facie evidence. ...

5. After taking into account the guidelines laid as above, the Tribunal held as follows : If the above principles are kept in mind, we may straightaway observe that each of the cases cited by both the sides must be held to have decided the matter on the facts of that case. In fact, there is plethora of decisions on this point and it will be futile exercise to deal with all those decisions as ultimately we have to bear in mind the basic principles and look to the facts of the case before us in order to decide whether the land in question is an agricultural land or not. On the facts of the case before us, we have no hesitation in holding that the land is an agricultural land.

As already mentioned the land is registered in the Jama Bandi register as cultivated land.

According to me, the above findings of the Tribunal were merely findings of fact. It has been repeatedly mentioned by the Tribunal as would be evident from the above extracts of its order that it was deciding merely a question of fact. It had found that the land in question was an agricultural land as per record of rights. It had been found that in the 'Jama Bandi' the land had been registered as a cultivated land. The Tribunal had further found that the land revenue had been paid in respect of the land. A statement had been made by the assessee that it was growing crops on the land in question and this statement of the assessee according to the Tribunal remained uncontroverted. The Tribunal also noticed the fact that the assessee had sent a letter to the WTO on 24-2-1975 requesting him to make on the spot enquiries which would have shown that the land was nothing but an agricultural land. No spot enquiries were made by the WTO and, therefore, the Tribunal held that the department had no evidence to show that the land was not cultivated or the crops were not raised on the land on question. These findings of the Tribunal are entirely within the realm of facts. It may be that certain decisions of the Hon'ble High Courts and the Supreme Court which were cited on either side had been considered by the Tribunal but that according to me, does not convert a question of fact into a question of law. As has been held by the Hon'ble Punjab and Haryana High Court in Smt. Sheela Devi's case (supra), the question whether a particular piece of land is or is not an agricultural land is necessarily a question of fact which has to be decided in the circumstances of given case depending on the nature and character of the land, its environment, its being assessed to land revenue and various other relevant facts. I am further certified in my views after taking into account the views of the Hon'ble Supreme Court in the case of Officer-in-Charge (Court of Wards) (supra). Their Lordships of the Supreme Court have said as follows : ... We agree that the determination of the character of land, according to the purpose for which it is meant or set apart and can be used, is a matter which ought to be determined on the facts of each particular case. ...

Therefore, the following direction of the Hon'ble Supreme Court clearly indicates that the question whether a land is an agricultural or not is a question of fact. Their Lordships held as follows in the last paragraph of their decision : We think that this is a fit case in which we should set aside the judgment of the Full Bench of the High Court and hold that the Tribunal should determine afresh, from a correct angle, the question of fact whether any of the lands under consideration were 'agricultural' or not. ...

6. Having thus noticed the findings of the Tribunal, which have been extracted above and the decision of the Hon'ble Supreme Court and the Punjab and Haryana High Court in the aforementioned two cases, it appears to me that the order of the Tribunal dated 24-11-1983 did not give rise to any questions of law. The question of referring question Nos. 1 and 2 identically raised in the assessment years 1966-67 to 1974-75, therefore, does not arise.

7. Question No. 3 as it stands framed in the departmental reference applications relating to the assessment years 1973-74 and 1974-75 is also not a question of law. The revenue seems to have a grievance that the Tribunal was not justified in taking into account the fact that the lease in respect of the agricultural land had expired on 1-4-1973.

According to it, the fact of cessation of the lease on 1-4-1973 having not been put forth for the consideration of the WTO, that fact could not have been brought to the notice of the Tribunal by the assessee and taken cognizance of by it. It was wholly within the jurisdiction of the Tribunal as per the Income-tax Appellate Tribunal Rules, 1963 to have taken into account the factum of cessation of the lease on 1-4-1973.

The lease deed seems to have been produced before the Tribunal and if on consideration thereof, it accepted an uncontroverted fact that the lease in respect of the agricultural land in question had expired on 1-4-1973, no question of law can be said to arise therefrom.

8. In conclusion, all the three questions raised in the reference applications under consideration are held to be questions of fact and for that reason the reference applications are rejected.

1. In these matters, a consolidated draft statement of the case was prepared on 24-7-1984. At the time of finalisation, the learned Accountant Member, vide order dated 16-11-1984 became of the view that no referable questions of law emanate from the Tribunal's consolidated order dated 24-11-1984.

2. Consequently, the matter is being placed before the worthy senior Vice President for being placed before the worthy President under Section 24(11) of the 1957 Act, read with Section 255(4) of the Income-tax Act, 1961, for further necessary action in the matter. The necessary facts in details have been incorporated in the statement of the case.

1. Whether the stage anterior to the stage of finalisation of a draft statement of the case is tentative and whether it is open to the parties to reagitate the matter before the draft is actually finalised 2. Whether at the stage of the finalisation of the consolidated statement of the case, it was legally tenable to differ 3. If the answer to question Nos. 1 and 2 above is in the affirmative, are the questions raised ...the referable mixed questions of law and fact...? 1. The point of difference of opinion in these reference applications is whether a question of law arises out of the order of the Tribunal passed in WT Appeal Nos. 86 to 94 (Delhi) of 1980. Although the Tribunal has developed a healthy convention that in matters of reference applications, when one Member feels that a question of law does arise out of the order of the Tribunal, the other Member should not normally disagree, yet my learned brothers could not agree on this question. It is easier for me to propose to this convention to say that questions of law do arise out of the order of the Tribunal but I find that there are compelling reasons for an honest difference of opinion to exist and, therefore, I appreciate the difference of opinion and I would like to lean in favour of the view that no question of law arises out of the order of the Tribunal or atleast a referable question to the High Court even if it is held eventually that a question of law does arise out of the order of the Tribunal, because it has now been settled by a cantena of decisions of the High Courts and the Supreme Court that even if an order of the Tribunal gives rise to a question of law, that question need not be referred to the High Court if it is of an academic interest or the question of law is decided by a judgment of the Supreme Court. It is the latter part of well laid out dictum that applies to the facts of this case. As in my opinion, the matter that now debated between my learned brothers stands concluded by a decision of the Supreme Court, I felt that no question need to be referred to the High Court for its opinion under Section 27(1), even if in the ultimate analysis it is said or can be said that a question of law arises out of the order of the Tribunal.

2. Now adverting to the facts, the assessee is a HUF and these reference applications arise out of the wealth-tax assessments made on this HUF for the assessment years 1966-67 to 1974-75, in respect of each of which the valuation date is the year ended 31st March. The assessee owned certain lands in the Cantonment Road, Cuttack, Orissa.

On this land, there was a small dilapidated house, the value of which was not in dispute in these appeals. This land is the Government land originally. It was given on lease to one P.S. Beumont of Calcutta long prior to 1950. This land was bequeathed by her in favour of her daughter Mrs. P.M. Macdonald. who become entitled by virtue of the probate granted by the Calcutta High Court on 9-2-1945. Just before the grant of the probate, the assessee's father, late Shri. S.M. Samal, entered into an agreement which the executors of the will of Mrs.

Macdonald to purchase the leasehold rights. That agreement somehow did not come through and a second agreement was executed on 10-4-1951.

After the mutation of the land in favour of the legatee, the sale deed was executed by her and Shri P.K. Samal became the owner of the leasehold rights. Khaitan (record of rights) was issued in favour of the assessee on 5-6-1953. The total area of the land was 3.508 acres.

In the year 1969, the Government of Orissa started acquisition proceedings for a portion of the land measuring about 2 acres. However, the actual land acquired was 1.764 acres. A compensation of Rs. 4,18,600 was paid for the land. The remaining portion of the land of 0.236 acre was not acquired although the Government of India deposited the compensation for the same with the Collector of Cuttack.

Subsequently that land also was resumed. The lease in favour of the assessee in the meantime expired on 1-4-1973. The question that arose for wealth-tax purposes was whether the value of this land was includible in the net wealth of the assessee. The main contention was whether this land was put to agricultural use and, was therefore, an agricultural land or not. It was pointed out that in the Government records, this land was shown as an agricultural land and that land revenue was being paid by the assessee. It was also contended that the lease that the assessee was holding was precarious and, consequently, it has no value. It was shown that it was terminable at the option of the Government by giving three months' notice. It was also contended that the value taken was very high even if it is ultimately held that it was taxable. Then when the lease expired on 1-4-1973, there was no question of including the value of the land. Eventually, when the matter come for decision before the Tribunal, the Tribunal agreed with the assessee's contention and vacated the findings of the lower authorities. It held that keeping in view the various principles of law decided by the various High Courts and the Supreme Court and applying those principles to the facts on record, there would be no doubt that the land in question was an agricultural land. The Tribunal held : On the facts of the case before us, we have no hesitation in holding that the land is an agricultural land. As already mentioned the land is registered in the Jama Bandi register as cultivated land. The statement of the assessee that crops were grown remained uncontroverted. It must, therefore, be held that actual cultivation was taking place and crops were being raised for several years.

There is no conversion of agricultural use to non-agricultural use at any stage. There was not even an attempt by the assessee to convert it into non-agriculture use by any mode. The fact that the land is in a developed residential area is not a decisive factor as held by the Gujarat High Court in Sercon (P.) Ltd. v. CIT [1982] 136 ITR 881 and also by the Madras High Court in Gemini Pictures Circuit (P.) Ltd. v. CIT [1981] 130 ITR 686. We, accordingly, hold that the land is agricultural in character and on this finding the value of the land cannot be included in the wealth of the assessee. We may also add here that so far as 0.846 acre of land is concerned, admittedly there is an orchard and the land was shown as cultivated land.

On the question of the assessee possessing only precarious lease and, therefore, this was not an asset whose value could be included in the net wealth, the Tribunal disagreed with the assessee. On the question of valuation also, the Tribunal did not express any opinion because of its finding that the land was an agricultural land. On these facts, the Commissioner states that the following questions arise out of the order of the Tribunal as questions of law : 1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in coming to the conclusion that the land adjoining the property under the name Wilson House was agricultural in nature and, therefore, was not included in the tax able wealth of the assessee 2. On the facts and in the circumstances of the case, whether the Tribunal was justified in stating that the WTO did not carry any enquiry in treating the property as one in which no agricultural operation was carried on 3. Whether the Tribunal was legally justified in accepting the contention that the lease period expired on 1-4-1973 and directing the deletion of property from the taxable wealth although no such contention was at any time put forth for consideration by the WTO 3. The learned Judicial Member was of the opinion that these questions arise out of the order of the Tribunal as questions of law and proposed to refer them to the High Court for its opinion under Section 27(1).

But the learned Accountant Member was of the view that the decision given by the Tribunal turned on pure questions of fact which do not give rise to any question of law. He relied very heavily upon the decision of the Supreme Court in the case of Officer-in-Charge (Court of Wards) (supra), where the Supreme Court laid down the principle that the determination of the character of land according to the purpose for which it was meant or set apart and can be used is a matter which ought to be determined on the facts of each particular case. This was the view held by the learned Accountant Member with regard to the first two questions. With regard to the third question relating to the assessment years 1973-74 and 1974-75, he was of the opinion that it was wholly within the jurisdiction of the Tribunal as per the Income-tax (Appellate Tribunal) Rules, to take into account the factum of cessation of the lease and that the lease deed seemed to have been produced before the Tribunal and, therefore, that was not a question of law but a pure question of fact. Thus, the difference of opinion that arose between my learned brothers has been referred to me by the President as a Third Member.

4. I have already indicated in the beginning of this order about my inclination. Whatever may be the position of our convention, the fact remains now that the difference of opinion arose whether a question of law can be said to arise out of the order of the Tribunal it has to be resolved. From the portion of the order extracted above, it is abundantly clear that the Tribunal gave a categorical finding on consideration of the relevant facts that the land was agricultural in character. It found that the land was under cultivation. It found that the land revenue was being raid. It also found that on a portion of the land, orchards were standing. These are pure findings of fact which do not give rise to any question of Jaw. The conclusion to be drawn from these uncontroverted findings of fact is only one and that is that the land is agricultural in character. This finding of the Tribunal that the land is an agricultural land is a pure finding of fact and does not give rise to any question of law. As rightly pointed out by the learned Accountant Member that the Supreme Court has rightly pointed out in the case of Officer-in-Charge (Court of Wards) (supra) at p. 144 that the determination of the character of land is to be determined on the facts of each particular case. Elsewhere in the judgment, the Supreme Court pointed out that "We think that this is a fit case in which we should set aside the judgment of the Full Bench of the High Court and hold that the Tribunal should determine afresh, from a correct angle, the question of fact whether any of the lands under consideration were 'agricultural' or not". Here again, the Supreme Court advisedly used the expression 'determine afresh the question of fact whether any of the lands under consideration were agricultural or not'. This shows that the determination of the character of land is always a question of fact and this observation is only reiteration of the principle laid down by the Supreme Court that the determination of the character of land is always a question of fact. In these circumstances, I find it difficult to say that from the findings of fact recorded by the Tribunal which are not controverted by the department by raising separate questions by assailing those facts, that a question of law arises out of the order of the Tribunal. Even otherwise if it is held that the order of the Tribunal does give rise to a question of law, it is now laid down by the Supreme Court that if the answer to the question is self-evident or where the question is of an academic interest, i.e., where it is concluded by a judgment of the Supreme Court the Tribunal need not refer that question to the High Court for its opinion-- CIT v. Chander Bhan Harbhajan Lal [1966] 60 ITR 188 (SC), CIT v. Himangshu Sekhar Chakravarty [1974] 94 ITR 318 (SC) and Mathura Prasad v. CIT [1966] 60 ITR 428 (SC). In view of this settled position of law on this question, I am of the opinion that no referable question of law arises from the order of the Tribunal.

5. Insofar as the third question is concerned, it is again a pure finding of fact and the finding of the Tribunal that the lease expired on 1-4-1973 does not give rise to a question of law. The fact of the matter is that the order of the AAC contains references to the lease and its expiry on 1-4-1973 and it was not a new fact that was discovered by the Tribunal at the appellate stage. It is already a fact found by the revenue which the Tribunal adopted as correct. Therefore, the question now raised suggesting as though the Tribunal accepted the contention on the basis of fresh evidence produced for the first time at the appellate stage before, it does not seem factually correct.

6. It would now be useful to refer to the points of difference as framed by my learned brothers : 1. Whether the stage anterior to the stage of finalisation of a draft statement of the case is tentative and whether it is open to the parties to reagitate the matter before the draft is actually finalised 2. Whether at the stage of the finalisation of the consolidated statement of the case, it was legally tenable to differ 3. If the answer to question Nos. 1 and 2 above is in the affirmative, are the questions raised ...referable mixed questions of law and fact ....? Insofar as the first question is concerned, by answer to it, is clearly in the affirmative as laid down by the Gujarat High Court in the case of Sayaji Mills Ltd. (supra). In this case, also, a similar point arose for consideration. There also as in the case before me after the draft statement of the case was placed before the parties for finalisation, questions of law could be reagitated. If after the draft is finalised a different position might have emerged but before the draft statement is finalised and it is placed before the parties for their comments, the question is what is the nature of the right of the parties to reagitate the matter of questions to be referred. The Gujarat High Court held that till a reference by the Tribunal is actually filed in the High Court, the earlier stages which the Tribunal goes through are tentative stages and not final and at no intermediate stage can it be said that a final decision has been taken by the Tribunal.

Therefore, when the Tribunal placed before the parties the draft statement of the case for reference for their suggestions, it would not amount to a final decision of the Tribunal not to refer certain suggested questions and it would be open to the parties to reagitate the matter, The Gujarat High Court has followed a decision of the Bombay High Court in the case of N.V. Khandvala v. CIT [1946] 14 ITR 635 and a decision of the Supreme Court in Lakshmiratan Cotton Mills Co. Ltd. v. CIT [1969] 73 ITR 634 in coming to the above conclusions.

In view of my answer to the first question that it is open to the parties to reagitate the matter before the draft is actually finalised and even to request the Tribunal not to refer the questions even though it was mentioned in the draft statement, it is open to the Members finalising the draft statement to agree or not to agree with the request put forward on behalf of the assessee or the department. In case they agree to drop a question although included in the said draft statement of the case, there was nothing in law preventing the Members from doing so. Similarly, it is also open to the members finalising the draft statement to include certain questions which were not originally included. All this is possible because the stages anterior to the finalisation of the draft statement are tentative. When it is open to the Members finalising the draft statement to agree or not to agree with the request put forward on behalf of the parties before them, it follows that it is open for them also to disagree on their opinion.

Whether it is the stage of finalisation of the draft statement or whether it is the stage of preparation of the draft statement, the question that the Members were considering is whether a question of law arises out of the order of the Tribunal. When it is open to the members to differ on this question at the time of preparation of the draft statement, there is nothing preventing them from differing at the time of finalisation also, because the finalisation is only a continuation of the preparation of the draft statement. The Members would become non est only after the draft is finalised and the reference application leaves the office of the Tribunal. But I, in the interest of building up a good and healthy convention and for ensuring proper judicial discipline and to increase the faith of the litigants before the Tribunal in its capacity to administer justice without fear and favour, would say that it is always advisable to refrain from differing more particularly at the stage of iinalisation of the draft statement of the case. The Members may agree to drop a question or to include a question but normally should refrain from differing at that stage much less at a later stage on the question whether a question of law arises out of the order of the Tribunal or not although there was nothing against it in law.

7. In view of my conclusion recorded in the earlier paragraph, I hold that the order of the Tribunal does not give rise even to a mixed question of law and fact because in my opinion, the findings recorded by the Tribunal are pure findings of fact based upon ample material and those findings of fact could not be said to be mixed questions of law and fact.

8. Now the matter will go before the regular Bench for disposing of these reference applications in accordance with the opinion of the majority.


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