M. S. MENON C.J. - This is a reference by the Income-tax Appellate Tribunal, Madras Bench, under section 64(1) of the Estate Duty Act, 1953. The question referred is :
'Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was correct in law in having included the value of the forest lands in the total value of the estate for the purpose of estate duty ?'
The question arises out of the order of the Appellate Tribunal in E. D. As. Nos. 12 and 18 of 1962-63, date the 28th July, 1964. The estates concerned are those of Smt. Jayalakshmi Devi and Shri Madhava Rajah of Kollengode. The former died on the 6th March, 1954, and the latter, on the 9th May, 1955.
The statement of the case deals with the order of the Appellate Tribunal in so far as it relates to this reference as follows :
'The Tribunal permitted the accountable person to raise the contention that the value of the forest lands has to be excluded as they were agricultural lands. So far as this contention was concerned, the following facts were not in dispute, viz., that the forest consisted of trees of spontaneous growth; that no operations in the nature of forest development were being carried on; and that only operations in the nature of exploitation of the forest were being conducted. The accountable person, however, contended that these lands were capable of being brought under cultivation at a future date and that, therefore, they must be deemed to be agricultural lands. Reliance was sought to be placed upon the decision of the Madras High Court in Sarojini Devi v. Sri. Krishna in which it was held that the expression agricultural lands must be taken to Include lands which are used or are capable of being used for raising any valuable plants or trees or for any other purpose of husbandry. The Tribunal was, however, of the view that in the said decision, their Lordship did not intend to lay down a definition of the expression agricultural lands for all purposes and that, on the other hand, they clearly indicated that the expression admits of different interpretations and that it was only from the context of the particular enactment in which his expression is used that its meaning has to be inferred. The Tribunal observed that the very wide definition of the expression agricultural lands laid down in the above cited decision was not applicable to cases under the Estate Duty Act. The Tribunal, therefore, negatived the contention of the accountable person that the forest lands had to be excluded from the value of the assessable estate of the deceased.'
The area with which we are concerned was part of the Madras State till the 1st November, 1956. It became part of the Kerala State on that date.
The estate duty in respect of agricultural land forms Entry 48 in List II (State List) of the Seventh Schedule to the Constitution. The Estate Duty Act, 1953, being a Central enactment, did not apply to the Madras State until the issue of S. R. O. No. 1227 dated the 6th June, 1956. The S. R. O. reads as follows :
'Whereas in pursuance of the provisions contained in clause (1) of article 252 of the Constitution a resolution has been passed by the Legislature of the State of Madras on the 2nd April, 1955, adopting the Estate Duty Act, 1953 (34 of 1953), in so far as it relates to estate duty in respect of agricultural lands situate in the said State;
Now, therefore, in pursuance of the provision contained in sub-section (2) of section 5 of the said Act, the Central Government hereby adds the name of the State of Madras to the first Schedule thereof.'
S. R. O. 1227 was issued subsequent to the death of both Smt. Jayalakshmi Devi and Shri Madhava Rajah. It is, therefore, not disputed that if the areas concerned are agricultural lands, then their value is not assessable to estate duty.
The expression 'agricultural land' is not defined either in the Estate Duty Act, 1953, or in the Constitution of India. Entry 18 in List II (State List) of the Seventh Schedule to the Constitution reads as follows :
'Land, that is to say, rights in or over land, land tenures including the relation of landlord and tenant, and the collection of rents; transfer and alienation of agricultural land; land improvement and agricultural loans; colonization.'
This entry corresponds to Entry 21 in List II (Provincial Legislative List) of the Seventh Schedule to the Government of India Act, 1935.
In Megh Raj v. Allah Rakhia, Varadachariar J. surveyed the authorities and said :
'In this state of the authorities, it seems to us best to refrain from deciding the precise scope of the expression agricultural land.... It may on a proper occasion be necessary to consider whether for the purpose of the relevant entries in Lists 2 and 3, Constitution Act, it will not be right to take 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 the descend according to laws framed under List 2, but that when the same parcel of land is used to produce something else (as often happens in this country), it should be governed by and descend according to laws framed under List 3.'
In Sarojini Devi v. Sri Krishna, Patanjali Sastri J. said :
'..... It seems to us that the expression agricultural land must receive the widest meaning....'
'We are of opinion that for the purpose of the relevant entries in Lists II and III of Schedule 7 of the Government of India Act, 1935, the expression agricultural lands must be taken to include lands which are use or are capable of being use for raising any valuable plants or trees or for any other purpose of husbandry.'
In Commissioner of Income-tax v. Raja Benoy Kumar Sahas Roy, the Supreme Court recognised the force of the above expressions of opinion and said that the two decisions were authority for the proposition 'that the expression agricultural land mentioned in Entry 21 of List II of the Seventh Schedule to the Government of India Act, 1935, should be interpreted in its wider significance as including lands which are use or are capable of being use for raising any valuable plants or trees or for any other purpose of husbandry.'
'Agricultural land', as we understand it, is land on which a prudent owner will undertake any of the processes of farming in its widest sense. The fact that a particular area is being used for agriculture may indicate that the land is agricultural in character. But a current user is by no means conclusive. During a period of food shortage, a building site which a prudent owner may never use for purposes of husbandry may be brought under cultivation because the need is great, the prices are high, and the expense is of no consideration. Similarly, during days of national peril, a scorched earth policy may be followed and farming land deprived of its vegetation. That too cannot necessarily mean that the land had lost its agricultural character.
The test, as we have already indicated, should be whether a prudent owner would embark on an adventure in agriculture in respect of the lands concerned. The prudent owner is the common man of the common law, sane and sensible, reasonable and responsible, averse to gambling and speculative experiments, but none the less prepared for normal risks and legitimate expenditure.
The statement of the case is insufficient to apply the test we have mentioned above and we cannot but require the Appellate Tribunal to modify the statement of the case by incorporating therein a clear finding as to whether the lands concerned are of such a character that a prudent owner would undertake in respect thereof any of the processes of farming in its widest sense. We do so in exercise of the power of this court under sub-section (5) of section 64 of the Estate Duty Act, 1953.