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Chandravati Atmaram Patel Vs. Commissioner of Income-tax, Gujarat-iii, Ahmedabad - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtGujarat High Court
Decided On
Case NumberIncome-tax Reference No. 51 of 1975
Judge
Reported in[1978]114ITR302(Guj)
ActsIncome-tax Act, 1961 - Sections 1(14); Wealth Tax Act, 1957 - Sections 2
AppellantChandravati Atmaram Patel
RespondentCommissioner of Income-tax, Gujarat-iii, Ahmedabad
Appellant Advocate K.H. Kaji, Adv.
Respondent Advocate G.N. Desi, Adv.
Cases ReferredC) and Keshav Mills Co. Ltd. v. Commissioner of Income
Excerpt:
direct taxation - agricultural land - section 1 (14) of income tax act, 1961 and section 2 of wealth tax act, 1957 - assessee sold plots to society - claimed exemption from capital gain tax as land was agricultural land - tribunal concluded that land was non-agricultural land - land treated as agricultural land for wealth tax assessment - land had standing crops at time of sale - land revenue payable for agricultural purposes levied - permission for non-agricultural user obtained by society after date of sale - tribunal not considered presumption from actual user of land and entries in revenue record and whether presumption rebuttable - court decline to proceed with matter as tribunal failed to consider from correct angle. - - , speaking for the division bench, observed :it should be.....divan, c.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 land in question in an agricultural land within the meaning of section 2(14)(iii) of the income-tax act, 1961, and, therefore, whether the capital gains arising from the sale thereof is exempt from assessment to income-tax under the said act ?' 2. the facts giving rise to this reference are as follows : the assessment year under reference is 1969-70, the relevant previous year of account being samvat year 2024 which ended on october 21, 1968. the assessee is an individual and she and one, shantaben dahyabhai patel (wife of the assessee's husband's brother) jointly purchased two plots of land bearing.....
Judgment:

Divan, C.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 land in question in an agricultural land within the meaning of section 2(14)(iii) of the Income-tax Act, 1961, and, therefore, whether the capital gains arising from the sale thereof is exempt from assessment to income-tax under the said Act ?'

2. The facts giving rise to this reference are as follows : The assessment year under reference is 1969-70, the relevant previous year of account being Samvat year 2024 which ended on October 21, 1968. The assessee is an individual and she and one, Shantaben Dahyabhai Patel (wife of the assessee's husband's brother) jointly purchased two plots of land bearing survey Nos. 51/1/1 and 51/1/2/2/2 of Changispur village. These two plots were subsequently given final plot No. 65 of the Town Planning Scheme No. 20 admeasuring about 2,360 square yards. The assessee had one-half share in the land bearing plot No. 65. The assessee agreed to sell the land of plot No. 65 to Messrs. Amit Corporation, a partnership firm. Amit Corporation agreed to sell the land to Manav Flats Co-operative Housing Society Ltd. under an agreement of sale dated January 9, 1968. Thereafter, by a sale deed dated September 4, 1968, the assessee sold her half undivided share in the said plot of land, namely, 1,180 square yards of land, to Manav Flats Co-operative Housing Society Ltd. The sale deed was also executed by the partners of Messrs. Amit Corporation as confirming parties. The land was sold for Rs. 1,18,000.

3. In the course of the assessment for the assessment year under reference, the assessee claimed that she was not liable to pay any tax on capital gains since the land sold by her was agricultural land. the Income-tax Officer rejected this contention of the assessee. According to the Income-tax Officer the market value of the land on January 1, 1954, was Rs. 11,810 at the rate of Rs. 10 per square yard. He, therefore, worked out the taxable capital gains at Rs. 55,710.

4. Against the order of the Income-tax Officer, the assessee went in appeal before the Appellate Assistant Commissioner. By his order the Appellate Assistant Commissioner held that the land in question continued to be agricultural land up to the time of its sale and, therefore, no tax on capital gains could be levied. He, therefore, allowed the appeal of the assessee and set aside the order of the Income-tax Officer.

5. Against the decision of the Appellate Assistant Commissioner, the revenue took the matter in appeal to the Appellate Tribunal and the Tribunal, after appreciating the evidence on record and applying the test laid down by this High Court in Rasiklal Chimanlal Nagri v. Commissioner of Wealth-tax [1965] 56 ITR 608 , and Himatlal Govindji v. Commissioner of Wealth-tax : [1977]106ITR658(Guj) , held that the land in question was non-agricultural land when it was sold. Since the Appellate Assistant Commissioner had not considered the contentions regarding the proper computation of capital gains, the Tribunal remanded the matter to him.

6. Thereafter, at the instance of the assessee, the question hereinabove set out has been referred to us for our opinion.

7. In order to appreciate the facts in the proper background, it is necessary to refer to some of the documents which have been annexed to the statement of the case and also some of the facts which are not in dispute before us. It appears from the recitals in the sale deed executed by the assessee in favour of Manav Flats Co-operative Housing Society Ltd., that S. No. 51/1 of Changispur belonged to one Somnath Bapuji Patel of Ahmedabad. Somnath Bapuji Patel Died in 1939, without leaving any will. Somnath Bapuji Patel's wife had pre-deceased Somnath and Somnath had no other son or any other issue except Gulchand Somnath Patel. The said Gulchand Somnath Patel sold 1,767 1/2 square yards of land out of S. No. 51/1 to Harilal Chhaganlal Bhatt and Indraprasad Devshanker Bhatt on January 5, 1942, by a registered sale deed. One Hormasji Ratanji Dalal purchased this area of 1,767 1/2 square yards from Harilal Chhanganlal Bhatt and Indraprasad Devshanker Bhatt by a registered sale deed dated May 6, 1942, and after that sale deed this area of 1,767 1/2 square yards was shown in revenue records as survey No. 51/1/1/1 and separate entry in the record of rights was maintained in respect of this area. Another plot of 810 square yards out of survey No. 51/1 was given on lease by Gulchand Somnath Patel to Indraprasad Devshanker Bhatt and Jamiatram Dahyashanker Pandya, with an option of purchase to the lessees and that lease was executed on January 5, 1942, and was duly registered. It appears that Indraprasad Devshanker Bhatt and Jamiatram Dahyashanker Pandya exercised their option to purchase and by the document of April 23, 1942, the 810 square yards were sold to these purchasers by a registered document. On May 6, 1942, Hormasji Ratanji Dalal purchased from Indraprasad Devshanker Bhatt and Jamiatram Dahyashanker Pandya, the right, title and interest of these two persons in 810 square yards and this plot of 810 square yards was given survey No. 51/1/2/2/2 and it was also entered separately in the record of rights. Thus, these two adjoining plots of land, namely, 1,767 1/2 square yards and 810 square yards aggregating to 2,577 1/2 square yards were of the ownership of Hormasji Ratanji Dalal and, thereafter, the assessee and Shantaben Dahyabhai Patel purchased the entire area of 2,577 1/2 square yards by a registered sale deed, executed in their favour of June 8, 1959, and each of the two purchasers was an owner of the undivided half share in the plot of land. This land was within the area of Town Planning Scheme No. 20. On July 15, 1966, Town Planning Scheme No. 20 was finalised and ultimately, final plot No. 65 admeasuring 2,360 square yards was allotted to the assessee and Shantaben Dahyabhai Patel, each being entitled to one-half undivided share in the said property.

8. For the assessment years 1964-65 to 1966-67, wealth-tax assessments of the assessee were made on the basis that this plot of land, final plot No. 65, was agricultural land and even for the assessment year 1969-70, the wealth-tax authorities accepted this plot of land as agricultural land at least so far as Shantaben was concerned for wealth-tax purposes. It is the contention of Mr. Kaji, learned counsel appearing for the assessee before us, that the plot of 2,577 1/2 square yards of land purchased by the assessee and Shantaben was adjoining another plot of land admeasuring 3,025 square yards which belonged to two brothers, namely, the husbands of Shantaben and the assessee, and this plot of land of 3,025 square yards was ancestral property of those two brothers which had been in possession and occupation of those two brothers since the time of their ancestors and that plot of land, namely, 3,025 square yards, had been an agricultural land since the time of their ancestors. Mr. Kaji emphasised that the adjoining land of 3,025 square yards was sold in 1970, and in connection with that sale, the income-tax authorities had accepted the contention as regards assessment year 1971-72, that it was agricultural land and hence no capital gains should be levied or assessed arising in respect of the sale price of 3,025 square yards of land.

9. On November 23, 1967, the assessee had entered into an agreement of sale with Amit Corporation and on January 9, 1968, Amit Corporation sold its rights under the agreement to Manav Flats Co-operative Housing Society (proposed). On April 6, 1968, the Collector of Ahmedabad granted permission under section 63 of the Bombay Tenancy and Agricultural Lands Act to sell this land on the footing that it was agricultural land and thereafter on September 4, 1968, the sale deed was executed in favour of Manav Flats Co-operative Housing Society Ltd. It was this co-operative society that applied to the revenue authorities for permission for non-operative society that applied to the revenue authorities for permission for non-agricultural use after September 4, 1968. Mr. Kaji also emphasized the fact that in the sale deed it has been specifically mentioned that the land sold by the assessee to Manav Flats Co-operative Housing Society Ltd. was agricultural land and agriculture was being carried on this plot of land. It was also mentioned that there was a standing crop of juwar on this plot of land at the time of the execution of the sale deed on September 4, 1968.

10. Before considering the rival contentions urged by Mr. Kaji for the assessee and Mr. G. N. Desai for the revenue, it is necessary to refer to the relevant sections of the Income-tax Act, 1961. Under the charging section, namely, section 4 of the Act, where any Central Act enacts that income-tax shall be charged for any assessment year at any rate or rates, income-tax at that rate or those rates shall be charged for that year in accordance with, and subject to the provisions of the Act in respect of the total income of the previous year or previous years, as the case may be, of every person. Section 2(24) mentions that 'income' includes, inter alia, any capital gains chargeable under section 45. Section 45 provides that any profits or gains arising from the transfer of a capital asset effected in the previous year shall, save as otherwise provided in sections 53 and 54, be chargeable to income-tax under the head 'Capital gains', and shall be deemed to be the income of the previous year in which the transfer took place. Section 2(14) defines 'capital asset' to mean property of any kind held by an assessee, whether or not connected with his business or profession, but does not include, under clause (iii), agricultural land in India. This was the provision as it stood at the relevant time. The provisions of sections 53 and 54 are not material for the purpose of this judgment.

11. The question as to what is agricultural land in the context of lands situated in or near urban areas has been the subject-matter of several decisions of this High Court and recently by the Supreme Court. The first of these decisions in this High Court is the decision in Rasiklal Chimanlal Nagri v. Commissioner of Wealth-tax [1965] 56 ITR 608 . Thereafter, there are the decisions in Commissioner of Wealth-tax v. Narandas Motilal : [1971]80ITR39(Guj) , Ranchhodbhai Bhaijibhai Patel v. Commissioner of Income-tax : [1971]81ITR446(Guj) , Himatlal Govindji v. Commissioner of Wealth-tax : [1977]106ITR917(Guj) . Thereafter, there are two unreported decisions in Income-tax Reference No. 154 of 1974. Commissioner of Income-tax v. Prakash Industries (see Appendix I, page 316 infra) decided by both of us sitting as a Division Bench on April 14, 1976, that is, after the decision in Commissioner of Income-tax v. Manilal Somnath : [1977]106ITR917(Guj) and the latest decision of this High Court on this point is the decision in Smt. Yaswanti R. Bhatt v. Commissioner of Wealth-tax (Wealth-tax Reference No. 11 of 1974 (see Appendix II, page 318 infra), decided by a Division Bench consisting of Obul Reddi C.J. and M. P. Thakkar J., on April 7, 1977. So far as the Supreme Court decision is concerned, that decision is in Commissioner of Wealth-tax v. Officer-in-charge (Court of Wards) : [1976]10ITR133(SC) .

12. It may be mentioned that under the provisions of the Wealth-tax Act, the agricultural land is exempted from the definition of 'assets' in the Wealth-tax Act and wealth-tax has to be paid on the net assets held by an assessee and the question of what constitutes 'agricultural land' is common for assessment for wealth-tax purposes and assessment for capital gains under the Income-tax Act and the same principle under the Wealth-tax Act and the Income-tax Act have been applied to the concept of 'agricultural land'.

13. In Commissioner of Income-tax v. Manilal Somnath : [1977]106ITR917(Guj) , the Division Bench consisting of both of us considered the earlier decisions in Rasiklal Chimanlal Nagri v. Commissioner of Wealth-tax [1965] 56 ITR 608 , Commissioner of Wealth-tax v. Narandas Motilal : [1971]80ITR39(Guj) , Ranchhodbhai Bhaijibhai Patel v. Commissioner of Income-tax : [1971]81ITR446(Guj) and Himatlal Govindji v. Commissioner of Wealth-tax : [1977]106ITR658(Guj) , and the principles which we culled out from these decided cases were-See : [1977]106ITR917(Guj) :

'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 [1965] 56 ITR 608 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 : [1977]106ITR658(Guj) , 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.'

14. In Commissioner of Income-tax v. Prakash Industries (See Appendix I, pages 316, 317 infra), we referred to the decision in Manilal Somnath's case : [1977]106ITR917(Guj) and observed :

'We have there pointed out that if at the date of the sale the land is actually put to agricultural use and there are no circumstances detracting from the inference which would follow from the actual agricultural use of the land, the land should be held to be agricultural land and even though the land under consideration may be in the vicinity of developed or developing area. If the land is not actually a building site at the date of the sale, the inference flowing from the continuous agricultural use of the land will not be dislodged by sale by yardage or any other similar footing.' The decision in Manilal Somnath's case : [1977]106ITR917(Guj) was followed in the case of Prakash Industries (see Appendix I, page 316 infra).

In Smt. Yashwanti R. Bhatt's case (see Appendix II, pages 318, 322 infra) the Division Bench consisting of S. Obul Reddi C.J. and M.P. Thakkar J. referred to the earlier decisions and also the decision in Manilal Somnath's case : [1977]106ITR917(Guj) and S. Obul Reddi C.J., speaking for the Division Bench, observed : 'It should be clearly understood that whether a particular land is an agricultural land or not depends on the facts and circumstances of each case. The cumulative effect of the evidence placed on record should be the guiding factor in reaching the conclusion whether a particular land is agricultural land. It is true, as pointed out by Mr. Patel, that after the assessee purchased the land there were agricultural operations till 1960-61. The Tribunal has found that the area was well developed for housing purposes and co-operative housing colonies had come up before the period involved in these appeals. It would, therefore, appear form the facts of the case that on account of the development of the area all round the land, the assessee had stopped agricultural operations presumably with a view to find a good buyer who would develop it into a housing colony. It is not as if the assessee, for the reason that she could not get a tenant or she could not personally raise some vegetables or some crop on the land, stopped cultivating the land for the six assessment years. The fact that she resumed cultivation in the last two assessment years 1969-70 and 1970-71, and realised a meagre income of Rs. 83.25 and Rs. 301.35 respectively from a very valuable land would clearly bring out her intention that she was not intending to use it as an agricultural land and that she was only waiting for a proper buyer who would buy for a good price.'

15. It appears from the judgment in Smt. Yaswanti R. Bhatt's case (see Appendix II, page 318 infra) that what weighed with this High Court in that case was that the mere fact that the land was put to agricultural use in the last two assessment years would not make it an agricultural land. It seems that the facts of Rasiklal Chimanlal Nagri's case [1965] 56 ITR 608 , where also the land had been lying fallow for a number of years, the facts were similar to Smt. Yaswanti R. Bhatt's case (see Appendix II, page 318 infra).

16. In Manilal Somnath's case [1977] 106 ITR (Guj), and following Manilal Somnath's case in Prakash Industries case (see Appendix I, page 316 infra), we had emphasized that if the land is put to agricultural use at the relevant date, namely, at the date of the sale, the presumption would arise that it is agricultural land unless that presumption flowing from the actual use of the land is dislodged by the presence of other factors in the particular case.

17. In Commissioner of Wealth-tax v. Officer-in-Charge (Court of Wards) : [1976]10ITR133(SC) , the question before the Supreme Court was whether the property called 'Begumpet Palace' within the municipal limits of Hyderabad consisting of vacant lands of about 108 acres and also buildings enclosed in compound walls constituted 'agricultural land' within the meaning of clause (i) of section 2(e) of the Wealth-tax Act, 1957. Because the land was never intended to be used for agriculture and was not ploughed or tilled, the income-tax authorities and the Appellate Tribunal held that the property could not be treated as 'agricultural land' within the meaning of section 2(e). On a reference, the High Court held this land to be agricultural land because : (i) the area was 108 acres abutting the Hussain Sagar tank; (ii) the land had two wills in it; (iii) it was capable of being used for agricultural purposes; (iv) it had not been put to any use which could change the character of the land by making it unfit for immediate cultivate; and (v) it was classified and assessed to land revenue as 'agricultural land' under the Andhra Pradesh Land Revenue Act. On appeal by the revenue, the Supreme Court held that the first four features considered by the High Court and based upon absence of any user for non-agricultural purposes were inconclusive, and the fifth feature alone provided some evidence of its purpose. That the property was classified in the revenue records as agricultural land was not conclusive and such entries could raise only a rebuttable presumption. The Supreme Court pointed out that the question had not been considered either by the Appellate Tribunal or by the High Court from the point of view of this presumption and it directed that the Appellate Tribunal should determine afresh whether the lands were agricultural after giving opportunity to both sides to lead further evidence. Beg J., as he then was, speaking for the Supreme Court, observed at page 136 :

'It is true that this case (Commissioner of Income-tax v. Raja Benoy Kumar Sahas Roy : [1957]32ITR466(SC) , 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 use 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 : [1957]32ITR466(SC) have a direct bearing. In that case, this court held that the wider meaning given to agricultural operations, such as breeding and rearing of livestock, 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.'

18. Beg J., as he then was, further observed in this case at page 141 :

'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 other words, this exemption had to be be necessarily given a more restricted meaning than the very wide ambit given to it by the Full Beg J. further observed at page 143 of the report : 'Learned counsel for the assessee-respondents submitted that no evidence had been led on the question of intended user before the taxing authorities as the 'prima facie evidence', provided by the entries in the revenue records, was considered enough. It has, however, to be remembered that such entries could raise only a rebuttable presumption. It could, therefore, be contended that some evidence should have been led before the taxing authorities of the purpose or intended user of the land under consideration before the presumption could be rebutted. If the 'prima facie' evidence of the entries was enough for the assessee to discharge his burden to establish an exemption, as it seemed to be, evidence to rebut it should have been led on behalf of the department.

We think that this aspect of the question was examined by the Full Bench from a correct angle. Although it seems to have based its conclusion primarily on the 'prima facie' evidence provided by the entries under section 50 of the Andhra Pradesh land Revenue Act, it had also used other indicia which were really not very helpful. They had a bearing on potentialities for agricultural user. The Full Bench had, however, not recorded a finding that the conclusion reached by the taxing authorities, that the land was never even intended to be used for an agricultural purpose, rested on no evidence at all. It had not given its reasons for rejecting this finding of the Tribunal.'

19. In this case the Supreme Court did not approve of the test laid down by the Madras High Court in Sarojini Devi v. Sri Krishna, : AIR1944Mad401 , which was followed by the Full Bench of the Andhra Pradesh High Court in the case of Officer-in-Charge (Court of Wards) v. Commissioner of Wealth-tax : [1969]72ITR552(AP) , and which held that for the purpose of coming to the conclusion that the land in question was 'agricultural land' it was enough to show that the land under consideration was capable of being used for agricultural purposes. According to the Supreme Court, this view was erroneous and this view had led the Full Bench of the Andhra Pradesh High Court into giving excessive weight to considerations which had a bearing only on potentialities of the land for use for agricultural purposes : [1976]10ITR133(SC) , the conclusions of the Supreme Court were mentioned in the following words :

'For the reasons already given, we do not think that the term 'agricultural land' had such a wide scope as the Full Bench appears to have given it for purposes of the Act we have before us. 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 are possibility of user of land, by some possible future owner or possessor, for an agricultural purpose. It is not the mare 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. We do not not think that all these considerations were kept in view by the taxing authorities in deciding the question of fact which was really for the assessing authorities to determine having regard to all the relevant evidence and the law laid down by this court. The High Court should have sent back the case to the assessing authorities for deciding the question of fact after stating the law correctly.'

20. In this case, the law, therefore, is very clear. If the land is actually used for agricultural purpose as shown by Manilal Somnath's case : [1977]106ITR917(Guj) and also by the Supreme Court in Commissioner of Wealth-tax v. Officer-in-Charge (Court of Wards) : [1976]10ITR133(SC) , it can be said to be agricultural land, at least, prima facie, as agricultural land could be said to be land which is either actually used or ordinarily used or meant to be used for agricultural purposes. If it is actually used at the relevant date for agricultural purposes and there are no special features, for example, building plot being actually used as a stop-gap arrangement for agricultural purposes or a building site being used for agricultural purposes, actual user or ordinary use or intention to use the land for agricultural purposes or land is meant to be used for agricultural purposes, it would be 'agricultural land'. Secondly, potential case of the land as agricultural land is totally immaterial. Thirdly, entries in the record of rights are good prima facie evidence regarding agricultural land and if the presumption raised either from actual user of the land or from agricultural use of the land is to be rebutted, there must be material on the record to rebut that presumption. The approach of the fact-finding authorities, namely, the income-tax authorities and the Tribunal should be to consider the question from the point of view of presumption arising from entries in the record of rights or actual user of the land and then consider whether that presumption is dislodged by the presence of other factors in the case.

21. On the facts of this case it appears that this very land was treated as agricultural land for wealth-tax assessment purposes by the taxing authorities for assessment years 1964-65 to 1966-67. In the case of the other co-owner of the land, namely Shantaben, who was the owner of the remaining one-half of final plot No. 65, also the land was treated as 'agricultural land' for wealth-tax purposes for the assessment year 1969-70. The adjoining land owner by the husbands of Shantaben and the assessee was treated as agricultural land for income-tax purposes, that is, for considering capital gains when the adjoining land plot of 3,025 square yards was sold in 1970 and the sale of adjoining plot of land was exempt from capital gains. There are the following further factors which have to be borne in mind, namely, that the land at the time of sale had standing crops thereon as was shown by the sale deed itself. That till the date of the sale only land revenue payable for agricultural purpose was being levied and permission for non- agricultural user was obtained by the Manav Flats Co-operative Housing Society Ltd. after the date of the sale. It has also been pointed out that on an application made by the assessee, an inspection from the income-tax department was sent to the land on August 20, 1968, by the Income-tax Officer and e found that the land was cultivated and seeds of juwar were sown on the land. It is also pointed out that ever since the assessee became the joint owner of the land, this land under consideration was being cultivated and at least for the years 1963-64 to 1968-69, entities from the revenue record shown that juwar was being grown in this plot of land every year. It was further pointed out that permission under section 63 of the Bombay Tenancy and Agricultural Lands Act could only be granted in respect of land which was agricultural land and for this purpose provision of section 63 and other provision of the Bombay Tenancy and Agricultural Lands Act have a bearing on the question that arises for our consideration in the instant case.

22. As against these factors which we have so far mentioned in favour of the assessee, there are the factors that land round about was fully developed and co-operative societies and other housing projects had come up to the land under consideration and further previous transaction regarding this land showed that as far back as 1942 two plots of land which were of 1,767 1/2 square yards and 810 square yards which were purchased from Hormasji Ratanji Dalal by the assessee and Shantaben jointly were being sold by the yardage and not by the bigha or by acre and further that those pervious transaction showed that this plot of land had lost its character as an agricultural land.

23. It was pointed our by Mr. Kaji that the mere fact that a meagre income was being derived from agricultural operations is not a fact that should be taken into consideration for deciding the character of the land as an agricultural land and it was contended that in this particular case the facts were very similar to the case in Manilal Somnath's case : [1977]106ITR917(Guj) and the present case was entirely covered by Manilal Somnath's Case : [1977]106ITR917(Guj) .

24. On the other hand, Mr. Desai for the revenue has contended that no entries for the years 1959-60 to 1963-64 have been produced and the record of rights entries which are annexed to the statement of the case are merely from the years 1963-64 onwards. It was also contended that in reference to survey No. 51/1/1/1 an entry has been made in the rights 'You are entitled to hold this land for n. a. purpose.' The relevant mutation entry which was responsible for this entry in the record of rights is shown at annexure 'J' as Mutation Entry No. 2651 and very strong reliance was placed by Mr. Desai for the revenue on this aspect of the case Mr. Desai also contended that as shown by the amendment made by the Finance Act, 1970, to section 2(14)(iii) which amendment came into effect from April 1, 1970, the trend was to treat all lands within municipal limits as non-agricultural land irrespective of the user to which the land was to be put.

25. In the instant case, we are not concerned with the provision of law which came into effect from April 1, 1970, as it is obvious from the very provision of the amendment, that it is to cases arising after April 1, 1970, that this amended definition would apply and as is well settled, legislative interpretation or interpretation placed by the legislature in view of the changing condition so society cannot have any bearing on the position of law prevailing prior to the particular amendment in the Act. Mr. Desai for the revenue very strongly urged before us that the Tribunal has in terms found that this land was not being used for agricultural purposes and the Tribunal has gone to the extent of saying that even assuming for the sake of argument that some agricultural operations were carried on in the land those operation were in the nature of stop-gap arrangement.

26. As the Supreme Court has pointed out, if the fact-finding authorities have not correctly appreciated the legal position and have approached the whole question from a wrong or erroneous angle, the proper course for the High Court is to express the legal position and to send the case back to the Tribunal to enable the parties to lead evidence in the lights of the legal position as explained by the High Court. The legal position requires determination of the question whether a particular plot of land is agricultural land at least with reference to the law prior to March 31, 1970. The correct test to be laid down is from the point of view of the actual user of the land or, as the Supreme Court pointed out, whether the land could be said to be either actually used or ordinarily used or meant to be used for agricultural purposes. The test that we have mentioned above is whether the presumption from actual user of the land is to be dislodged by other factors and also whether the presumption arising from entires in the record of rights has been rebutted by any other evidence led before the authorities. It is obvious from the order of the Tribunal that the Tribunal has not considered the question from the point of view of this presumption arising in favour of the assessee in the instant case from the actual user of the land and the entries in the revenue record and then considering whether that presumption can be said to be rebutted or dislodged by other factors in the case. The ratio of Rasiklal Chimanlal Nagri's case [1965] 56 ITR 608 has been explained by us in Manilal Somnath's case : [1977]106ITR917(Guj) and it appears to us that the Tribunal has not correctly applied the law for determining as to what is agricultural land for the purpose of section 2(14)(iii) of the Income-tax Act, 1961, as it stood prior to March 31, 1970.

27. It is true that, ordinarily, the High Court has to accept the fact as found by the Tribunal but as pointed out by the Supreme Court in Commissioner of wealth-tax v. Officer-in-Charge (Court of Wards) : [1976]10ITR133(SC) , of the law has not been correctly appreciated by the Tribunal, its appreciation of facts is bound to be affected by the wrong approach to the evidence.

28. On these facts, in the light of the situation as prevailing, two courses are open to us : (1) to call for a supplementary statement of the case from the Tribunal; or (2) decline to answer the question raised by the Tribunal and to leave the Tribunal to take appropriate steps to adjust its decision under section 260, sub-section (1), of the Income-tax Act, 1961, in the light of the answer of this court. If we direct the Tribunal to submit a supplementary statement of the case, the Tribunal will, according to the decision of the Supreme Court in New Jehangir Vakil Mills Ltd. v. Commissioner of Income-Tax : [1959]37ITR11(SC) , Petlad Turkey Red Dye Works Co. Ltd. v. Commissioner of Income-tax : [1963]48ITR92(SC) and Keshav Mills Co. Ltd. v. Commissioner of Income-tax : [1965]56ITR365(SC) , be restricted to the evidence on the record and many not be entitled to take additional evidence. That may result in injustice.

29. In the circumstances, we think it appropriate to decline to answer the question on the ground that the Tribunal has failed to consider and decide the question whether the land was agricultural land from the correct angle, that is, has not considered the question whether the land under consideration was agricultural land or not from the proper perspective and the proper angle has not applied the correct law to this point and its whole approach was erroneous in the lights of the law as explained by this court in Manilal Somnath's case [1917] (Guj) and by the Supreme Court in Commissioner of Wealth-tax v. Officer-in- Charge (Court of Wards) : [1976]10ITR133(SC) , and the Tribunal had not considered all appropriate provisions of law applicable to this question. It would be open to the Tribunal to dispose of the appeal under section 260, sub section (1), of the Income-tax Act, 19611, in the lights of the observation made by us in this decision after approaching the question from the correct angle as explained by us [Vide Commissioner of Income-tax v. Indian Molasses Co. P. Ltd. : [1970]78ITR474(SC) ]. There will be no order as to costs of this cost.


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