1. This reference under the Wealth-tax Act relates to the assessment years 1959-60 to 1963-64, the corresponding valuation dates being the 31st day of March preceding the respective assessment years. The assessee, who was at the relevant time serving in the army, purchased under a document dated November 2, 1955, 17 acres and 39 cents of lands in Velachery village, Saidapet Taluk, Chingleput District, for a sum of Rs. 33,000. The lands were covered by certain cowles granted in 1861, 1863 and 1864. The then Government wanted to encourage the planting of trees so as to cover the surface of the country with verdure to attract rain and for this purpose, granted the cowles. The lands was to be free of rent for 20 years from the date of grant. The holder of the cowle was at liberty to grow any fruit or forest trees, or plantation for fuel. 20% of the land was to be planted with trees, within the first year of the cowle and another 20 in each succeeding year, so that the whole area would be planted with trees within five years. The cowle was liable to be cancelled unless good and sufficient reasons could be shown for not planting the area. If the cowle-holder thought proper, he could plant trees on a portion only and pay for the remainder the full assessment, but each acre of land planted should contain 40 standards at the least. The cowle-holder was not to be charged any rent for cultivation so long as he used his own water. If he elected to make use of water from Government tanks or channels, he would have to pay the water charges levied usually therefor. When coconut or other trees were planted on registered two crop land by the aid of Government water, the second crop charge was not to be levied unless the planter had used Government water throughout the year. At the end of the 20 year period, if the land was still irrigated with Government water, then the rent then demanded would be that of the neighbouring wet land. The cowle-holder was to replant a tree for every one that was cut. At the relevant time there were 700 palmyrah trees and 150 palm trees on the said lands. The assessee was deriving an amount income of approximately Rs. 1,000 from the land, part of which was cultivated with blackgram, horsegram, etc. There is a well in the middle of the property and the property has been described in the revenue records as 'punjai' and it was also so described in the sale deed dated 2nd November, 1955.
2. The assessee submitted wealth-tax returns offering these lands for assessment at the value at which they were purchased in 1955. Before the assessment orders for the relevant year were communicated, the assessee wrote on 6th April, 1965, claiming that these lands were exempt from assessment under Section 2(e) of the Wealth-tax Act. The Wealth-tax Officer had completed the assessment for each of these years on 26th March, 1965, but the relevant assessment orders were served on the assessee only on 12th April, 1965. In the assessment orders the Wealth-tax Officer referred to the area as a 'fast developing industrial area' so that there was a great demand for building sites for factories and house sites. He conducted a spot enquiry to find out the value of adjacent land. He found that the assessee had entered into an agreement with some housebuilding society by June, 1964, or thereabouts to sell the entire plot at Rs. 2,000 per ground. He, therefore, took the value of this property at a progressively increasing valuation per ground. As the question of valuation is not relevant for the disposal of this reference we do not think it necessary to refer to the details of valuation.
3. The assessee appealed against the assessments and took before the Appellate Assistant Commissioner a ground claiming exemption under Section 2(e) of the Wealth-tax Act. During the pendency of the appeal, the Wealth-tax Officer submitted a note to the Appellate Assistant Commissioner saying that, since 1947, Velacheri had been included within the city limits, that the registers of the Deputy Tahsildar, South West, did not contain any details to indicate whether or not any crops were grown on the above land, that there was no inspection of the land by the Deputy Tahsildar's office, that the karnam, who was contacted, was of the opinion that most of the land was sandy where no cultivation was possible and that, if at all there was any cultivation prior to 1947, it could have been only in S. No. 26/2 covering an area of 2.23 acres out of a total of about, 18 acres.
4. The Appellate Assistant Commissioner relying on : (1) the area having been included in the Corporation limits from 1947 ; (2) the negligible nature of income and expenditure from these lands as shown by the absence of the accounts; (3) the presence of big factories and quarters for company executives in the adjoining tracts of land; and (4) the absence of any tilling or any agricultural operations performed in the relevant year, confirmed the assessment. He referred to the presence of palmyrah trees, but stated that such trees dotted the entire landscape near Madras and that they were standing on the land partly because of the absence of agricultural operations. He held that the land was not agricultural land within the meaning of the Wealth-tax Act.
5. The assessee appealed to the Tribunal. The Tribunal pointed out that there was evidence that in pursuance of the terms of the cowle the palmyrah trees and date-palm trees, which did not require much water for their maintenance, were planted on the lands, that there were about 700 palmyrah trees and 150 palm trees on the lands, that there was a collection of Rs. 1,000 as and by way of income, that the land was described in the revenue records as 'punjai', that there was a well in the middle of the property and that all the materials unmistakably showed the character of the land. The finding of the Tribunal was that the land was converted into agricultural land as per the terms of the cowle granted by the Government, and that there was nothing to show that the character of the lands had been altered by conversion as building or industrial sites. Referring to the inclusion of the area in the city limits and the presence of some factories and quarters of company executives in nearby areas, the Tribunal observed that it was unable to think that these circumstances by themselves were sufficient to change the character of the land. In its opinion unless the assessee converted them for non-agricultural purposes, the lands continued to be agricultural in character and that there was no evidence in the case that the assessee had so converted the land into non-agricultural land. It, therefore, held that the property was agricultural land entitled to exemption under Section 2(e) of the Wealth-tax Act.
6. At the instance of the Commissioner, the following question has been referred:
'Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that 315 grounds of land owned by the assessee at Velachery are agricultural lands liable to be excluded in computing the net wealth of the assessee for the assessment years 1959-60 to 1963-64 ?'
7. Before proceeding to discuss the contentions and the cases cited before us, we may point out that the Wealth-tax Act has been enacted by Parliament in exercise of the powers conferred by entry 86 of List I of the Seventh Schedule to the Constitution. The said entry is in the following terms:
'Taxes on the capital value of the assets, exclusive of agricultural land, of individuals and companies ; taxes on the capital of companies.'
8. Under section 3 of the Wealth-tax Act, wealth-tax is leviable on the net wealth on the corresponding valuation date of every individual, Hindu undivided family and company at the rate or rates specified in the schedule.'Net wealth' is denned in Section 2(m) of that Act as meaning the, amount by which the aggregate value computed in accordance with the provisions of the Act of all the assets, wherever located, belonging to the assessee on the valuation date, was in excess of the aggregate value of all the debts owed by the assessee. The word 'assets' occurring in Section 2(m) has been defined in Section 2(e) of the Act and to the extent material it runs as follows :
' 'Assets' includes property of every description, movable or immovable, but does not include-
(i) agricultural land and growing crops, grass or standing trees on such land;...'
9. We have, therefore, to see whether the lands in the present case can be called 'agricultural lands'. There is no definition of the expression 'agricultural land' in the Act. The expression has, therefore, to be interpreted in its ordinary sense controlled, no doubt, by the context of the Act. The meaning of the words 'agricultural lands' has been the subject of consideration in several cases in this court. In Sarojini Devi v. Sri Kristna : AIR1944Mad401 a Hindu widow claimed right of succession to a mango grove under the provisions of the Hindu Women's Rights to Property Act, 1937.
10. The Federal Court had held in In re Hindu Women's Rights to Property Act,  FCR 12 (FC) that the Act of 1937 did not operate to regulate succession to agricultural land in the Governor's Provinces but operated only in respect of other kinds of property. Thus, if the mango-grove could be classified as 'agricultural land', then the claim of the widow under the Hindu Women's Rights to Property Act, 1937, would not be sustainable. After pointing out that in order to ascertain in what sense the expression is used in the legislative Lists in Schedule 7 of the Government of India Act, regard must be had to the object and purpose of Section 100 of which those Lists formed part and that Section 100 dealt with powers as between the federal and provincial legislatures. Patanjali Sastri J. (as he then was) observed as follows:
'In such context it seems to us that the expression 'agricultural land' must receive the widest meaning for it would be somewhat grotesque to suppose that Parliament intended that lands devoted to the production of one kind of crop should devolve according to laws passed by provincial legislatures, while those used for growing another kind should pass according to laws made by the Central legislature, or that 'the circumstances in which the cultivation is carried on' (per Reilly J. in Chandrasekara Bharati Swamigal v. Doraiswami Naidu AIR 1931 Mad 659 should determine the law which governs the devolution of the land. Nor could it have been intended that succession to such lands should depend on the degree of tillage or preparation of the soil or of the skill and labour expended in rearing and maintaining the plants. We are of opinion that for the purposes of the relevant entries in Lists II and III of Sch. 7 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. It follows that the mango grove in question is agricultural land.....'
11. It may be noticed that the learned judges referred to 'agricultural lands' as including lands which were used or were 'capaple of being used' for raising any valuable plants, etc. The Supreme Court in Commissioner of Income-tax v. Raja Benoy Kumar Sahas Roy : 32ITR466(SC) noticed this decision at page 476 of the report. That was a case where the question was whether the income from certain forest was exempt from the assessment under the Indian Income-tax Act on the ground that such income was agricultural income. The conclusion was that 'agriculture' in its primary sense denoted cultivation of the field and was restricted to cultivation of the land in the strict sense of the term. It was pointed out that there must be expenditure of human skill and labour upon the land itself.
12. As the trees in the forest grow spontaneously and without any aid of humanency, the income was held to be outside the scope of exemption under the Indian Income-tax Act. At page 476 their Lordships referred to the case in Sarojini Devi v. Sri Kristna and observed as follows:
'There was 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 used or are capable of being used for raising any valuable plants or trees or for any other purpose of husbandry. (See Sarojini Devi v. Sri Kristna and Megh Raj v. Allah Rakhia).' In Megh Raj v. Allah Rakhia AIR 1942 FC 27 the Federal Court had noticed the difficulty in determining the precise scope and meaning of the expression 'agricultural land' in relation to a grove and left the question with the following observations:
'It may on a proper occasion be necessary to consider whether for the purposes 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 and 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 accordingto laws framed under List 3.'
13. The Supreme Court could not apply the tests formulated in the decisions of the Madras High Court and the Federal Court cited above, because it was not concerned with the nature of the land but the character of the income.
14. Our attention was drawn to a Privy Council decision in Kajumal v. Salig Ram, AIR 1924 PC 1. It was held that the land cultivated with tea was 'agricultural land' within the meaning of Section 3(1) of the Punjab Pre-emption Act, 1905. There is no formulation of any test in this case nor is there any guidance by way of discussion. In Kesho Prasad Singh v. Sheo Pragash Ojha, AIR 1924 PC 247 the Privy Council considered that a grove was not land 'held for agricultural purposes' within the meaning of Section 79 of the Agra Tenancy Act, 1901. In this decision also, there is no discussion and the construction has obviously been placed on the terms of the particular enactment then under consideration. It is on this view that this decision has not been considered to be a conclusive authority on the question to be decided in Sarojini Devi's case.
15. Certain other cases dealing with the concept of agricultural income were brought to our notice ; but the expression 'agricultural income' is the subject of definition in the Income-tax Act and the cases had to consider the question in the light of the said definition. The question before us is not whether there is any 'agricultural income' on the facts herein, but whether the lands are 'agricultural lands'. We do not, therefore, think it necessary to go into those decisions.
16. There are decisions under the Wealth-tax Act itself which have considered the scope of the expression 'agricultural land' to which we shall turn now. In Sri Krishna Rao L. Balekai v. Third Wealth-tax Officer, City Circle 1, Bangalore : 48ITR472(KAR) the Mysore High Court was concerned with certain 'agricultural lands' which had been requisitioned by the Government in the year 1944 or 1945 for the purpose of locating a military aerodrome. The question was whether the land on which the military aerodrome stood for about 15 years could be called 'agricultural land' so as to be exempted under the Wealth-tax Act. At page 474, the learned judges observed as follows :
'Normally, when we say that a land is an 'agricultural land', we mean that that land is used or is capable of being used for 'agricultural purpose'. It is not what use it can be put to by changing its character.'
17. At page 475, it was observed as follows:
'But it must be remembered that in the instant case the land in question has been converted into an airfield, an act which is totally different from planting a grove. It has long ceased to be an ' agricultural land' and it can be only reconverted into an 'agricultural land' by expending considerable labour and money.'
18. It maybe seen that the test adopted by the Mysore High Court issimilar to the one adopted by Patanjali Sastri J. in Sarojini's case. Theland was not considered to be agricultural, because it was converted intoan aerodrome and could be restored to its position as agricultural landonly after incurring considerable expense.
19. The Gujarat High Court in Rasiklal Chimanlal Nagri v. Commissioner of Wealth-tax  56 ITR 608 considered the assessability to wealth-tax of certain plots of land situated in Ahmedabad in a wholly residential area with numerous residential buildings around the plots. The area was covered by a town planning scheme and the land had ceased to be cultivated for over two decades. The conclusion of the court was that under the circumstances the plots in question could not be said to be 'agricultural land'. In this case the Gujarat High Court propounded the test as follows at page 615:
'Whether a particular land is agricultural land or not must depend on the general nature or character of the land, and various factors would have to be taken into account. The development and use of the lands in the adjoining area and the surroundings and situation of the land would be an important factor which would have a bearing on the question whether the land is agricultural land or not.....The physical characteristics of theland would be another factor to be taken into account.....Then the intention of the owner as gathered from all the relevant circumstances would also have a bearing on the general nature or character of the land.....Thefact that the land is assessed for agricultural purposes would also be a relevant consideration and due effect would have to be given to this factor in arriving at the conclusion whether the land is agricultural land or not.'
20. The emphasis here is on the character of the land. The court didnot, however, agree that the capacity of the land for being put to agricultural use was a determinative factor in deciding whether the land isagricultural land of not. To this extent, the decision runs counter toSarojini Devi's case.
21. In Tea Estates India Private Ltd. v. Commissioner of Wealth-tax : 59ITR428(Cal) a company owning a tea estate claimed that certain lands covered by a forest was 'agricultural land' within the meaning of Section 2(e) of the Wealth-tax Act. The assessee claimed also that its water supply system representing water tanks, pipelines, etc., and roads and bridges employed and used in its tea estates were liable to be excluded from the category of 'assets' under Section 2(e) of the Act. The Calcutta High Court was of the opinion that 'agricultural land' should comprise the following characteristics: (1) it must be a land; (2) it must pertain to or be connected with cultivation; and (3) it must involve expenditure of human labour and skill for the purpose of cultivation or for keeping it in a cultivable state. The court held that a part of the estate in which the forest grew spontaneously was not 'agricultural land' and that 'agricultural land' included water tanks and roads, which were necessary ingredients of and vitally connected with plantation portion. The bridges and pipes were considered to be outside the category of 'agricultural land' unless there was a clear finding to the effect that the agricultural activity in the particular garden was not feasible without them. This case links the test for determining the character of the land as 'agricultural land' with the expenditure of human skill and labour for the purpose of cultivation. In a way the test appears to be that unless agricultural income was earned therefrom, the land was not 'agricultural land '. This test is inconsistent with the decisions of this court in Sarojini Devi v. Sri Kristna andin Wilfred Pereira Ltd. v. Commissioner of Income-tax : 53ITR747(Mad) . In the latter case, the question was whether certain lands purchased by the assessee with the avowed object of growing herbs and plants for medicinal purposes, but compulsorily acquired by the State Government for putting up the Integral Coach Factory could be classified as 'agricultural lands'. The learned judges held that the lands had ceased to be agricultural lands. In the course of the judgment at page 749 it was pointed out as follows :
'It may be conceded that agricultural land would not cease to possess that character, if no income is derived from it in any particular year. Continuous and uninterrupted derivation of agricultural income is not an essential sine qua non to determine the character of the land; even if the land had been used for agricultural purposes by fits and starts, the land could yet be called the land from which the income derived is agricultural income.'
22. In that case if the land was agricultural land it would be outside the category of 'capital assets' so that the compensation received for the acquisition thereof would not come within the scope of 'capital gains'. It was pointed out that it was not enough for the assessee who claimed the exemption to show that the land was once an agricultural land, and that it might be that the land became converted into a house-site, or devoted to the location of a brick-kiln. Thus, where the agricultural land had been converted into non-agricultural property, then the exemption cannot be availed of by the assessee. It is this aspect which was also present in the case decided by the Mysore High Court in Sri Krishna Rao L. Balekai v. Third Wealth-tax Officer, City Circle 2, Bangalore, as the land had ceased to be 'agricultural land' by conversion into an aerodrome in that case. We are, therefore unable to accept the proposition that unless the land yielded agricultural income in the relevant year, it would not be agricultural land. But even that test is satisfied in this case, as there is receipt of agricultural income.
23. There is a Full Bench decision of the Andhra Pradesh High Court in Officer-in-charge (Court of Wards) v. Commissioner of Wealth-tax : 72ITR552(AP) . There a property, 'Begumpet Palace', at Begumpet, within the limits of the Municipal Corporation of Hyderabad, consisted of vacant land of about 108 acres and also buildings enclosed by compound walls. The land was never ploughed or tilled, though it was capable of being used for agriculture. Land revenue was assessed on it. The wealth-tax authorities and the Tribunal had held that the lands were not agricultural lands so as to be exempt from wealth-tax. On a reference, the Full Bench held that the property in question came within the scope of the exemption. At page 559 it was pointed out that 'agricultural land' Was an open land which was either cultivated or which was fit for cultivation and that it was the inherent quality of the land that had to be taken into consideration in determining whether it had the characteristic of agricultural land or not. At page 559 it was observed as follows :
'If it is shown that the land is actually cultivated either presently or in the immediate past or if it is shown that it is lying fallow, but is capable of being cultivated, so long as the land has not been actually diverted to purposes other than agricultural purposes by construction of buildings thereon and other operations which render the land itself incapable of being cultivated without undertaking some other operations for making it fit for carrying on agricultural operations, it can be said to answer the description of agricultural land in its widest significance.'
24. At pages 570 and 571 it was pointed out as follows :
'As a result of the foregoing discussion, the position may be summarised thus:
(1) the words 'agricultural land' occurring in Section 2(e)(i) of the Wealth-tax Act should be given the same meaning as the said expression bears in entry 86 of List I and given the widest meaning;
(2) the said expression not having been defined in the Constitution, it must be given the, meaning which it ordinarily bears in the English language and as understood in ordinary parlance ;
(3) the actual user of the land for agriculture is one of the indicia for determining the character of the land as agricultural land;
(4) land which is left barren but which is capable of being cultivated can also be 'agricultural land' unless the said land is actually put to some other non-agricultural purpose, like construction of buildings or an aerodrome, runway, etc., thereon, which alters the physical character of the land rendering it unfit for immediate cultivation;
(5) if land is assessed to land revenue as agricultural land under the State revenue law, it is a strong piece of evidence of its character as agricultural land;
(6) mere enclosure of the land does not by itself render it a non-agri-tural land;
(7) the character of the land is not determined by the nature of the products raised, so long as the land is used or can be used for raising valuable plants or crops or trees or for any other purpose of husbandry;
(8) the situation of the land in a village or in an urban area is not by itself determinative of its character.'
25. The Patna High Court had occasion to go into this question in Syed Rafiqur Rahman v. Commissioner of Wealth-tax : 75ITR318(Patna) . The land in that case was situated in the City of Patna. The court upheld the assessment to wealth-tax and ultimately proceeded on the basis that it was a question of fact depending upon the evidence in each case. Though there was some discussion of the cases, there was no enunciation of the principle which would govern a matter o.f this kind. The Punjab and Haryana High Court in Commissioner of Wealth-tax v. Smt. Sheela Devi was concerned with a case where the assessee owned two plots of land on either side of the central plot which originally belonged to her but had been sold by her earlier to the Government for establishment of Government postal colony. The court held that the lands were 'agricultural lands'. It was pointed out at page 703 after referring to the decision of the Madras High Court in Sarojini Devi v. Sri Kristna and Officer in-charge (Court of Wards) as follows:
'The question whether a particular piece of land is or is not 'agricul-tural land' within the meaning of Section 2(e)(1) of the Wealth-tax Act is necessarily a question of fact to be decided in the circumstances of a given case depending on the nature and character of the land, its environment, the use to which it has been previously put or is capable of being put, sometimes possibly the intention of the owner, its assessment or non-assessment to the land revenue, its situation, within a municipal or a town planning area, its potential value, and various other relevant factors.'
26. The Gujarat High Court again considered this question in Commissioner of Wealth-tax v. Narandas Motilal : 80ITR39(Guj) in the context of its earlier decision which we have already considered, viz., Rasiklal Chimanlal Nagri v. Commissioner of Wealth-tax, Gujarat. The land in question was situated within the Municipal limits of Ahmedabad, but somewhat outside the actual residential areas. The court held that the fact that a draft town planning scheme had been applied to the area, or that the lands had been plotted out by the assessee or that the plots of land had been sold to different persons on the basis of yardage, would not be sufficient to change their character as agricultural lands. The Punjab and Haryana High Court went again into the question of the assessability to wealth-tax of agricultural lands which had been requisitioned and used as parade ground by the police authorities in Avtar Singh Rangwala v. Commissioner of Income-tax-cum-Wealth-tax . After referring to the decision of this court in Sarojini Devi v. Sri Kristna and the other cases which we have already noticed, it was held that the requisition by the police to use the land as parade ground for about 18 or 19 years prior to the dates of valuation as also on the dates of valuation could not lead to the conclusion that the landhad ceased to be 'agricultural land', that the inclusion of the area in a town improvement scheme did not also change the nature or the kind of land and that the situation of the land within the municipal limits of Amritsar did not also lead to the conclusion that the land could not be agricultural land.
27. On a consideration of all these authorities we do not think it possible to evolve any precise test or universal formula for the purpose of finding out whether any land is agricultural land or not. The decision of this Court in Sarojini Devi v. Sri Kristna, which was noticed by the Supreme Court in Commissioner of Income-tax v. Raja Benoy Kuwar Sahas Roy, and which had been followed by the several High Courts in the cases discussed already still holds the field. Under that decision if the land was used or was capable of being used for raising any valuable plants or trees or for any other purpose of husbandry, it would be agricultural land. The test as to whether the land is capable of being used for agriculture has to be understood in the sense of the quality or nature of the land, or its being fit for cultivation, as it is. The classification of the land in the revenue records of the State Government would throw some light on the problem. The situation within the municipal limits or the application of a town planning scheme to the area would not be conclusive. The proposition urged for the revenue that there can be no agricultural land within the city limits is too wide to be accepted. The application of the town planning scheme is only to regulate building activity and does not by itself convert what is already an agricultural land into non-agricultural property unless the owner has taken steps to convert the land into building plots or factory sites. A clear case of agricultural land would be where income derived therefrom is agricultural income in the relevant year. However, the absence of income in one or more years would not convert the property into non-agricultural property, if there is no evidence of the owner having abandoned any idea of agriculture with reference to that property or had decided to convert it into non-agricultural property. The intention of the owner to keep it as agricultural property, though not conclusive, would be a relevant circumstance. If, however, the property is surrounded by residences, then the intention of the owner would lose its significance. Keeping these principles in view we have to approach the question in the present case.
28. At any rate, prior to 1947 when the property was outside the citylimits and when there was no town planning scheme in any portion ofthat area, it could not have been contended on behalf of the Commissionerthat the property was non-agricultural property. The Governmenthad granted a cowle only with a view to promotion of planting trees thereon. If the cowle-holder had not complied with the conditions, one would have expected the Government to have withdrawn or called back the cowle. There is evidence to show that part of the land was actually cultivated with blackgram or horsegram. The presence of a well in the middle of the property also shows that the owner intended to cultivate the land. Though the number of trees may not be appreciable having regard to the extent of the property, still it shows that the cowle-holder had attempted to comply with the terms of the grant about a century ago. The question as to whether any land is agricultural land cannot be taken to be such a question of fact as to be outside the scope of scrutiny on a reference. On the facts herein we are satisfied that there were materials to show that the lands were agricultural lands. We do not have before us a copy of the note as submitted by the Income-tax Officer before the Appellate Assistant Commissioner. It is not clear whether a copy of the note was actually passed on to the assessee. In these circumstances we are unable to deal with this note any further. We are satisfied that on the facts the Tribunal came to the correct conclusion. The question referred to us is answered in the affirmative and in favour of the assessee. The assessee will have his costs. Counsel's fee Rs. 250.