ORDER
C.L. Sethi, Judicial Member
1. The present appeal filed by the assessee is directed against the order dt 16.12.2002 passed by the CIT (A) in the matter of an assessment made Under Section 143(3)/263 of the Act for the assessment year 95-96.
2. The solitary ground raised by the assessee reads as under:
On the facts and in the circumstances of the case and in law, the Hon’ble CIT(A) erred in confirming the land situated at village Takve Budruk, Tal Maval Dist Pune sold during the year as non agricultural land and confirming the order of the ld AO without appreciating the facts. It is prayed that the addition of capital gain Rs. 15,12,425/- by treating the land under question as non agricultural land be deleted.
3. The facts of the case emerging from the orders of the authorities below and the materials on record may be summarized as under.
The assessee is an individual. For the assessment year under consideration, the original assessment was completed Under Section 143(3) on 28.3.96 on a total income of Rs. 6,94,140/-. During the previous year relevant to the assessment year under consideration, the assessee had sold land situated at Gat No. 418 to 424 and 426 of Takve Budruk, Tal. Maval, Dist. Pune, wherein the assessee had one-half share. The assessee claimed the said land to be of agricultural land in nature. Since the aforesaid land was claimed as agricultural land by the assessee, long term capital gains on transfer of these lands were claimed exempted and a note to that effect was appended to the statement of income fled along with the original return of income. During the original assessment proceedings, the relevant documents were also produced by the assessee before the AO. On consideration of all the facts and circumstances of the case, the AO was satisfied about the claim of the assessee that the long term capital gains on sale of land were exempt from taxation. However, subsequently, the CIT invoked the jurisdiction Under Section 263 of the Act and passed the order under that section on 27.3.98 by observing as under:
The assessee in this case claims the lands to be agricultural because of the documentary evidence produced by him. It is to be noted that the land is sold to one of the Public Limited Company Alia Laval (I) Ltd. Further, as stated in the agreement of sale, the Regional Town Planning Department Govt. of Maharashtra, Pune, had issued a map dt. 18/8/92 certifying that the lands are located in industrial zone designated by Govt. of Maharashtra prior to 25/7/91. The A. O. during the assessment proceedings failed to take a note of the above Notification of the Govt. and erroneously concluded that the land to be agricultural without verifying the fact. Hence, I am of the opinion that the A.O. has not applied his mind to this aspect while finalising the assessment. 1, therefore, conclude that the order is prejudicial to the interest of revenue and I set aside the order with the direction to look into the above facts and reconsider the exemption granted to the assessee under the capital gains tax, after giving an opportunity to the assessee of being heard.
4. As per direction given by the CIT in his order Under Section 263, the AO proceeded to complete the fresh assessment by issuing a notice Under Section 143(2). The assessee was asked by the AO to furnish the following information:
i) Date of purchase of this land describing in detail the purpose for which the land was to be used from the date of purchase.
ii) Copies of 7/12 extract for the last three years prior to the date of sale of land.
iii) Evidence in respect of agriculture operation carried on by you, if any.
iv) Evidence in respect of sale of agriculture produce, if any.
Before the AO, the assessee explained the matter vide its submission dt 28.1.2000. The various points raised by the assessee in his submission were dealt with by the AO as under:
Assessee’s submission
i) The agricultural lands in question (Hereinafter referred to as the lands) have been actually put to agricultural use and 1 have taken Rice as main crop. This fact is evidenced from the revenue records. The copies of 7/12 extract relevant year are enclosed herewith, the agricultural income was not disclosed as the income was very small and the inclusion of the same could not made any difference to the tax liability.
AO’s comments:
The assessee’s contention is not acceptable to me. The assessee has filed 7/12 extract for the relevant year, He was asked to file the evidence in respect of agricultural operations carried out and also evidence in respect of sale of agricultural produce. The assessee did not comply with the queries. In view of this fact, the assessee’s contention that the lands have been actually put to use for agricultural purpose, is not acceptable.
Assessee’s submission
ii) The land in question have been purchased on 2-6-1984 and since that the date till the date of sale the lands were used for agricultural purpose only. This long period of more than seven years conclusively proves that the lands were purchased by me for agricultural use and operation and with no other intention.
AO’s comments:
It is true that the assessee has purchased land on 2-6-1984 but it is pertinent to note that for a long period of more than seven years the assessee has not earned any agricultural income and which is not reflected in the Income Tax Return. The assessee has failed to produce the evidence in respect of agricultural operations carried out on the land, the expenses so incurred for the purpose of use of agricultural land and also income earned therefrom. Therefore, the assessee could not prove conclusively that the land purchased by him was for agricultural use and operations. The contention of the assessee is therefore not accepted.
Assessee’s submission
iii) The lands have been sold for a lumpsum price and not on the basis of per Sq. ft. or Sq. mts. basis. Due to unprecedented boom, witnessed by the real estate market, in the year 1994 and 1995, I could bag a substantial price. Even considering the price of lands in the year 1984, the price realized by me on sale of lands is very much commensurate with the inflationary trends.
AO’s comments:
The lands in question arc sold to Alfa Laval (I) Ltd., a Public Ltd. Company. The Public Ltd. company always requires land for lumpsum price. The contention that it is not sold out on the basis of per Sq. Ft. pr. Sq. mts. is not accepted. The price realized by him on sale of land is only because of the reason that Regional Town Planning Department, Government of Maharashtra has issued a map dt 18-8-92 certifying that the said land/s are located in industrial zone designated by Govt. of Maharashtra prior to 25-7-91. This fact is reflected in the agreement of sale executed between the assessee and Alfa Laval (I) Ltd. Co. on Page2. Page 3.
Assessee’s submission
(iv) The mere inclusion of lands in industrial zone without any infrastructure development does not and cannot convert the agricultural lands into non agrl. lands. At the relevant point of sale of these lands, the surrounding area was totally undeveloped and except mere future possibility of development, there were no other circumstances adversely affecting the true and correct agricultural nature of the land.
AO’s comments:
The question is whether the lands were put to use for agricultural purpose. As stated above, the assessee failed to give proper evidence for earning agricultural income for the last eight years since it is in respect of purchase of that land and also failed to disclose the income in the original return of income. Thus, these are the lands not used for agricultural purpose. Therefore, it is held that the lands are not agricultural lands and not in the nature of agriculture. The contention of the assessee is not acceptable to me.
Assessee’s submission
v) It is to be noted that by an amendment introduced to Section 2(14) of the I. T. Act, 1961, by finance Act, 1970, agricultural land situated in all the rural areas are not brought within the tax net and do not automatically become capital assets within the meaning of the provisions of Section 2(14) of I. T. act, 1961. A reference to this effect may please be made to the memorandum Explaining the provisions of Finance Act, 1970, issued by CBDT wherein it has been clarified by the CBDT vide Para No. 30 as under:
Agricultural land situated in rural areas i.e. areas outside any municipality or cantonment board having a population of not less than ten thousand and also beyond the distance notified by the Central Government from the limits of any such municipality or cantonment board, will continue to be excluded from the capital asset.
After dealing with the assessee’s various submissions, the AO concluded that the assessee’s contention to the effect that the land sold was agricultural land is not acceptable as the land in question was not used for agricultural purpose. The AO, therefore, concluded that the assessee was not entitled for exemption under capital gains.
5. Being aggrieved with the AO’s order in treating the land in question as not of agricultural land, the assessee carried the matter before the CIT (A). Before the CIT (A), the assessee submitted, in brief, as under:
1) The lands in question were purchased on 2.6.1984 and since that time till date of sale, the lands were used for agricultural purposes only. This long period of more than seven years proves that the lands were purchased for agricultural use.
2) The land has been sold for lump sum price and not on the basis of sq. ft. or sq. mt. basis.
3) Due to unprecedented boom in the real estate market rate in 94-95 and 95-96, the assessee could bag a substantial price. Even considering the price of land in 1984, the price realized on sale was very much commensurate with the inflationary trends.
4) Mere inclusion of land in Industrial Zone without any infrastructural facility did not and could not convert the agricultural land into non agricultural land.
5) At the time of sale, the surrounding area was totally undeveloped,
6) The 7/12 extracts of the revenue records are prima facie evidence of the fact that the land was used and held for agricultural purposes and agricultural activity were carried thereupon.
7) As per provisions of Section 2(14) of the Act, agricultural land situated in all the rural areas were not brought within the tax net and did not automatically become capital asset.
6. After considering the submissions of the assessee, the CIT (A) decided the issue against the assessee by observing and holding as under:
2.3 The submission have been considered. It is a fact now that the appellant has not shown any income out of such large tract of agricultural land in the I. T. Returns. Despite opportunity given by the Assessing Officer and even at the appellate stage the appellant has not furnished any iota of evidence to show that the appellant had incurred expenses for any agricultural activity on these lands or had any receipt on sale of agricultural produce. Despite this question raised several times the Appellant’s Representative reiterated that the appellant solely relied upon 7/12 extracts. The copy of the 7/12 extracts filed at the appellate stage which was claimed to have been filed before the Assessing Officer is pertaining to F.Y. 1903-94 and not for F. Y. 1994-95. The entry in the land records could not be a conclusive evidence of agricultural activity on those lands. Merely because there is certain entry that by itself would not prove that the appellant was conducting agricultural operations on those lands. The appellant has failed to produce even a small evidence to show that he had been conducting agricultural operations on those lands. It is common knowledge that for having agricultural operations on such large tract of land when the appellant himself is not a farmer has to employ manpower and put in other resources for the agricultural operations. There is no evidence to show that the appellant has incurred any expenses for the agricultural operations. There is no evidence to show that the appellant has conducted any agricultural operations on those lands. There is no evidence to show that the appellant had any receipt out of agricultural produce. The appellant has not disclosed any agricultural income in any of the assessment years and despite opportunity given, the appellant has only relied on 7/12 extracts. All these clearly show that there is nothing with the appellant to prove that these lands were used for agricultural activity. Mere entries in the land records by itself would not prove that the land was agricultural land for the purposes of Section 2(14) of the 1. T. Act, 1961. In this regard reliance has also been placed on the decision in Sarifababi Mohd. Ibrahim and Ors. 204 ITR 631 (SC). further under transfer of land situated in an industrial area and not used for agricultural purposes and also not intended for agricultural purpose in future cannot be termed as agricultural land within the meaning of Section 2(14) of the I. T. Act. 1961. Reliance is also placed on the decision in the case of CIT v. Gopal C. Shanna 209 ITR 946 (Bom). It has been held that the under lying purpose of the Act to exclude agricultural income from income tax was to encourage actual cultivation or defacto agricultural operations. The actual use of the land for agricultural purpose of business thereof at the relevant time was not undoubtly one of the crucial test, when the land was sold or transferred to non-agricultural for non agricultural purpose soon after sale was also important factor. Merely because the land was used for agricultural purpose in the remote past or it continued to assessee to land revenue on the footing of agricultural land was not a decisive factor. The character of the land had also gone under change because of its inclusion into industrial zone. The lands were sold to M/s Alfa Laval (I) Ltd. which was to be used by the purchaser for non agricultural purposes. Therefore, the land in question is not considered as agricultural land within the meaning of Section 2(14) of the I. T. Act, 1961 and the inclusion of income from capital gain on sale of such land is found to be in order and therefore the addition is confirmed.
7. Still aggrieved, the assessee has preferred this appeal before us.
8. The various submissions and contentions that were made before the AO as well as before the CIT (A) were reiterated before us. It was submitted by the Id counsel for the assessee that there are various criteria which may be applied to find out if the land in a particular case is agricultural or not. The criteria, as pointed out by the Id counsel for the assessee, are as under:
1) Classification and assessment of the land to land revenue;
2) Whether agricultural operations are carried on;
3) Intention of the owner;
4) Character of adjoining land, if the surrounding lands are agricultural lands, the presumption would be in favour of holding that the land in question was also agricultural land.
He further submitted that since the expression “agricultural land” is not defined either in the Income-tax Act or any other statute, it, therefore, must be given the meaning which it ordinarily bears in English language and as it is understood in ordinary parlance. He further submitted that determination of the character of a particular piece 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 the entries in the Revenue records are, however, good prima facie evidence though they should not be conclusive on the point. He further submitted that as per the definition of capital asset, the land in question did not fall within the definition of capital asset, inasmuch as it was neither situated in any area which is comprised within the jurisdiction of a municipality or cantonment board etc. which has a population of not less than ten thousand according to the last preceding census of which the relevant figures have been published before the first day of the previous year. In the background of the aforesaid submission, the Id counsel for the assessee drew our attention to the copy of 7/12 extracts of the lands in question to point out that in the 7/12 extracts, there is a specific mention of land revenue in rupees paid by the owner and there is also a specific mention of the details of the crops produced in that land in the relevant year and the area occupied by such crop. He further submitted that these extracts are issued by Talathi’ i.e. authority for agricultural land record and land revenue. He further pointed out that in the 7/12 extracts, it is also mentioned that the land in question was cultivated by the owner himself, i.e. Khudd. He further submitted that surrounding lands were also agricultural lands. He, therefore, submitted that the evidence in the form of latest 7/12 extracts, which were placed on record before the AO as well as CIT (A) clearly establishes and shows that agricultural operations were carried out on the said land. As to the doubt raised by the AO as to why agricultural income was not disclosed in the return of income filed by the assessee in earlier years, it was clarified by the assessee that as agricultural income was very small and inclusion of the same could not make any difference to the tax liability, agricultural income was not disclosed in the return of income filed by the assessee in the earlier years. It was further clarified that the land was actually sold to Shri. Ashok H Bafna, who in turn sold the same to Alfa Laval (I) Ltd. He further clarified that mere inclusion of land in the Town Planning Industrial zone does not make the land as non agricultural land. In this connection, he drew our attention to the circular No. 2D(WT) of 1960 dt 26.2.68 wherein it was clarified that the land which is covered by the Town Planning Scheme may be treated as agricultural land provided the following conditions are satisfied:
1) Land revenue/agricultural cess is paid,
2) Agricultural operations have been carried out from year to year,
3) It has not been put to non agricultural use.
He further submitted that although the said circular applies to wealth-tax for granting exemption Under Section 2(e)(i) of the Wealth-tax Act, the same can be applied with equal force in the relevant circumstances arising under the Income-tax Act. In support of his contentions and submissions, the ld counsel for the assessee has made a reference to the following decisions:
1) CIT v. Raja Benoy Kumar Saha Roy ,
2) CWT v. Officer in-charge (Court of Wards) Paigah ,
3) Smt Saifabibi Mohammed Ibrahim and Ors v. CIT ,
4) Addl CIT v. Tarachand Jain
9. The Id DR, on the other hand, submitted as under.
The assessee has failed to give any evidence to show and establish that the land was used for agricultural purposes, and the assessee had derived any agricultural income therefrom. There was no evidence of agricultural activity carried out on the said land by the assessee and no evidence of any expenses having incurred by the assessee for the purpose of carrying out agricultural activity has been furnished. No agricultural income was ever declared by the assessee in the return of income filed by him. No evidences were also produced for sale of agricultural produce allegedly produced by the assessee on the said agricultural land. Mere entry in the 7/12 extracts, which were pertaining to the financial year 93-94, are by itself not sufficient to prove the assessee’s case that the assessee was conducting or carrying on agricultural operations in the land in question. The fact that the land was sold not for agricultural purpose and was not intended for agricultural purpose by the purchaser in future is relevant to conclude that the land in question was not agricultural land held by the assessee. No proof as to the actual cultivation or de facto agricultural operations were produced by the assessee except 7/12 extracts. The character of the land has also undergone a change because of its inclusion into industrial zone and the land was ultimately sold to such a party who has no intention to use the same for agricultural purposes. The AO as well as the CIT(A) has rightly disallowed the assessee’s claim that capital gain arising from the land in question is not liable to tax.
10. We have heard both the parties. We have gone through the orders of the authorities below. We have deliberated upon the judicial precedents cited at the Bar.
11. The issue that arises for our consideration in the present case is, whether on the facts and in the circumstances of the present case, the land in question could be termed as agricultural land. In this case, the assessee’s claim of treating the land in question to be agricultural for the purpose of capital gain has been rejected by the AO in fresh assessment order made pursuant to the CIT’s order passed Under Section 263 of the Act. The CIT vide his order Under Section 263 of the Act has set aside the original assessment order made by the AO Under Section 143(3) with a direction to look into the following facts and reconsider the exemption granted to the assessee under the capital gains tax:
It is to be noted that the land is sold to one of the Public Limited Company Alfa Laval (I) Ltd. Further, as stated in the agreement of sale, the Regional Town Planning Department Govt. of Maharashtra, Pune, had issued a map dtd. 18/8/92 certifying that the lands are located in industrial zone designated by Govt. of Maharashtra prior to 25/7/91. The A. O. during the assessment proceedings failed to take a note of the above Notification of the Govt. and erroneously concluded that the land to be agricultural without verifying the fact.
12. It is thus clear that the CIT has set aside the AO’s order for the reason that the AO had failed to take a note of the above Notification of the Government. One of the question arising in this case would be thus as to whether by reason of the Notification of the Government, putting lands in industrial zone can be sufficient to convert the agricultural land into non agricultural land. However, the moot question to be decided by us is as to whether the land in question is agricultural land or not.
13. The question as to whether a land is agricultural land or not is essentially a question of fact. The question has to be answered in each case having regard to the facts and circumstances of that case. There may be factors both for and against a particular point of view. The Court has to answer the question on a consideration of all of them a process of evaluation and the inference has to be drawn on a cumulative consideration of all the relevant facts. It may be stated here that not all the factors or tests would be present or absent in any case and that in each case one or ore of the factors may make appearance and that ultimate decision will have to be reached on a balanced consideration of the totality of the circumstances.
14. The expression ‘agricultural land’ is not defined in the Act, and now, whether it is agricultural land or not has got to be determined by using the tests or methods laid down by the Courts from time to time.
15. The Hon’ble Supreme Court in the case of Smt Sarifabibi Mohmed Ibrahim has approved the decision of a Division Bench of the Hon’ble Gujarat High Court in the case of CIT v. Siddharth J Desai (1983) 139 ITR 628 and has laid down 13 tests or factors which are required to be considered and upon consideration of which, the question whether the land is an agricultural land or not has got to be decided or answered. We reproduce the said 13 tests as follows:
1. Whether the land was classified in the revenue records as agricultural and whether it was subject to the payment of land revenue?
2. Whether the land was actually or ordinarily used for agricultural purposes at or about the relevant time?
3. Whether such user of the land was for a long period or whether it was of a temporary character or by any of a stopgap arrangement?
4. Whether the income derived from the agricultural operations carried on in the land bore any rational proportion to the investment made in purchasing the land?
5. Whether, the permission Under Section 65 of the Bombay Land Revenue Code was obtained for the non agricultural use of the land? If so, when and by whom (the vendor or the vendee)? Whether such permission was in respect of the whole or a portion of the land? If the permission was in respect of a portion of the land and if it was obtained in the past, what was the nature of the user of the said portion of the land on the material date?
6. Whether the land, on the relevant date, had ceased to be put to agricultural use? If so, whether it was put to an alternative use? Whether such cesser and/or alternative user was of a permanent or temporary nature?
7. Whether the land, though entered in revenue records, had never been actually used for agriculture, that is, it had never been ploughed or tilled? Whether the owner meant or intended to use it for agricultural purposes?
8. Whether the land was situated in a developed area? Whether its physical characteristics, surrounding situation and use of the lands in he adjoining area were such as would indicate that the land was agricultural?
9. Whether the land itself was developed by plotting and providing roads and other facilities?
10. Whether there were any previous sales of portions of the land for non agricultural use?
11. Whether permission Under Section 63 of the Bombay Tenancy and Agricultural Lands Act, 1948, was obtained because the sale or intended sale was in favour of a non agriculturist? If so, whether the sale or intended sale to such non agriculturists was for non agricultural or agricultural user?
12. Whether the land was sold on yardage or on acreage basis?
13. Whether an agriculturist would purchase the land for agricultural purposes at the price at which the land was sold and whether the owner would have ever sold the land valuing it as a property yielding agricultural produce on the basis of its yield?
16. A reference could be made to the case of CWT v. Officer-in-charge, (Court of Wards) wherein the Constitution Bench of the Hon’ble Supreme Court stated that the term ‘agriculture’ and ‘agricultural purpose’ was not defined in the Indian Income-tax Act and that we must necessarily fall back upon the general sense in which they have been understood in common parlance. The Hon’ble Supreme court has observed that the term ‘agriculture’ is thus understood as comprising within its scope the basic as well as subsequent operations in the process of agriculture and raising on the land all products which have some utility either for someone or for trade and commerce. It will be seen that the term ‘agriculture’ receives a wider interpretation both in regard to its operation as well as the result of the same. Nevertheless there is present all throughout the basic idea that there must be at the bottom of its cultivation of the land in the sense of tilling of the land, sowing of the seeds, planting and similar work done on the land itself and this basic conception is essential sine qua non of any operation performed on the land constituting agricultural operation and if the basic operations are there, the rest of the operations found themselves upon the same, but if the basic operations are wanting, the subsequent operations do not acquire the characteristics of agricultural operations. The Constitution Bench of the Hon’ble Supreme Court in the aforesaid case observed that the entries in revenue records were considered good prima facie evidence.
17. The Hon’ble Gujarat High Court in the case of Motibhai D Patel (Dr) v. CIT referring to the Constitution Bench of the Hon’ble Supreme Court had stated that if agricultural operations are being carried on in the land in question at the time when the land is sold and further if the entries in the revenue records show that the land in question is agricultural land, then, a presumption arises that the land is agricultural in character and unless that presumption is rebutted by evidence led by the revenue, it must be held that the land was agricultural in character at the time when it was sold. The Division Bench of the Hon’ble Gujarat High Court further held that there was nothing on record to show that the presumption raised from the long user of the land for agricultural purpose and also the presumption arising from the entries of the revenue records are rebutted.
18. The Hon’ble jurisdictional Bombay High Court in the case of CWT v. H V Mungale held that the Hon’ble Supreme Court had pointed out that the entries raised only a rebuttable presumption and some evidence would, therefore, have to be led before taxing authorities on the question of intended user of the land under consideration before the presumption could be rebutted. The Court further held that the Supreme Court had clearly pointed out that the burden to rebut the presumption would be on the Revenue. The Hon’ble Bombay High Court held that the ratio of the decision of the Supreme Court was that what is to be determined is the character of the land according to the purpose for which it was meant or set apart and can be used. It is, therefore, obvious that the assessee had abundantly proved that the subject land sold by them was agricultural land not only as classified in the revenue records, but also it was subjected to the payment of land revenue and that it was actually and ordinarily used for agricultural purpose at the relevant time.
19. We may also refer to the case of CIT v. Manilal Somnath , wherein the Division Bench of the Hon’ble Gujarat High Court observed that the potential non agricultural value of the land for which a purchaser maybe prepared to pay a large price would not detract from its character as agricultural land on the relevant date of sale.
20. We may also refer to the case of Gopal C. Sharma v. CIT , in which, the case of Smt. Sarifabibi Mohmed Ibrahim v. CIT (supra) was referred to and relied, amongst other cases. In this case, the Division Bench of the jurisdictional High Court has stated that the profit motive of the assessee selling the land without anything more by itself can never be decisive for determination of the issue as to whether the transaction amounted to an adventure in the nature of trade. In other words, the price paid is not decisive to say whether the land is agricultural or not.
21. We may refer to a judgment of the Hon’ble Madras High Court in the case of CWT v. E Udayakumar where the Hon’ble Madras High Court has referred to the decision of the Hon’ble Punjab & Haryana High Court in the case of CIT v. Smt Savita Rani and has observed and held as under:
8. It is well settled in the case of CIT v. Smt. Savita Rani , wherein it is held that the land being located in a commercial area or the land having been partially utilised for non-agricultural purposes or that the vendees had also purchased if for non-agricultural purposes, were totally irrelevant consideration for the purposes of application of Section 54B.
9. In the above-said case, the assessee an individual sold 15 karnals, 18 marlas of land out of her share in 23 karnals, 17 marlas land during the financial year 1990-91, relevant to the assessment year 1991-92. the sale was effected by three registered sale deeds. While filing her return of income, she claimed exemption from levy of capital gains under Section 54B of the Act on the ground that the land sold by her was agricultural land and the sale proceeds were invested in the purchase of agricultural land within two years. The Assessing Officer rejected the claim of the assessee holding that the land sold by the assessee was not agricultural land and this was upheld by the Commissioner (Appeals). On further appeal, the Tribunal accepted the claim of the assessee holding that the transaction in question duly fulfilled the conditions specified for relief. On further appeal to the High Court, the Punjab and Haryana High Court found that the finding that the land had been used for agricultural purposes was based on cogent and relevant material. The revenue record supported the claim. Even the records of the Income-tax Department showed that the assessee had declared agricultural income from this land in her returns fir the preceding two years. The land being located in commercial area or the land having been partially utilised for non-agricultural purposes or that the vendees had also purchased it for non-agricultural purposes, were totally irrelevant consideration for the purposes of application of Section 54B.
10. It is seen from the aforesaid decision that the agricultural land sold by the assessee with an intent to purchase another land within two years had also been permitted to claim exemption under Section 54B of the Income-tax Act, 1961. In the instant case, even though there was no sale as such, the assessee owned agricultural land within the limits of Tirunelveli corporation and he had not put up any construction thereon, the assessee is entitled to claim exemption from the Wealth-tax Act for the assessment of wealth-tax. That the land in question is adjacent to the hospital is totally irrelevant.
22. Taking note of the aforesaid judicial decisions, we may now revert to the facts and circumstances of the present case. It is not in dispute that the land in question was classified in the revenue records as agricultural, as would be evident from the extract of 7/12 records maintained by the Talathi (authority for agricultural land record and land revenue.) The extracts of 7/12 records in respect of the Gat Numbers 418, 419, 420, 421, 422, 423, 424 & 426 have been perused by us. These extracts are placed at pages 7 to 14 of the paper book. These stand in the name of Shri. Govind Hirdasing Ajwani and Shri. Harish Virumal Milani (the assessee). The land is thus owned jointly by Shri. Govind Hirdasing Ajwani and Shri. Harish Virumal Milani. The extracts of 7/12 indicates that these lands were subjected to land revenue. These, as reflected in extract of 7/12, are tabulated as under:
S.No Gat Area Assessment Boundaries in Gat Nos ---- Nos II Ares Rs. Ps East South West North 1 418 0 93 1.46 390 417 419 374 2 419 0 64 0.98 381 3 420 0 68 1.04 382 4 421 0 49 1.02 418 417 420 374 5 422 0 47 0.98 419 417 421 374 6 423 0 67 1.41 420 417 422 374 7 424 0 55 1.15 421 417 423 374 8 426 1 77 3.10 422 417 424 374 423 417 426 374 424 417/ Strcam/427/433/ 425 road 374
From the perusal of the said entries in the Extract of 7/12, it is thus clear that the aforesaid lands were subjected to land revenue and assessment of the land revenue was accordingly entered into the extract of 7/12. It is also seen that the total cultivatable land has also been shown therein. The area mentioned in the extract of 7/12 has been classified as cultivable land. In the 7/12 extracts, it is also indicated that the land was cultivated by the owner himself, i.e. Khudd. The nature of crop produced is mentioned as Rice and Animal Feed Grass in Gat Nos. 418, 419, 420, 421 and 422, Rice and Jawar in Gat No. 423, Animal Feed Grass in Gat No. 424 and Rice and Animal Feed Grass in Gat No. 426. On perusal of the details of 7/12 extracts, the following facts are found:
1) That the land was undoubtedly classified in the revenue records as agricultural lands,
2) That the land was subjected to payment of land revenue,
3) That the land was used by the owner himself,
4) That the nature of the agricultural produce produced from the said land are Rice, Jawar and Animal Feed Grass.
It is also equally true that the assessee has not given any evidence of incurring any expenditure on agricultural operations carried out on the said land. No direct evidence has been produced by the assessee to show and establish that the agricultural produce in the nature of Rice, Jawar and Animal Feed Grass were produced from the said land. On the other hand, no evidence has also been produced by the Revenue to show and establish that the land was used for some other purposes other than agricultural purposes. It is nobody’s case that the assessee had used the land for non-agricultural purposes before selling the same. No permission for non-agricultural use has also been obtained by the assessee. No evidence to that effect that the assessee had ever used the land for non-agricultural purposes was brought on record, The evidence in the form of 7/12 extracts clearly shows that agricultural operations were carried out on the land in question. The extract also gives the details and kinds of agricultural produce produced or cultivated on the said land.
23. It is further pertinent to note that mere inclusion of land in the industrial zone without any infrastructure development thereupon or without establishing and proving that the land was put into use for non agricultural purposes does not and cannot convert the agricultural land into non agricultural land. In the instant case, at the relevant point of sale of the land in question, the surrounding area was totally undeveloped and except mere future possibility to put the land into use for non agricultural purposes would not change the character of the agricultural land into non agricultural land at the relevant point of time when the land was sold by the assessee. It is also an admitted position that the assessee had not applied for conversion of the land in question into non agricultural purposes and no such permissions were obtained from the concerned authority. In the revenue records, the land is classified as agricultural land and has not been changed from agricultural land to non agricultural land at the time when the land was sold by the assessee. It is also not in dispute that there was no activity undertaken by the assessee of developing the land by plotting and providing roads and other facilities and there was no intention also on the part of the assessee to put the same for non agricultural purposes. No such finding has been given by the department. No material or evidence in support of the fact that the assessee has put the land in use for non agricultural purposes has been brought on record. Merely because the assessee has not given any direct evidence of sale of agricultural produces, which were stated to have been consumed by the assessee for own purposes, is not sufficient to say that the land in question was not agricultural land when it is classified as agricultural land in 7/12 extracts where the nature of the crop and the person who cultivated the land are duly mentioned at the relevant point of time when the lands were sold by the assessee and where nothing is brought on record to show that the land was put in use for non agricultural purposes by the assessee. In view of the decision of the Hon’ble jurisdictional High Court in the case of Gopal. C. Sharma v. CIT (supra), it is also clear that the profit motive of the assessee in selling the land without anything more by itself can never be decisive to say that the assessee used the land for non agricultural purposes. We may also refer to a decision of the Hon’ble Supreme Court in the case of N. Srinivasa Rao v. Special Court where it was observed that the fact that agricultural land in question is included in urban area without more, held not enough to conclude that the user of the same had been altered with passage of time. Thus, the fact that the land in question in the instant case is brought in industrial zone cannot be a determining factor by itself to say that the land was converted into use for non agricultural purposes.
24. In the light of the foregoing discussions and considering the totality of the facts and circumstances of the case, we hold that the land in question sold by the assessee was an agricultural land in nature at the relevant point of time when the land was sold and, as such, any gain arising from sale thereof is exempted from tax under the Income-tax Act. Therefore, the addition of capital gain of Rs. 15,12,525/- included by the AO in the assessment of the assessee stands deleted.
25. In the result, the appeal filed by the assessee is allowed.