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Issues Involved:
1. Whether the lands can be treated as agricultural lands. 2. Whether the assessee can be permitted to urge the contention that the lands not being agricultural lands cannot be brought within the scope of the compounding provisions at all. Detailed Analysis: Issue 1: Whether the lands can be treated as agricultural lands. The court examined the classification of the lands in question. The lands contained small teak plants, which were not cultivated by the assessee but were of spontaneous growth. The Assistant Commissioner's report from 1960 indicated that there had been no agricultural operations for about 50 or 60 years, and it was difficult to prove any agricultural activity even before that period. The Commissioner of Agricultural Income Tax (Agrl. ITO) had classified these lands as "dry" in revenue accounts, suggesting they were meant to be used as agricultural lands. However, the court found no evidence to support the Commissioner's conclusion that the trees were once planted or that any agricultural operations had been conducted. The court referred to the Supreme Court's interpretation in CWT v. Officer-in-Charge (Court of Wards) Paigah [1976] 105 ITR 133, which stated that classification in revenue records is not conclusive. The lands had no record of dry crops being raised, and the mere classification as dry lands in revenue registers had no evidentiary value. The court emphasized that for land to be considered agricultural, it must involve basic agricultural operations such as tilling, sowing, and planting, as defined in CIT v. Raja Benoy Kumar Sahas Roy [1957] 32 ITR 466. In the absence of such operations, the income derived from the land could not be treated as agricultural income. Issue 2: Whether the assessee can be permitted to urge the contention that the lands not being agricultural lands cannot be brought within the scope of the compounding provisions at all. The assessee had initially applied for compounding the agricultural income-tax under Section 65 of the Tamil Nadu Agricultural Income Tax Act, 1955, which was accepted. However, the court noted that Section 65 is a substitute for the computation of tax payable under the Act, implying that there must be a liability to agricultural income-tax in the first place. Since there were no agricultural operations on the lands, there was no agricultural income, and consequently, no liability to agricultural income-tax that could be compounded under the Act. The court examined the definition of "land" under Section 2(nnn) of the Act, which includes agricultural land used for agricultural purposes and assessed to land revenue. The lands in question did not satisfy the condition of being used for agricultural purposes, despite being assessed as dry lands. The court clarified that even the second part of the definition, which includes horticultural land, forest land, garden land, and plantations, must be understood as lands yielding agricultural income. The court concluded that there was no liability to tax which could be compounded under Section 65. The previous writ petitions had not addressed the question of liability under the law, which was now being raised. The court decided that in the absence of any agricultural income derived from the lands, there was no scope for compounding any tax liability. Conclusion: The court allowed the writ petitions, setting aside the subsequent revision of the compounding by the Agrl. ITO and the modification by the Commissioner. The original compounding was not to be disturbed. There was no order as to costs.
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