1979 (1) TMI 72 - HC - Income Tax

Summary

Issues Involved:
1. Whether the land under reference was agricultural land within the meaning of the Income-tax Act, 1961.
2. The implications of the land's use and classification at the time of sale.
3. The relevance of permissions obtained under the Bombay Tenancy and Agricultural Lands Act, 1948.
4. The significance of entries in revenue records and actual use of the land.

Issue-wise Detailed Analysis:

1. Whether the land under reference was agricultural land within the meaning of the Income-tax Act, 1961:
The primary question was whether the land sold by the assessee was agricultural land. The Tribunal concluded that the land was not agricultural at the time of sale. However, the High Court noted that the land was used for agricultural purposes until the date of sale, as evidenced by entries in the revenue records (Pani Patraks) and the continued cultivation by the assessee. The court emphasized the presumption arising from the actual use of the land and revenue records, which were not rebutted by any other factors.

2. The implications of the land's use and classification at the time of sale:
The High Court referred to several precedents, including decisions of the Gujarat High Court and the Supreme Court, to determine the character of the land. The court reiterated that the actual use of the land is a significant factor. It was noted that the land was continuously used for agricultural purposes until the sale, and the remaining land continued to be used for agriculture even after the sale. The court held that the potential non-agricultural value of the land did not affect its classification as agricultural land at the time of sale.

3. The relevance of permissions obtained under the Bombay Tenancy and Agricultural Lands Act, 1948:
The assessee had obtained permission under Section 63 of the Bombay Tenancy and Agricultural Lands Act to sell the land to a non-agriculturist. The Tribunal had considered this as a factor indicating the land had ceased to be agricultural. However, the High Court clarified that the permission was for future non-agricultural use by the purchaser and did not change the land's agricultural character at the time of sale. The court pointed out that if the land was not agricultural, there would have been no need to obtain such permission.

4. The significance of entries in revenue records and actual use of the land:
The court placed substantial weight on the entries in the revenue records, which showed the land was used for agricultural purposes. These entries provided prima facie evidence of the land's agricultural character. The court noted that the Tribunal's findings, which contradicted these records, were perverse and not supported by the evidence. The High Court emphasized that the presumption from actual use and revenue records was not rebutted by any other material.

Conclusion:
The High Court concluded that the Tribunal erred in its judgment by not recognizing the land as agricultural at the time of sale. The court answered the referred question in the negative, favoring the assessee and against the revenue. The Commissioner was directed to pay the costs of the reference to the assessee.