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Issues Involved:
1. Whether the land in question was agricultural land within the meaning of Section 2(e)(i) of the Wealth Tax Act, 1957, at the date of sale. Detailed Analysis: Issue 1: Determination of Agricultural Land Status The primary question was whether the land sold by the assessee was agricultural land as defined under Section 2(e)(i) of the Wealth Tax Act, 1957, at the time of sale. The relevant assessment year was 1969-70, and the assessee, a Hindu Undivided Family (HUF), had purchased the land in 1930 and 1933. Initially used for agricultural purposes, the land was later utilized for brick-making until 1952. The assessee applied for discontinuance of non-agricultural use in 1952, and from then on, the land was assessed as agricultural land for land revenue purposes. The land lay fallow for some years, grew grass, and from 1959-60 onwards, was used partly for growing juvar. By 1963-64, the land was exclusively used for cultivating juvar. The land was sold in 1968, and the assessee realized gross capital gains of Rs. 8,13,353. The Income Tax Officer (ITO) held that the land was not agricultural and assessed the capital gains. The Appellate Assistant Commissioner (AAC) reversed this decision, but the Tribunal reinstated the ITO's decision, leading to the present reference. Legal Precedents and Tribunal's Findings: The Tribunal based its decision on the fact that the assessee had obtained permission under Section 63 of the Bombay Tenancy and Agricultural Lands Act to sell the land for non-agricultural purposes. The Tribunal held that this permission and the surrounding circumstances indicated that the land was not agricultural at the time of sale. The Tribunal relied on its earlier decisions, asserting that the intention to sell the land for non-agricultural purposes changed its character. High Court's Analysis: The High Court referred to several precedents, including CIT v. Manilal Somnath and CWT v. Officer-in-Charge (Court of Wards), Paigah, which emphasized the importance of actual use of the land in determining its character. The Court noted that land used for agricultural purposes at the relevant date is prima facie agricultural land unless other factors dislodge this presumption. The Court examined the revenue records and found that the land had been used for agricultural purposes since 1952, with juvar being grown from 1963-64 onwards. The Court rejected the Tribunal's reliance on the permission obtained under Section 63, stating that the intention to use the land for non-agricultural purposes in the future does not change its character at the time of sale. Conclusion: The High Court concluded that the land was agricultural at the date of sale, as evidenced by its actual use and entries in the revenue records. The Court held that the Tribunal erred in law by deciding in favor of the revenue. The Court answered the question in the negative, in favor of the assessee, and against the revenue, stating that the amount of Rs. 8,13,363 could not be assessed as capital gains. The Commissioner was directed to pay the costs of the reference to the assessee. Final Note: The High Court emphasized that it did not find any new facts but drew legal inferences from the facts on record. The decision reaffirmed the principle that the actual use of the land at the time of sale is crucial in determining its character as agricultural land.
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