2006 (4) TMI 71 - HC - Wealth-tax

Wealth tax Assessee diverted the agricultural land in non-agricultural after getting permission - once an application is filed for diverting the land and the nature of land is changed the land cannot be termed as agricultural land nature of land has changed and it ceases to be agricultural land and once the land ceases to be an agricultural land, party cannot claim exemption treating the land to be an agricultural asset assessee s appeal dismissed

Summary

Issues:
1. Determination of land classification as agricultural or non-agricultural based on diversion for different purposes.
2. Impact of permission to divert land on its classification.
3. Interpretation of legal provisions regarding agricultural lands and assets.
4. Requirement of permission for diversion of land under relevant laws.
5. Consequences of land ceasing to be agricultural on tax exemptions.

Analysis:
The main issue before the court was the classification of land as agricultural or non-agricultural based on its diversion for different purposes. The Tribunal had held that the land in question was non-agricultural due to the permission obtained by the assessee to divert the land for agricultural operations carried out as a stop gap activity pending sale. The counsel for the aggrieved party relied on a Gujarat High Court case to support this argument.

The court observed that once an application is filed to divert land and its nature is changed, the land cannot be considered agricultural. In this case, the petitioner had purchased agricultural land with the intention to develop a residential colony, for which permission was obtained from the authorities. The layout plan for the residential colony was approved, and the land revenue was paid after obtaining permission to divert the land for non-agricultural purposes.

Regarding the interpretation of legal provisions, the court referred to a case from Gujarat which highlighted that land ceases to be agricultural once it is diverted for non-agricultural purposes with the necessary permissions. The court emphasized the importance of obtaining permission for diverting land under relevant laws, such as the M.P. Revenue Code, which mandates seeking permission from the sub-divisional officer for any purpose other than agriculture. In this case, the permission was granted, leading to a change in the nature of the land from agricultural to non-agricultural.

Consequently, the court held that once the land ceases to be agricultural, the party cannot claim exemptions under the Wealth-tax Act for agricultural assets. The reference was answered in favor of the Revenue, affirming the non-agricultural classification of the land based on the diversion for residential development and the permission obtained for the same.