1976 (8) TMI 2 - SC - Wealth-tax

Whether mere possibility of user for agricultural purposes would make land agricultural one - Hold that the Tribunal should determine afresh, from a correct angle, the question of fact whether any of the lands under consideration were agricultural or not for the purposes of the Act before it. Accordingly, we allow these appeals, set aside the judgment and order of the Full Bench and send back the cases to the Tribunal for appropriate orders

Issues Involved:
1. Definition and scope of "agricultural land" under section 2(e)(i) of the Wealth-tax Act.
2. Criteria for determining whether land is "agricultural land" for wealth-tax exemption.
3. The role of actual user, potential user, and revenue records in classifying land as "agricultural."

Detailed Analysis:

1. Definition and Scope of "Agricultural Land" under Section 2(e)(i) of the Wealth-tax Act:
The primary issue was whether certain lands situated in Begumpet, Lalguda, Jaiguda, Subsimandi, Yerraguda, Zamboorkhana, and Vicarabad qualify as "agricultural lands" under section 2(e)(i) of the Wealth-tax Act. According to section 2(e), "assets" include property of every description, movable or immovable, but exclude "agricultural land and growing crops, grass or standing trees on such land."

The term "agricultural land" is not defined in the Act, which necessitated reliance on common parlance and judicial interpretations. The court referenced the case of Commissioner of Income-tax v. Raja Benoy Kumar Sahas Roy, which defined "agriculture" as involving human skill and labor upon land, implying cultivation. The court concluded that "agricultural land" must have a connection with agricultural use or purpose, and this connection is crucial for determining the land's status under the Wealth-tax Act.

2. Criteria for Determining Whether Land is "Agricultural Land" for Wealth-tax Exemption:
The court examined various criteria to determine whether land qualifies as "agricultural land." The Full Bench of the Andhra Pradesh High Court had laid down several conclusions, including that land assessed to land revenue as agricultural land is a strong piece of evidence of its character. The High Court also held that the actual user of the land for agriculture is one of the indicia for determining its character.

However, the Supreme Court disagreed with the High Court's interpretation that the widest possible meaning should be given to "agricultural land." The Supreme Court emphasized that the term must be interpreted in a way that aligns with the statute's purpose, avoiding absurd results. The court stated that the exemption is connected with the actual user of the land for agricultural purposes and not merely its potential for such use.

3. The Role of Actual User, Potential User, and Revenue Records in Classifying Land as "Agricultural":
The Supreme Court highlighted that the actual user of the land, its intended user, and entries in revenue records are crucial factors in determining whether the land is "agricultural." The High Court had relied heavily on the classification of the land in revenue records as "agricultural land" under section 50 of the Andhra Pradesh Land Revenue Act, which the Supreme Court acknowledged as "strong prima facie evidence." However, this presumption is rebuttable.

The Supreme Court noted that the taxing authorities had found that the land was never used or intended to be used for agricultural purposes. The court stressed the need for credible evidence to establish the intended user of the land for agricultural purposes. The Full Bench's reliance on potential agricultural use and the classification in revenue records without considering the actual and intended user was deemed insufficient.

Conclusion:
The Supreme Court set aside the judgment of the Full Bench of the Andhra Pradesh High Court and remanded the case to the Tribunal. The Tribunal was instructed to determine afresh whether the lands in question were "agricultural" for the purposes of the Wealth-tax Act, considering the actual user, intended user, and relevant evidence. The court emphasized that the exemption from wealth-tax requires a clear connection with agricultural use, and mere potential for such use is not sufficient.

Appeal allowed. Case remanded to the Tribunal.

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