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TMI Blog1987 (1) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... an adventure in the nature of trade in the assessment of the assessee for the year 1971-72 ? (4) Whether, on the facts and in the circumstances of the case, the six acres of Ajni lands sold in the assessment years 1969-70 and 1971-72 could be considered to be agricultural lands for the purposes of section 2(14) ? (5) Whether, on the facts and in the circumstances of the case, the reopening of the assessment of the assessee for the assessment year 1969-70 under section 147(b) was legal ?" The first four questions are raised at the instance of the Revenue. The fifth question is raised at the instance of the assessee. Mr. Jetly, learned counsel for the Revenue, submitted that the fifth question should not be answered in view of the judgment of the Supreme Court in CIT v. Damodaran [1980] 121 ITR 572. Mr. Manohar, learned counsel for the assessee, submitted that the question would not be hit by the judgment in the aforementioned case, but, he stated, the assessee was not pressing for an answer to it. Accordingly, the fifth question shall not be answered. The four surviving questions relate to land in the village of Binaki and land in the village of Ajni. These lands will her ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee appealed therefrom and by his order dated June 30, 1973, the Sub-Divisional Officer, Nagpur, found that the Ajni land was continuously under agricultural operations till the year 1969 and the nature of the land was not changed till then. Under section 115 of the Maharashtra Land Revenue Code, 1966, non-agricultural assessment was leviable with effect from the date on which land was actually used for non-agricultural purposes. The Sub-Divisional Officer, therefore, ordered that non-agricultural assessment upon the Ajni land should be recovered only with effect from the year 1970-71, i.e., " from the date of actual use of the land for non-agricultural purposes ". In his return for the assessment year 1966-67, the assessee declared the sum of Rs. 1,40,703 as surplus from the sale of the Binaki land, but contended that the income was not chargeable to tax. The Income-tax Officer held while making the assessment that the assessee had purchased the Binaki land with the object of selling it and the profit from the sale was from a transaction which was an adventure in the nature of trade. Accordingly, he included the sum of Rs. 1,40,708 in the assessee's total income. The asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same for non-agricultural purposes but the assessee had continued to cultivate the lands and used them for agricultural purposes till the dates of their respective sales; that the Binaki land had been sold as a: measure of forestalling the acquisition thereof and that the assessee had purchased the Binaki and the Ajni lands, as investments. Accordingly, the Tribunal held that the profits from the sales of the Binaki land and the Ajni land were not taxable under the heading " Business " as income from an adventure in the nature of trade in the assessee's assessments for the assessment years 1966-67, 1969-70 and 1971-72. The Tribunal also held that the Ajni land was agricultural land within the meaning of section 2(14) and the surplus from the sale thereof was not taxable as capital gain in the assessments of the assessee for the assessment years 1969-70 and 1971-72. The questions posed to us arise from this common order of the Tribunal. Mr. Jetly urged, in regard to the first, second and third questions, that the profits earned by the assessee upon the sales of the Binaki and Ajai lands were taxable under the heading " Business " as arising from an adventure in the nature of tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i land to non-agricultural purposes. But that one factor by itself cannot establish that the purchase of the Binaki and the Ajni lands was with a view to trading in them especially when the assessee was, as found by the Tribunal, an agriculturist who owned other agricultural lands and the sale of the Binaki land was to forestall its acquisition. In the result, we must answer the first, second and third questions in the negative and in favour of the assessee. This brings us to the question as to whether the Ajni land was agricultural land when the assessee sold it. Mr. Manohar, learned counsel for the assessee, fairly summed up the facts found by the Tribunal which suggested that the Ajni land was agricultural land on the date of its sale but the facts found suggested the converse. The facts found are: (1) at the time of its purchase by the assessee, the Ajni land was agricultural land; (2) it had been under cultivation by the assessee till the dates of its sale, (3) it continued to be assessed to land revenue as agricultural land until sold, (4) the intention of the assessee, when he purchased it, was to acquire agricultural land for agricultural purposes, (5) the 'assessee's use ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on the use or intended user before the taxing authorities as the evidence provided by the entries in the revenue records had been considered to be enough. The Supreme Court observed that it had to be remembered that such entries could raise only a rebuttable presumption. It could, therefore, be contended that some evidence should have been led before the taxing authorities of the purpose or intended user of the, land under consideration before the presumption could be rebutted. What was really required to be shown was the connection with an agricultural purpose and user and not the mere possibility of user of land by some possible future owner or possessor for an agricultural purpose. It was not the mere potentiality which would affect its valuation as part of the assets, but its actual condition and " intended user " which had to be seen. " One of the objects ", the Supreme Court said (at p. 144): " of the exemption seemed to be to encourage cultivation or actual utilisation of land for agricultural purposes. If there is neither anything in its condition, nor anything in evidence to indicate the intention of its owners or possessors, so as to connect it with an agricultural pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f had considered this land to be non-agricultural land and in fact treated it as building site land. It is not in dispute that the land is situated in the midst of developed lands and there are buildings round about. The land was situated within the Corporation limits of Ahmedabad within the Draft Town Planning Scheme No. 29 framed on March 3, 1967, which was sanctioned on November 21, 1968, and was eminently suitable for construction of houses. Such land cannot be characterised as agricultural land merely because it was entered in the revenue records as agricultural land and the assessee was paving land revenue assessment on the basis that it was agricultural land. As we have discussed hereinbefore, it suited the assessee not to apply for permission to convert it into non-agricultural land because the assessee would be required to pay wealth-tax on it and also to pay capital gains tax in case the land was sold. The mere fact that it stood in the records as agricultural land is of no importance." In CIT v. Universal Cine Traders Pvt. Ltd. [1986] 161 ITR 696, this court took into account the intention of the owner in regard to non-agricultural use of the land. As against this, M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as going to happen in future that the Tribunal had held that the land was non-agricultural in character. It had to be borne in mind that if the land was actually used for agricultural purposes, it could, at least prima facie, be said to, be land which was either actually used or ordinarily used or meant to be used for agricultural purposes. Mr. Manohar drew our attention to the judgment of the Gujarat High Court in CIT v. Lilavati Thakorelal Patel [1985] 152 ITR 565 (Guj), wherein the judgment in Arundhati Balkrishna's case [1982] 138 ITR 245 (Guj) was explained. In Arundhati Balkrishna's case, it was said, the court had found, having regard to the fact that the assessee, who was a lady and whose main source of income was dividends on shares and interest on securities, could not have intended to carry on agricultural operations on the land since there was no evidence to show that she possessed any agricultural implements, etc., and, therefore, the land was not meant for being used for agricultural purpose. These speaking circumstances had carried weight and, on an overall consideration, particularly of the factors referred to above, it had been concluded that the land was not agr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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