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TMI Blog1979 (2) TMI 45X X X X Extracts X X X X X X X X Extracts X X X X ..... was right in holding that the land sold to Kalpana Co-operative Housing Society was non-agricultural in character when it was sold ? " This question has been referred to us at the instance of the assessee. The second question is : " Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that there was a valid partition of the land in question and, therefore, the capital gains arising out of the sale transaction between Devidas Sunderlal and the Kalpana Co-op. Housing Society were not taxable in the hands of the assessee ? " This question No. 2 has been referred to us for our opinion at the instance of the revenue. We are concerned in this case with assessment year 1969-70, the relevant previous year being Samvat 2024. Samvat 2024 ended on October 21, 1968. The assessee is a HUF in the name of Vajulal Chunilal-HUF. The assessee-family owned 23 acres and 17 gunthas of land at Adajan village in Chorashi Taluka of Surat District. These lands were purchased by Vajulal Chunilal on June 29, 1929. At that time, the lands were in four survey numbers, namely, survey Nos. 464, 465, 470 and 471 on Adajan village. The total area aggregated to 25.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Surat for permission under s.63 of the Bombay Tenancy and Agricultural Lands Act to sell the land to a non-agriculturist. This permission was granted by the Assistant Collector of Olpad Division, Surat, by his letter dated February 12/14, 1968. The land was not converted to non-agricultural use as contemplated by s.65 of the Bombay Land Revenue Code prior to the date of sale, but on an application made by the chairman of the Kalpana Housing Society, permission for non-agricultural user was granted by the District Development Officer, Surat, on March 10, 1969, and the permission granted clearly shows that this permission was being granted on the application of Shri A. G. Patel, Chairman and others of Surat, Kalpana Co-op. Housing Society Ltd. for obtaining permission to make non-agricultural use of the land forming part of survey Nos. 464, 465 and 471. At the time of the assessment proceedings, it was ascertained that an amount of Rs. 3,71,105 would be the capital gains out of the sale price in respect of this land and this amount of capital gains was arrived at after making necessary adjustments regarding the cost of acquisition and other permissible adjustments. The assessee- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stion that has been referred to us is : " Whether, on the facts and in the circumstances of the case, the assessee was entitled to the recognition of partial partition of the land in question effected by a deed dated May 8, 1968, under section 171 of the Income. tax Act, 1961 ? " The assessee in I.T. Reference No. 5 of 1976 is the HUF of Vajulal Chunilal and as the question itself indicates, the main question arising in this reference is again relating to the validity of the partition or the question of giving recognition to the partition of May 8, which is question No. 1 referred to us in I.T. References Nos. 70 and 71 of 1976. The assessment years in all the cases is the same, namely, 1969-70. It is thus clear that once we answer the questions referred to us in I.T. References Nos. 70 and 71 of 1976, the questions referred to us in the other two references which are being taken up in this group will be answered automatically. As regards question No. 2 arising in I.T. References Nos. 70 and 71 of 1976, referred to us at the instance of the revenue, the main question is whether the Tribunal was right in holding that there was a valid partition of the land in question. The Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax than what Devidas would be liable to pay but that fact only would not be sufficient to question the genuineness of the partition. " After considering the decision of the Supreme Court in CIT v. A. Raman Co. [1968] 67 ITR 11, the Tribunal held that it was a partition within the meaning of s. 171 of the Act. The Tribunal considered the words of the Expln. to s. 171 and held that in view of the fact that the land which was allotted was not capable of physical division, the Expln. was not attracted to the facts of this case. It was held that it would not be necessary to physically divide the property if it is allotted to only one coparcener. In such a case, the question of dividing the property does not arise at all, and according to the Tribunal, this was precisely what was done in this case and hence the question of dividing the property by metes and bounds as contemplated by s. 171 did not arise in this case. In our opinion, the reasoning of the Tribunal is correct in law. There could always be a partial partition as regards person or as regards property or as regards both. In this particular case, there was no complete severance of the HUF. Devidas himself did not leave th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are no special features, for example, building plot being actually used as a stop-gap arrangement for agricultural purposes or a building site being used for agricultural purposes, actual user or ordinary use or intention to use the land for agricultural purposes or land is meant to be used for agricultural purposes, it would be 'agricultural land'. Secondly, potential use of the lands as agricultural land is totally immaterial. Thirdly, entries in the record of rights are good prima facie evidence regarding agricultural land and if the presumption raised either from actual user of the land or from agricultural use of the land is to be rebutted, there must be material on the record to rebut that presumption. The approach of the fact-finding authorities, namely, the income-tax authorities and the Tribunal should be to consider the question from the point of view of presumption arising from entries in the record of rights or actual user of the land and then consider whether that presumption is dislodged by the presence of other factors in the case. " This decision in Smt. Chandravati Atmaram's case [1978] 114 ITR 302 (Guj) has been subsequently followed in the case of Chhotalal Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, since that date, it was being used as agricultural land. The entries in the record of rights consistently go to show that, over several years, crops are being grown, plantations of Khajura trees, Chiku trees and other crops were being reared and nurtured on the land in question, and it cannot be said that from 1929 to 1966 it was a temporary arrangement! in Himatlal Govindji v. CWT [1977] 106 ITR 658 (Guj) a plot of land which was already converted to non-agricultural use for the purpose of the Land Revenue Code was being cultivated pending the finalisation of the transaction of sale. In the instant case, the land was put to agricultural use right till the date of sale and was being used for agricultural purposes. Crops were being grown, grass, vegetables and other materials were being grown on the four survey numbers as shown by the panipatraks. The circumstance that the land was surrounded by residential locality would not render the land non-agricultural, if, in fact, continuously during the years from 1929 it was being used for agricultural purposes. The question of the land under consideration being wanted by a co-operative society or being surrounded by housing development ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her observed : " It is true that permission to sell the land to Tarakkunj Co-operative Housing Society Ltd. was granted on condition that the land would be used for residential purposes and the application for permission under section 63 of the Bombay Tenancy and Agricultural Lands Act was applied for on the footing that, after the sale, the land would be used for residential purposes. But that only goes to show that, after the date of the sale, this land was to cease to be agricultural land. The permission granted by the City Deputy Collector under section 63 of the Bombay Tenancy and Agricultural Lands Act clearly goes to show that in case the land did not cease to be agricultural land, the permission would be treated as cancelled and, therefore, the sale in favour of Tarakkunj Co-operative Housing Society Ltd. would be infructuous and the land would revert back to the assessee. In such an eventuality, the land would still continue to be agricultural land because the permission to sell to a non-agriculturist would be treated as cancelled. That eventuality has not happened and as pointed out it was some time in February, 1969, that the permission for non-agricultural use was gra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the effect of the permission granted under s. 63 of the Bombay Tenancy and Agricultural Lands Act. Under these circumstances, since the presumption arising from the actual user of the land, namely, for agricultural purposes, and the presumption arising from the entries in the revenue records, have not been rebutted by any other factors or special circumstances of the case, it must be held that this particular land which Devidas sold after getting it on partial partition to Kalpana Co-operative Housing Society was agricultural land on the date of the sale, applying the principles of law which we have mentioned hereinabove. Under these circumstances, the Tribunal was in error in holding that the land was not agricultural land on the date of sale and that the land had lost its agricultural character on the date of the sale, especially because of the permission granted under s. 63 of the Bombay Tenancy and Agricultural Lands Act. Question No. 1 referred to us in References Nos. 70 and 71 of 1976 which is at the instance of the assessee, must therefore be answered in the negative, that is, in favour of the assessee and against the revenue. For the same reasons, the question referred ..... X X X X Extracts X X X X X X X X Extracts X X X X
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