GORDHANBHAI KAHANDAS DALWADI Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) IN this case, at the instance of the assessee, the following question has been referred to us for our opinion :

(2.) THE assessment year under consideration is assessment year 1970 -71, the previous year being Samvat Year 2025. The assessee is an individual and by two sale deeds, one in August, 1954, and the other in August, 1955, the assessee purchased the area covered by survey Nos. 1586/1/2/3 of Anand Town admeasuring one acre twenty gunthas. This land was situated within the limits of Anand Municipality. The purchase price paid by the assessee for this land was Rs. 5,928. The assessee was a manufacturer of bricks. The entire land admeasuring one acre twenty gunthas was sold by the assessee to Vijay Corporation for Rs. 1,20,000 under a deed of sale dated January 30, 1969. The ITO sought to include the gains made by the assessee on the sale of the land as capital gains arising out of the transaction of sale. The assessee contended that since the land was agricultural land he was not liable to pay any capital gains in respect of this transaction. The ITO held that the land was non -agricultural in character and in coming to this conclusion he relied on the entries made in the record of rights which showed that except in the year 1964 -65, bajri was grown in this land. According to the ITO the land was surrounded by factories and other buildings. The ITO also found that the assessee had a brick kiln on the land for two years and the land was at a lower level than the surrounding land. The ITO observed that since the land was not put to agricultural use for a number of years, it was evident that the land was meant for non -agricultural purposes. The ITO also took into consideration the fact that the assessee had obtained permission under s. 63 of the Bombay Tenancy and Agricultural Lands Act for putting the land to non -agricultural use. The matter was carried in appeal by the assessee and before the AAC the assessee filed in the shape of additional evidence three affidavits of neighbours and one affidavit of Bai Chanchal, who, it was alleged, was staying on this land and was carrying on agricultural operations on this land. Apparently, the AAC took these affidavits into consideration but ultimately he confirmed the order of the ITO.

(3.) FOR the purposes of this judgment, in order to find out what are the facts found by the Tribunal and by the authorities below, we will not consider what has been stated in the three affidavits and in Bai Chanchal's affidavit filed at the stage when the proceedings were before the AAC. However, so far as the Tribunal was concerned, ultimately it has been found that for two years, namely, revenue years 1956 -57 and 1957 -58, temporary permission for making bricks was obtained from the revenue authorities and to that extent non -agricultural operations in the shape of brick -making was being carried on in this land, but as shown by the records for the subsequent years, that is, for revenue years 1958 -59 onwards, the land was lying fallow and in 1964 -65, it was used for raising bajri crop. In the land revenue record this land was shown as agricultural land right down to the date of sale. Barring those two years of 1956 -57 and 1957 -58 when on obtaining temporary permission for non -agricultural use bricks were manufactured in this land and a brick kiln was installed in this land, there is nothing to show that the land had ceased to be agricultural land. In para. 7 of its order the Tribunal found that the land was within the municipal limits of Anand. It was near Amul Dairy, Ganesh Dugghalaya and Charotar Tobacco Company. Charotar Iron Factory, Krishna Iron Factory and other industrial concerns were also in the vicinity of the land. Thus, according to the Tribunal, the land was in a fast developing locality. Permission had been obtained from the revenue authorities under s. 63 of the Bombay Tenancy and Agricultural Lands Act and a copy of that permission was filed before the Tribunal. The Tribunal held that the permission obtained under s. 63 of the Bombay Tenancy and Agricultural Lands Act proved that the intention of the assessee was to put the land to non -agricultural use. Permission was obtained to sell the land for the purpose of constructing buildings and it was, therefore, obvious that the land was sold for non -agricultural use.