MANIBHAI MOTIBHAI PATEL Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) WE are concerned in this case with asst. year 1970 71. The assessee is an individual. The relevant previous year is calendar year 1969. The assessee had income from share of profits from the partnership firm in which he was a partner, remuneration which he received from different sources, dividend income, income by way of interest and property income. The assessee was the joint owner along with three other individuals, namely, Vimalbhai Nagindas Shah, Gautambhai Vimalbhai Shah and Vikrambhai Vimalbhai Shah. The assessee was the owner to the extent of fifteen per cent. in the lands along with the other three co owners. The respective shares of the co owners were Vimalbhai Nagindas Shah, 25 per cent. Gautambhai Vimalbhai Shah, 30 per cent., Vikrambhai Vimalbhai Shah, 30 per cent. and the assessee 15 per cent. These four owners were the joint owners of five survey numbers, namely, Survey Nos. 98/1, 98/2, 99, 107/1/2 and 107/2. All these survey numbers were of Shekhpur Khanpur village, also called Navrangpura village. These lands were sold during the months of May and July, 1969, and the assessee received his share of the consideration after the sale of these lands. The lands were sold to different co operative societies. At the time when the assessee filed his return for asst. year 1970 71, he made a note along with the return of income ; "Sale of agricultural land during the year exempt u/s. 2(14) (iii)". The ITO examined the claim of the assessee in the light of the actual fact and came to the conclusion that the lands in question were not agricultural lands. He, accordingly, called upon the assessee to produce any evidence which could go to show that the lands were really agricultural lands. The assessee wrote the letter dated March 16, 1973, explaining the position and he claimed that the lands were agricultural lands and the sale of such lands could not result in capital gains under the IT Act. The ITO came to the conclusion that the surplus on the sale of lands was not agricultural income and the lands were not agricultural lands and, therefore, the assessee was liable to pay capital gains in respect of the profit made by him on his fifteen per cent. share from the sale of the five survey numbers. The assessee took the matter in appeal and the AAC held that the lands were agricultural lands and he, therefore, allowed the appeal and upheld the contention of the assessee regarding the profit that he had made from the sale of these lands. The Revenue took the matter in appeal to the Tribunal and the Tribunal found that these five survey numbers were sold for the aggregate price of Rs. 3,48,000 to different co operative societies and the societies purchased these different survey numbers for putting up houses for residential purposes. The Tribunal observed that the assessee had shown his share of the lands in his wealth tax returns for some years but the Tribunal treated this as not a conclusive factor but merely as a piece of evidence to be considered in order to find out the intention of the assessee. Up to 1963 64, the land was shown for three years as the wealth of the assessee for wealth tax purposes and as such it was admitted to be non agricultural land. Thereafter, the assessee filed a revised return claiming that the land was agricultural land. It was found by the Tribunal that the agreement to sell these lands was executed on September 26, 1968, and the lands were sold to co operative societies for construction of residential houses. The permission of the Collector under S. 63 of the Bombay Tenancy and Agrl. Lands Act was obtained on February 17, 1969, and the purpose for which the permission was obtained was for non agricultural purpose by the intending purchasers and according to the Tribunal, when the lands came to be sold in May and July, 1969, they were non agricultural lands. The Tribunal observed that the lands were covered by a town planning scheme, being Scheme No. 19, which had come into force on April 15, 1966, and the lands were within the municipal limits of Ahmedabad Municipal Corporation and residential localities were nearby the lands in question. Before the Tribunal reliance was placed on the affidavit made by one Laxmanji Ranaji Thakore who was the lessee of the lands in question and the affidavit was filed for the purpose of showing that Laxmanji, in his capacity as lessee, was carrying on agricultural operations on these lands. The assessee also relied upon the fact that in respect of these very lands a question had arisen in the City Civil Court, Ahmedabad, in a litigation concerning these lands as to whether the lands were agricultural lands, for the purposes of the Court Fees Act and the Court fees inspector had made a report on March 30, 1970, that the land was put to agricultural use on the date of the suit which was filed in 1967, and juvar crop was growing on the land in 1967 and the Court fees should be paid on the footing that the land was agricultural land. The Tribunal considered several decisions on the point and came to the conclusion that the lands were not agricultural lands. The Tribunal also relied on various decisions of the Tribunal cited in its order and ultimately it reversed the order of the AAC and restored the order of the ITO but remanded the matter to the AAC for determining the actual quantum of capital gains which had not been decided by the AAC. Thereafter, at the instance of the assessee, the following question has been referred to us for our opinion :

(2.) ONE error seems to have crept into the order of the Tribunal in para. 3 because there the Tribunal has observed that the affidavit of Laxmanji Ranaji Thakore was filed before the AAC whereas, in fact, as appears from the letter of the assessee written to the ITO on March 26, 1973, the affidavit was enclosed with that letter and the affidavit was filed before the ITO.

(3.) THERE are several decisions dealing with the question whether a particular plot of land can be said to be agricultural land or not. The earliest decision in point of time is the decision of the Supreme Court in Mst. Subhadra vs. Narsaji Chenaji Marwadi, AIR 1966 SC 806. Though this decision was reported in the AIR series in 1966, in fact it was rendered by the Supreme Court on August 9, 1961. The question which arose before the Supreme Court in that case was under the provisions of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947, and the question was whether the land in question came within the meaning of the word "premises" as defined under the provisions of the Bombay Rent Act. The Court had to be satisfied before any relief could be granted under the provisions of that Act that the plot of land which was leased was "premises" within the meaning of S. 5(8) and it was let out for residence, education, business, trade or storage. In para. 2 of the judgment, Shah J., as he then was, speaking for the Supreme Court, observed :