COMMISSIONER OF INCOME TAX Vs. SARIFABIBI MOHMED IBRAHIM

JUDGEMENT

(1.) SHAKESPEARE was in the realm of poetry and was speaking of roses when he said : 'What is in a name ?' In the field of taxation a lot turns on whether you call a parcel of land as 'agricultural land' or not. If it answers that description it is exempt from capital gains tax. Otherwise it is exigible to such tax. That is why the dispute. The assessee says, the land in question situated at a distance of one kilometre from Surat Railway Station is agricultural land mainly because it is entered as such in revenue records and land revenue is paid on that basis. Revenue contends otherwise. In our opinion, a very vital and decisive test having been overlooked by the Income -tax Tribunal and the Tribunal having failed to take an overall view based on the totality of the relevant circumstances in rendering the decision on the mixed (and vexed) questions of fact and law as to whether or not the disputed land was 'agricultural land' within the meaning of Section 2(14) of the I.T. Act, 1961, the decision of the Tribunal on this question cannot be sustained for reasons which will become manifest in the course of the judgment hereafter. '

(2.) THE Tribunal has reversed the concurrent findings recorded by the ITO and the AAC as per annexs. A and B that the land in question was not 'agricultural land' and has allowed the appeal preferred by the assessee by its order as per annex. C -4 dated July 3, 1975. It may be mentioned that initially the matter came up before a Division Bench of the Tribunal. The learned Members of the Tribunal disagreed. A reference was, therefore, made by the President to a third Member in exercise of the powers under Section 255(4) of the Act. The third Member came to the conclusion that the ITO and the AAC were in error and that he was not in a position to agree with the opinion expressed by the learned member of the Tribunal who was of the view that the decision of the ITO and the AAC was correct in law. He accordingly opined that the disputed land was agricultural land within the meaning of Section 2(14) of the Act as per his order at annex. C -3 dated June 24, 1975. Having regard to the view taken by the aforesaid Member to whom the matter was referred, in view of the difference between the two Members constituting the Bench, the Appellate Tribunal rendered its opinion in accordance with the majority opinion under Section 255(4) as per order at annex. C -4. The majority opinion being in favour of the assessee, the Tribunal has allowed the appeal of the assessee and has set aside the order of assessment passed by the ITO as confirmed by the AAC treating the profits as capital gains made by the assessee concerned in ITR No. 92 of 1976 in respect of her one -fourth share in the total sale proceeds of the entire block of 30,885 sq. yds. which was jointly owned (and jointly sold) by her along with her co -owners (co -heirs of original owner and assessees in all the three allied matters). A similar order has been passed in the case of each of the other three co -owners who have been separately assessed. Resultantly, there are four references under Section 256(1) of the I.T. Act to this court at the instance of the Commissioner. In each reference an identical question is involved on identical facts. It will, therefore, be convenient to dispose of these four allied references belonging to the group by this common judgment.

(3.) THE question arises on similar facts. We will advert to the facts pertaining to Sarifabibi (asseesee concerned in ITR No. 92 of 1976 who along with other co -owners inherited the block of land admeasuring 30,885 sq. yds. in the following manner. The land situated at a distance of one kilometre from the Surat Railway Station was purchased forty years back on February 1, 1936, for a sum of Rs. 5,425 as agricultural land by the mother of the assessee, Smt. Nurunissa, and upon her death on December 14, 1939, the assessee's father, Mohmed Ibrahim, became the owner thereof as an heir. Mohmed Ibrahim died on February 12, 1966. Thereafter, the four co -owners including the assessee inherited the said land. Assessee, Sarifabibi, and her co -owners converted a parcel of 2,607 sq. yds. to non -agricultural user after obtaining the requisite permission under Section 65 of the Land Revenue Code some 20 years back on March 28, 1958. In respect of the remaining block of land the co -owners (assessees) chose not to apply for and obtain such a permission On the parcel of 2,607 sq. yds. in respect of which permission was obtained for non -agricultural user, residential chawls were constructed. The entire land inherited by the four co -owners, including the assessee, Sarifabibi, admeasuring 30,885 sq. yds. was sold during the relevant assessment year on May 30, 1969, and the assessee was assessed to capital gains arising from the sale at the rate of Rs. 23 per sq. yd. After making appropriate deductions including the basic allowance of Rs. 5,000, the net amount of capital gains was computed at Rs. 52,403. The assessee claimed before the ITO that barring the area of 2,607 sq. yds. on which the chawl was constructed the remaining portion of land was agricultural land within the meaning of Section 2(14) of the Act and consequently gains arising from the sale thereof were not capital gains under Section 45 of the Act. The view taken by the ITO, repelling this contention, was confirmed by the AAC. As mentioned earlier, in the appeal preferred by the asscssee before the Tribunal, initially, there was a difference of opinion and ultimately the appeal of the assessee was allowed as per the majority opinion which has given rise to the present reference. The facts pertaining to this land catalogued hereunder are not in dispute :