M RANGANATHA SASTRI Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) T.C. No. 68/1975 is a reference made under s. 256(1) of the I.T. Act, 1961, raising the following questions

(2.) THE assessee's brother had similarly purchased the land bearing R.S. No. 157/11 of an equal extent at or about the same time. At the time of purchase, both these lands had been leased out to one Parthasarathy Naicker who was cultivating them. THE said Parthasarathy continued to cultivate the lands as lessee under the assessee and his brother right up to 1953. After 1953, there was no cultivation of the assessee's land. His brother also did not cultivate his land, but built a house thereon. On June 25, 1966, the Government of Madras issued a notification under s. 4 of the Land Acquisition Act proposing to acquire the assessee's land for the purpose of construction of buildings for the office of the Regional Provident Fund Commissioner. In the acquisition proceedings, the assessee claimed compensation at the rate of Rs. 22, 000 per ground before the Land Acquisition Officer who, by his award dated December 14, 1968, determined the compensation payable at Rs. 89, 843.27 made up of Rs. 78, 124.58 being the value of the land at the rate of Rs. 6, 500 per ground and Rs. 11, 718.69 being the solatium at 15 per cent. THE assessee was not satisfied with the compensation so awarded and he, therefore, got a reference made to the city civil court under s. 18 of the Land Acquisition Act. In the said reference, the city civil court awarded compensation for the acquired land at the rate of Rs. 10, 500 per ground and the assessee preferred an appeal to the High Court seeking compensation at the rate of Rs. 15, 000 per ground. At the time when this reference was made, the appeal before the High Court claiming compensation at Rs. 15, 000 per ground was pending. It appears that the matter has since been disposed of and compensation of a higher amount than what was awarded by the city civil court has been awarded by this courtFor the assessment year 1969-70 for which the previous year ended on March 31, 1969, the assessee disclosed in Part IV of his return the receipt of compensation of Rs. 89, 843.27 but he claimed that the land in question was agricultural land and hence not a capital asset within the meaning of the said expression as defined in s. 2(14) of the I.T. Act, 1961. THE contention of the assessee was that the capital gains arising out of the compulsory acquisition could not be brought to tax under s. 45 of the Act. Reference was made to the land being described as wet land in the revenue records maintained by the Government of Madras and even in the notification under s. 4 of the Land Acquisition Act.

(3.) THE ITO has not called for the papers relating to the assessee's claim for compensation before the land acquisition authorities to see the basis of the claim, made by him. From the manner in which the claim appears to have been made, it is clear that the basis is that the land was a house-site and not mere agricultural land. As pointed out by the Tribunal, the acquisition itself was for a non-agricultural purpose and the assessee also had claimed large compensation at the rate of Rs. 22, 000 per ground at which price no one would purchase agricultural lands. THE area is covered by a town planning scheme and the property is surrounded by residences all around. THEse are features which would, in a way, show the character of the property for the purposes of finding out whether it is agricultural land or not. It may be that in a particular case a man can put a land to use for agricultural purposes even if it is in a city or town, and surrounded by residential buildings. However, in the present case, there is no evidence to show that the assessee intended to keep the land as agricultural land and utilised it as such at any time after 1953Learned counsel for the assessee submitted that once the land was agricultural land then in the absence of any other evidence showing that it was converted into a land for non-agricultural purposes, the land should be treated as agricultural land. In other words, the proposition was, once a land was agricultural, it was always agricultural. We are unable to accept this submission.