Agricultural land retains its character where revenue records and actual cultivation continue, preventing capital gains taxation on sale surplus.

Land recorded in revenue records as agricultural and actually cultivated until sale retained its agricultural character, and the absence of any application for non-agricultural permission or other steps showing a contrary intention supported that conclusion. The fact that it lay within municipal limits, was sold on a square-yard basis, or was later acquired for housing development did not by itself convert it into non-agricultural land. The surplus on sale was therefore not chargeable to capital gains.

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Issues: Whether the land sold by the assessee was agricultural in character and, if so, whether the surplus from its sale was chargeable to capital gains.

Analysis: The land was entered in the revenue records as agricultural land and was actually cultivated till the year of sale. The owner had inherited the land, had not applied for non-agricultural permission, and had not taken steps showing an intention to exploit it as non-agricultural property. The mere facts that the land lay within municipal limits, had been sold on a square-yard basis, and was ultimately purchased for housing development did not outweigh the evidence of its agricultural character at the time of sale. The classification in the revenue records and the actual agricultural user provided strong prima facie evidence, and no cogent material displaced that presumption.

Conclusion: The land was agricultural land when sold, and the surplus arising from its sale was not liable to be taxed as capital gains.

Ratio Decidendi: Where land is recorded as agricultural and is actually used as such till sale, it retains its agricultural character unless there is clear evidence of a contrary intention or non-agricultural exploitation; municipal location or sale on a square-yard basis alone is insufficient to convert it into non-agricultural land.

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