Land not agricultural at sale, no exemption under Income-tax Act. Revenue favored, land taxable.

The court held that the land in question was not agricultural at the time of sale, as there was no evidence of agricultural use and the surrounding circumstances indicated a non-agricultural nature. Therefore, the capital gains from the sale were not exempt under section 2(14) of the Income-tax Act, 1961. The judgment favored the Revenue, ruling that the land was taxable, with no order as to costs.

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Issues Involved:
1. Whether the land in question is agricultural land and thus exempt from liability to pay capital gains tax.

Detailed Analysis:

Issue 1: Whether the land in question is agricultural land and thus exempt from liability to pay capital gains tax.

This case pertains to the assessment year 1967-68 and involves the question of whether the land owned by the assessee is agricultural land and therefore exempt from capital gains tax under section 2(14) of the Income-tax Act, 1961. The land in question is located within the municipal limits of Ahmedabad and was part of a larger piece of land that was divided into plots and sold.

Background and Facts:
- The land was originally part of Survey No. 3/1 and Survey No. 1 in the Changispur area of Ahmedabad.
- The land was purchased collectively by a group, including the assessee, and later divided into 14 plots.
- The assessee received plot No. 8, which was transferred to her name in 1951.
- The assessee sold this plot in 1966, declaring the sale proceeds as non-taxable, claiming the land was agricultural.

Tribunal and Lower Authorities:
- The Income-tax Officer considered the sale as an adventure in the nature of trade and taxed it as business income.
- The Appellate Assistant Commissioner disagreed, stating it was not an adventure in the nature of trade and was exempt from capital gains tax as it involved agricultural land.
- The Tribunal upheld that it was not an adventure in trade but ruled the land was not agricultural, making the capital gains taxable.

Evidence and Legal Precedents:
- The land was shown as agricultural in revenue records and assessed to land revenue.
- Grass was noted to be growing on the land from 1960-61 to 1963-64, but it lay fallow from 1963-64 to 1966-67.
- No application was made to convert the land to non-agricultural use.

Supreme Court and High Court Rulings:
- The Supreme Court in CIT v. Raja Benoy Kumar Sahas Roy defined "agriculture" as involving human skill and labor on the land.
- The Supreme Court in CWT v. Officer-in-Charge (Court of Wards), Paigah emphasized the actual condition and intended use of the land.
- The Bombay High Court in CWT v. H. V. Mungale ruled that land remaining fallow does not cease to be agricultural if it was used for agriculture previously.

Current Case Analysis:
- Despite being classified as agricultural in records, there was no positive evidence of agricultural use.
- The land's location within municipal limits, its division into plots, fencing, and the absence of agricultural operations indicated a non-agricultural nature.
- The land's sale price was higher than typical agricultural land, and there was no evidence of agricultural intentions by the buyer or seller.

Conclusion:
- The land could not be considered agricultural at the time of sale due to the lack of agricultural use and the surrounding circumstances.
- Therefore, the capital gains from the sale are not exempt under section 2(14) of the Income-tax Act, 1961.

Judgment:
- The question was answered in the negative, in favor of the Revenue, indicating the land was not agricultural and the capital gains were taxable.
- No order as to costs was made.

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