Agricultural land sale surplus treated as exempt income where revenue records and land character showed no business use.

The surplus from sale of land was not assessable as business income because the land remained agricultural in character: it was recorded as agricultural land in revenue records, lay beyond municipal limits, and was not shown to have been converted to non-agricultural use or stock-in-trade. Mere absence of actual cultivation during the holding period did not alter that character, and the transaction was not proved to be an adventure in the nature of trade. The surplus was therefore correctly treated as exempt agricultural income, and the addition was deleted.

---

---

Issues: Whether the surplus arising from sale of the land was assessable as business income or was exempt as agricultural income, and whether the land retained its character as agricultural land notwithstanding the absence of actual cultivation during the holding period.

Analysis: The land was shown in government revenue records as agricultural land at the time of purchase and sale, was situated beyond the municipal limit, and there was no material to show that it had been put to any non-agricultural use or converted into a trading asset. Mere non-cultivation by the assessee did not alter the character of the land. The assessee had disclosed the property as an investment, not as stock-in-trade, and the record did not support the conclusion that the transaction was an adventure in the nature of trade. The relevant test was the character of the land at the time of sale, not the subjective intention behind the purchase.

Conclusion: The surplus was not taxable as business income and was correctly treated as exempt agricultural income.

Final Conclusion: The Revenue failed to dislodge the finding that the land remained agricultural in character, so the addition was rightly deleted.

Ratio Decidendi: The character of land as agricultural is determined by its nature and treatment in the relevant records and use, and mere absence of cultivation or an alleged trading intention does not by itself convert it into business stock or make the sale proceeds taxable as business income.

---