Land made suitable for agriculture through human labor qualifies as agricultural land for tax purposes.

The High Court affirmed that the land sold by the assessee, which was made suitable for tea cultivation through human labor and skill, qualified as agricultural land under the Income Tax Act. The Court agreed with the Tribunal's determination that the land's capability for agricultural operations was the crucial factor, not the current existence of such operations. Consequently, the profit from the land sale was not treated as capital gains, favoring the assessee in the case.

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Issues involved:
Assessment of profit from the sale of land as capital gains under section 45(1) of the Income Tax Act, 1961.
Interpretation of whether the land sold by the assessee qualifies as agricultural land under section 2(14)(iii) of the Income Tax Act, 1961.

Assessment of Capital Gains:
The assessee, engaged in tea cultivation, sold land to M/s. Rukong Tea Estate. The Income Tax Officer (ITO) treated the profit as capital gains, contending the land was not agricultural due to lack of agricultural operations. The Appellate Authority Commissioner (AAC) disagreed, stating the land was fit for immediate cultivation. The Tribunal upheld this view, emphasizing human labor and skill had been expended to make the land suitable for tea cultivation.

Interpretation of Agricultural Land:
The Tribunal referred the question of whether the land sold was agricultural land under section 2(14)(iii) of the Income Tax Act to the High Court. The Court analyzed precedents, including the Gujarat High Court's ruling that potential non-agricultural value does not negate land's agricultural character. The Supreme Court's stance on agricultural operations requiring human labor and skill was also considered. The Court emphasized that the key factor is whether the land is capable of agricultural operations, not necessarily whether such operations are currently ongoing.

Decision:
The High Court, concurring with the Tribunal's finding that human labor and skill had been applied to make the land suitable for immediate cultivation, held that the land sold qualified as agricultural land. Citing relevant case law and the Tribunal's assessment of the situation, the Court ruled in favor of the assessee.

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