Agricultural character of land prevails at sale when revenue records support it and no conversion permission exists.

Land retained its agricultural character on the date of sale when revenue records described it as agricultural and no permission for conversion to non-agricultural use had been obtained under Section 65 of the Bombay Land Revenue Code. The presumption from the revenue entries was not displaced merely because the land had remained fallow, was located in a developed area, or fetched a high price. In the absence of clear evidence of preparation or intention to use the land for non-agricultural development, the surplus was treated as outside capital gains tax as agricultural land.

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Issues: Whether the land sold by the assessee retained its agricultural character on the date of sale and was, therefore, outside the charge to capital gains tax.

Analysis: The decisive test was the character of the land at the date of sale, to be judged from its actual or ordinary use, the intention for which it was meant to be used, and the surrounding circumstances. Entries in the revenue records showing the land as agricultural raised a prima facie presumption in favour of agricultural character. That presumption was not displaced by the facts that the land lay fallow for a long period, was situated in a developed locality, or fetched a high price. In the absence of permission to convert the land to non-agricultural use under Section 65 of the Bombay Land Revenue Code and in the absence of clear evidence of preparations for non-agricultural development, the land could not be treated as having lost its agricultural character.

Conclusion: The land was agricultural land on the date of sale, and the surplus was not liable to capital gains tax; the answer was in favour of the assessee.

Ratio Decidendi: Where revenue records show land as agricultural and no permission for conversion to non-agricultural use has been obtained, the presumption of agricultural character is not rebutted merely by fallow condition, location in a developed area, or high sale price, unless clear evidence shows an intention or preparation to put the land to non-agricultural use.

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