Agricultural land character stays unchanged despite future industrial intent; capital gains exclusion turns on the land's nature on relevant dates.

Land acquired from the assessee retained its character as agricultural land under section 2(14)(iii) of the Income-tax Act, 1961 because it was agricultural at both purchase and acquisition. The Court held that a future intention to use the land for industrial purposes did not alter its existing nature, and the mere absence of agricultural operations did not by itself convert agricultural land into non-agricultural land. The acquiring authority's intention was irrelevant, and the Tribunal's contrary view was found perverse because it conflicted with its own factual findings. The land therefore remained agricultural, with the consequence that capital gains treatment did not apply.

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Issues: Whether the land acquired from the assessee's ownership retained its character as agricultural land under Section 2(14)(iii) of the Income-tax Act, 1961, so as to exclude capital gains.

Analysis: The land was found to be agricultural both at the time of purchase and at the time of acquisition. The Tribunal itself recorded that the award in the acquisition proceedings established beyond doubt that the land was agricultural. The Court held that the assessee's future intention to use the land for industrial purposes did not alter its existing nature and character. Nor did the absence of agricultural operations, by itself, convert agricultural land into industrial land. The Tribunal's reliance on the acquiring authority's intention was held to be irrelevant, and its contrary conclusion was found to be perverse because it ran against its own findings on the record.

Conclusion: The land remained agricultural land, and the assessee was entitled to succeed on the question of capital gains.

Ratio Decidendi: The future intention to put land to a non-agricultural use does not, by itself, change its character; the decisive test is the nature and character of the land on the relevant dates.

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