Agricultural land character at sale depends on actual use and revenue records, not later conversion potential or market value.

Actual agricultural user, supported by revenue records, gave rise to a presumption that the land retained its agricultural character on the date of sale. The High Court held that this presumption was not displaced by the land's high market value, its potential for non-agricultural use, or the fact that conversion to non-agricultural use occurred only after the sale. Permission under section 63 of the Bombay Tenancy and Agricultural Lands Act, 1948, obtained because the purchaser was a non-agriculturist, did not alter the character of the land at the relevant time. The Tribunal was therefore wrong in treating the land as non-agricultural, and the reference was answered in favour of the assessee.

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Issues: Whether the land sold by the assessee was agricultural land on the date of sale and therefore outside the capital gains provisions.

Analysis: The land had been purchased long before, was continuously used for agricultural purposes, and the revenue records supported that user. Permission under section 63 of the Bombay Tenancy and Agricultural Lands Act, 1948, was obtained only because the proposed purchaser was a non-agriculturist, and conversion to non-agricultural use occurred only after the sale. The mere fact that the land fetched a high price or had potential for non-agricultural use did not displace its agricultural character. The presumption arising from actual cultivation and the entries in the record of rights was not rebutted by any contrary material.

Conclusion: The land remained agricultural land on the date of sale, and the Tribunal was wrong in holding otherwise; the reference was answered in favour of the assessee.

Ratio Decidendi: Actual agricultural user, supported by revenue entries, raises a presumption that land is agricultural land, and mere potential non-agricultural value or intended post-sale conversion does not by itself change its character at the date of sale.

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