Agricultural land test under tax law turns on actual use, not mere potentiality; revenue entries are only rebuttable evidence.

For determining whether land falls within the agricultural land exclusion under section 2(14)(iii) of the Income-tax Act, the decisive inquiry is whether it is actually used, ordinarily used, or intended to be used for agricultural purposes. Actual agricultural user generally raises a rebuttable presumption of agricultural character, but mere potentiality for such use is insufficient. Revenue-record entries are only prima facie evidence and are not conclusive. The text also notes that where the fact-finding body applies the wrong legal test, the reference may not be answered on the existing record and the matter requires reconsideration on the correct principles.

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Issues: Whether land used for agriculture and reflected as such in revenue records should be treated as agricultural land under section 2(14)(iii) of the Income-tax Act, 1961, and whether the reference could be answered without fresh appreciation of facts.

Analysis: The governing test was stated to be whether the land was actually used, ordinarily used, or meant to be used for agricultural purposes, with actual user ordinarily raising a presumption in favour of agricultural character unless displaced by surrounding factors. Mere potentiality for agricultural use was held to be insufficient. Entries in revenue records were treated as prima facie evidence, but they were not conclusive. On the facts, the Tribunal had not approached the question from the correct legal perspective, particularly in the light of actual user, revenue entries, and whether the presumption was rebutted by other material. Since the fact-finding process had been affected by the wrong legal approach, the question could not properly be answered in the reference as it stood.

Conclusion: The question referred was declined to be answered, and the matter was left to the Tribunal to dispose of the appeal afresh in accordance with the correct legal principles.

Ratio Decidendi: For determining whether land is agricultural land, the decisive inquiry is its actual, ordinary, or intended agricultural use, while potentiality alone is irrelevant and revenue-record entries create only a rebuttable presumption.

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