Agricultural land classification for wealth-tax depends on actual use, revenue records, and abandonment of cultivation.

Land retains agricultural character for wealth-tax purposes where it is recorded as agricultural, assessed to land revenue, and actually used for cultivation, and a mere agreement to sell does not by itself change that character. On those facts, lands connected with the Ciba of India, New Standard Engineering Co., and Nanubhai Industries remained exempt under section 2(e)(i) for the relevant years. By contrast, a parcel of 40,315 sq. yds. ceased to be agricultural land where it had not been cultivated for several years and the surrounding conduct showed abandonment of agricultural use and an intention to sell for non-agricultural purposes; that parcel was therefore includible in net wealth.

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Issues: (i) Whether lands ultimately sold to or acquired for Ciba of India, New Standard Engineering Co., and Nanubhai Industries were agricultural lands and exempt under section 2(e)(i) of the Wealth-tax Act for the relevant assessment years; (ii) Whether the land admeasuring 40,315 sq. yds. ceased to be agricultural land and was therefore liable to inclusion in net wealth.

Issue (i): Whether lands ultimately sold to or acquired for Ciba of India, New Standard Engineering Co., and Nanubhai Industries were agricultural lands and exempt under section 2(e)(i) of the Wealth-tax Act for the relevant assessment years.

Analysis: The lands were recorded as agricultural lands, assessed to land revenue, and no permission for non-agricultural use had been obtained. Agricultural operations were in fact carried on up to the relevant period, and the mere execution of agreements to sell did not by itself alter the character of the land. In the case of Ciba of India, title continued till conveyance; in the case of the other two concerns, the lands remained agricultural until acquisition proceedings culminated. The statutory exclusion in section 2(e)(i) therefore continued to apply.

Conclusion: The lands sold to or acquired for Ciba of India, New Standard Engineering Co., and Nanubhai Industries were agricultural lands and were exempt for the year 1960-61, and the lands sold to Ciba of India were also exempt for the year 1961-62.

Issue (ii): Whether the land admeasuring 40,315 sq. yds. ceased to be agricultural land and was therefore liable to inclusion in net wealth.

Analysis: The land had not been cultivated for several years, and the assessee's conduct showed an intention to divert portions of the property for non-agricultural sale. The absence of a formal change-of-user permission did not outweigh the factual inference that the land had ceased to be used as agricultural land. The Tribunal's finding rested on both prolonged non-use and the surrounding conduct showing abandonment of agricultural character.

Conclusion: The land admeasuring 40,315 sq. yds. had ceased to be agricultural land and was not entitled to exemption from wealth-tax.

Final Conclusion: The reference was answered by upholding exemption for the agricultural lands connected with the sale and acquisition transactions, while sustaining inclusion of the 40,315 sq. yds. parcel in the taxable net wealth.

Ratio Decidendi: Land continues to be agricultural for wealth-tax purposes so long as its agricultural character is preserved by actual use, revenue classification, and surrounding circumstances; conversely, prolonged non-use coupled with conduct showing abandonment of agricultural intention can justify a finding that the land has ceased to be agricultural.

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