1975 (12) TMI 74 - HC - Wealth-tax

High Court affirms agricultural status of Velachery lands, exempt from wealth tax

The High Court held that the lands owned by the assessee at Velachery were agricultural lands and therefore exempt from wealth-tax under section 2(e) of ... Agricultural Land, High Court, Question Of Fact, Wealth Tax Issues Involved:1. Whether the lands owned by the assessee at Velachery are agricultural lands.2. Whether these lands are liable to be excluded in computing the net wealth of the assessee for the assessment years 1959-60 to 1963-64 under the Wealth-tax Act.Detailed Analysis:1. Whether the lands owned by the assessee at Velachery are agricultural lands:The assessee purchased 17 acres and 39 cents of land in Velachery village, which were covered by cowles granted in the 1860s aimed at encouraging tree planting. The lands were described as 'punjai' in revenue records and the sale deed. The assessee derived an income of approximately Rs. 1,000 from the land, part of which was cultivated with blackgram and horsegram. The Wealth-tax Officer initially assessed the lands based on their potential for industrial and residential development, referring to the area as a 'fast developing industrial area.'The Appellate Assistant Commissioner upheld the assessment, citing the inclusion of the area within city limits since 1947, negligible income and expenditure from these lands, presence of factories and company quarters nearby, and absence of agricultural operations. The Commissioner argued that the land was not agricultural land within the meaning of the Wealth-tax Act.The Tribunal, however, found evidence of agricultural use, including the planting of palmyrah and palm trees, the presence of a well, and the description of the land as 'punjai.' The Tribunal concluded that the land retained its agricultural character and had not been converted for non-agricultural purposes.The High Court referred to various precedents to determine the meaning of 'agricultural land.' It noted that the term should be given its widest meaning, including lands used or capable of being used for raising valuable plants or trees or for any other purpose of husbandry. The Court emphasized that the character of the land should be assessed based on its inherent quality, its classification in revenue records, and the owner's intention.2. Whether these lands are liable to be excluded in computing the net wealth of the assessee for the assessment years 1959-60 to 1963-64 under the Wealth-tax Act:The Wealth-tax Act, under section 2(e), excludes agricultural land from the definition of 'assets.' The Court examined whether the lands in question qualified as agricultural land and thus were exempt from wealth-tax.The Court observed that the land was used for agricultural purposes, including the cultivation of blackgram and horsegram, and the presence of trees planted as per the cowle terms. The Court also noted that the land was described as 'punjai' in revenue records, indicating its agricultural nature. The inclusion of the area within city limits and the presence of nearby factories did not alter the character of the land as agricultural.The Court concluded that the lands were agricultural lands and were entitled to exemption under section 2(e) of the Wealth-tax Act. The Tribunal's finding that the lands had not been converted for non-agricultural purposes was upheld.Conclusion:The High Court answered the reference in the affirmative, holding that the Appellate Tribunal was right in law in holding that the 315 grounds of land owned by the assessee at Velachery are agricultural lands liable to be excluded in computing the net wealth of the assessee for the assessment years 1959-60 to 1963-64. The assessee was awarded costs, and the counsel's fee was set at Rs. 250.