Agricultural land classification based on revenue records kept sale proceeds exempt where no non-agricultural conversion was shown.

Revenue records, including 7/12 extracts and Form 7/7A, established that the land sold appurtenant to the bungalow was cultivated as agricultural land, and the Tahsildar's certificate showed it lay beyond the prescribed municipal distance with village population below the relevant threshold. As there was no evidence of conversion for non-agricultural use and no non-agricultural permission had been obtained, the land fell within section 2(14)(a)(iii) of the Income-tax Act. The absence of agricultural income in the return was treated as irrelevant where the land's agricultural character was otherwise proved. The sale proceeds were therefore held exempt, and the addition was deleted.

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Issues: Whether the land sold appurtenant to the bungalow was agricultural land within the meaning of section 2(14)(a)(iii) of the Income-tax Act, 1961 and whether the sale proceeds were exempt from tax.

Analysis: The land was supported by revenue records showing cultivation of rice, including 7/12 extracts and Form 7/7A appended to the sale deed. The Tahsildar's certificate showed that the land was beyond the prescribed municipal distance and that the village population was below the relevant threshold. No material showed any conversion of the land for non-agricultural use. Revenue records maintained by State authorities were treated as reliable evidence of the nature and use of land, and the absence of agricultural income in the return was held to be irrelevant where the land was shown as agricultural and no non-agricultural permission had been obtained. The same transaction had also been accepted as exempt in the cases of other co-owners.

Conclusion: The land was held to be agricultural land within section 2(14)(a)(iii), and the sale proceeds were held exempt from tax, resulting in deletion of the addition.

Ratio Decidendi: Where revenue records and surrounding evidence establish that land is agricultural in character and there is no conversion for non-agricultural use, the sale proceeds of such land are not taxable merely because no agricultural income was separately returned.

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