Agricultural land character for capital gains turns on totality of facts; revenue records and actual use preserved tax exemption here.

The character of land for capital gains purposes is determined on the totality of surrounding facts, with revenue records creating a strong but rebuttable presumption of agricultural character. Here, the land remained recorded as agricultural land, land revenue was paid on that basis, some agricultural user was shown over the years, and no conversion to non-agricultural use was sought. Competing factors such as municipal location, surrounding development, limited agricultural income, and later plantation did not outweigh the consistent revenue entries and overall treatment of the land. Accordingly, the land retained its agricultural character up to the date of sale and the surplus was not chargeable to capital gains tax.

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Issues: Whether the land sold by the co-owner assessees was agricultural land so that the gain on its transfer was not chargeable as capital gains under the Income-tax Act, 1961.

Analysis: The land stood recorded in the revenue records as agricultural land and land revenue had been paid on that basis. The evidence showed some agricultural user over the years, including sale of grass, expenditure on cultivation-related activity, and later planting of fruit trees, while no application was made to convert the land to non-agricultural use. The competing material relied on by the Revenue, such as the municipal location, surrounding development, meagre agricultural income, and the timing of plantation, was considered but did not outweigh the long-standing revenue record entries, the absence of conversion, and the overall treatment of the land. On the totality of circumstances, the land retained its agricultural character up to the date of sale.

Conclusion: The land was held to be agricultural land and the surplus on its sale was not exigible to capital gains tax.

Ratio Decidendi: The character of land for capital gains purposes must be determined from the totality of surrounding facts, with revenue records carrying a strong but rebuttable presumption, and land does not lose its agricultural character merely because of location, potential for non-agricultural use, or low agricultural income where agricultural user is otherwise established.

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