Agricultural land exemption under wealth tax turns on actual or intended use, not mere capability for cultivation.

For wealth-tax purposes, land is excluded as agricultural land only if its condition, actual use or intended use shows a real agricultural nexus; mere capability for agricultural use is insufficient. The Court held that the exemption must be proved by the assessee, and revenue entries create only a rebuttable prima facie presumption that cannot displace the factual inquiry into user and intention. Because the lower court applied an overly broad test, the matter was remitted for fresh factual determination on the correct legal principles, with opportunity for further evidence.

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Issues: (i) Whether lands claimed to be agricultural lands fell within the exclusion from "assets" under section 2(e)(i) of the Wealth-tax Act; (ii) whether the matter had to be decided on actual or intended agricultural user rather than mere capability for agricultural use; (iii) whether the case should be remitted for fresh factual determination on the correct legal test.

Issue (i): Whether lands claimed to be agricultural lands fell within the exclusion from "assets" under section 2(e)(i) of the Wealth-tax Act.

Analysis: The expression "agricultural land" was held to require a real connection with agricultural purpose and user. The Court rejected the view that every land capable of agricultural use is necessarily agricultural land for wealth-tax purposes. The exemption was treated as one to be proved by the assessee, and the character of the land had to be ascertained from its condition, use, and intended use.

Conclusion: The lands were not shown to be agricultural lands merely because they were capable of agricultural use.

Issue (ii): Whether the matter had to be decided on actual or intended agricultural user rather than mere capability for agricultural use.

Analysis: The Court held that potentiality alone is insufficient. What is material is actual user, ordinary user, or an established intention that the land is set apart for agricultural purposes. Revenue entries may furnish prima facie evidence, but they raise only a rebuttable presumption and cannot by themselves override the factual inquiry into user and intention.

Conclusion: The correct test is actual or intended agricultural user, not mere capacity for such use.

Issue (iii): Whether the case should be remitted for fresh factual determination on the correct legal test.

Analysis: The Court found that the Full Bench had adopted an overly broad approach and had not properly tested the factual findings of the taxing authorities on intended user. The proper course was to have the factual question reconsidered by the Tribunal on the correct legal principles with opportunity for further evidence.

Conclusion: The matter was required to be remitted for fresh determination.

Final Conclusion: The appeal succeeded, the High Court's judgment was set aside, and the factual question whether any of the lands were agricultural lands was sent back to the Tribunal for decision in accordance with the correct legal test.

Ratio Decidendi: For wealth-tax purposes, land is agricultural only when its actual condition and intended or ordinary use establish a genuine nexus with agricultural purpose; mere potential suitability for agriculture is insufficient, though revenue entries may constitute rebuttable prima facie evidence.

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